Factors Influencing Customers' Assessments of Service Quality and Their Invocation of a Service Warranty

This study makes a first effort to understand the factors affecting customers' decisions to invoke warranties, and to distinguish this behavior from the factors affecting customer perceptions of service quality. The study context is GTE's introduction of a warranty program as part of a telecommunications repair service for small business customers. The results suggest that customer perceptions of the service and the decision to invoke the service warranty depend on customers' attributions about the service failure and their perceived control of the service process -as represented by specific service attributes. For repair service, the customer's decision to invoke the warranty is strongly influenced by the severity of the service failure, the amount of time that elapsed between when the failure was reported and when it was resolved, and his/her causal attributions about the failure. Although these variables do not have a similar effect on the overall perceived quality of repair service, they are related to two underlying dimensions of service quality: reliability and responsiveness. For example, customer perceptions of responsiveness are influenced by the amount of time between when the problem was reported and when the first repair attempt was made. More extreme service attributes are required to result in warranty invocation rather than more negative perceptions of the service. EXECUTIVE SUMMARY Increasingly, companies in a variety of industries are offering warranties on their products. A warranty is a promise by the firm to correct a product failure that takes place during a specified time period. It is also a competitive marketing tool. Warranties can be used to communicate information about the underlying quality of a product offering, and to differentiate a firm's offering from competitive offerings. In markets where customers cannot distinguish between high and low quality offerings, companies can use warranties as a pre-purchase signal of quality. Prior research has confirmed that warranties are accurate signals of the reliability of goods, and that warranties influence customer perceptions of goods. This paper examines customers' response to service warranties. A customer's invocation of a warranty implies a failure by the firm to deliver an acceptable quality level in its service offering. The invocation of a warranty is a form of customer complaining behavior -that is, a behavioral response triggered by a dissatisfactory purchase episode. However, a warranty makes an explicit promise about the nature of the seller's efforts at redress that may affect customers' expectations and assessments of service quality. Hence, the factors influencing the invocation of a warranty may be different than the factors affecting other forms of complaining behavior. In particular, warranty invocation seems likely to depend on certain mediating variables, such as customers' attributions about an unexpected service failure and their perceived control over the service process. This study investigates the factors affecting customers' decisions to invoke service warranties, and distinguishes them from the factors affecting customer perceptions of services. The study context is GTE's pilot of a warranty program for a telecommunications repair service for small business customers in Beaverton, Oregon. The warranty expressly promised that GTE would repair any defect in GTE Intralata Network Services or Contracted Premises equipment or the small business customer would receive credit for one month's GTE service charges, up to $500, for each trouble. The results suggest that customer perceptions of a service and the decision to invoke a service warranty depend on customers' attributions about the service failure and their perceived control of the service process -as represented by specific service attributes. For repair service, the customer's decision to invoke the warranty is strongly influenced by the severity of the problem, the amount of time that elapsed between when the problem was reported and when it was resolved, and his/her causal attributions about the service failure. Although these variables do not have a similar effect on the overall perceived quality of repair service, they are related to two underlying dimensions of service quality: reliability and responsiveness. For example, customer perceptions of responsiveness are influenced by the amount of time between when the problem was reported and when the first repair attempt was made. Customers' specific repair perceptions -rather than their assessment of overall service quality -are influenced by the same service attributes as warranty invocation, and more extreme service attributes are required to result in warranty invocation rather than more negative perceptions of the service. From a managerial standpoint, the trial was successful because GTE obtained useful information about whether to introduce the warranty program nationwide. The warranty program was actually less costly than anticipated because (1) a smaller percentage of customers invoked the warranty than anticipated and (2) the average amount of the refund was less than expected ($191.55/customer). In 1993, the warranty program was introduced nationwide.