As a customer, few things make you feel better than doing business with a company that stands behind its products and services. Warranties and guarantees are seen as huge bonuses, but as a business owner, should you offer them to your own customers?
Consider the Following
Warranties play a valuable role in sales, branding, and customer loyalty. They’re fairly common, yet still provide a ton of value. A warranty is unique in that both the customer and business hope it never has to be used; however, it’s most valuable when it is used.
Warranties work best on products that are considered a financial investment. Take the roofing industry as an example. When the average homeowner has to replace their roof, it generally costs between $4,000 and $10,000. That’s not a trivial amount. And considering there’s a lot of manual labor involved, where mistakes can happen, roofing companies offer warranties as a way of putting homeowners’ minds at ease.
It’s not just for major investments like homes and cars, though. Browse through the aisles of your local Walmart and pick up varying
packages and products. You’ll notice that many products come with money-back guarantees. In these cases, the warranty is less about the investment and more about differentiating one product from another.
Regardless of whether your products and services fall into a low- or high-price category, warranties are worth your consideration. But there are some details you’ll have to work through.
Warranties shouldn’t be taken lightly. From a business perspective, a warranty is a promise from your brand to the marketplace. It’s better to not offer a warranty than to offer one and fail to live up to it. Having said that, here are some things to think about:
- Implied Explicit
When you sell something, you’re technically already giving the customer what’s known as an “implied” warranty. In other words, there’s the expectation that your product will live up to its claims. If you’re selling a bag of potato chips, it’s implied that they’re fresh. If you’re changing a customer’s oil, it’s assumed that you’ll use the correct type of oil and filter.
In this article, we’re referring to explicit warranties. These are guarantees that go beyond the implied assumption that the product works. An explicit warranty sets an additional standard above and beyond what’s expected.
- Follow the Magnuson-Moss Act
If you choose to offer an explicit warranty, you’ll need to follow the federal guidelines laid out in the Magnuson-Moss Act. “As a warrantor or a seller,” entrepreneur Jensen Lee notes, “you must say whether the warranty is full or limited, state specific information about the warranty in one easy-to-understand document and provide warranties to customers before buying, if they request them.
- What’s Covered?
It’s imperative that you discuss exactly what’s covered in your warranty. For example, do you cover all malfunctions with your product, or only those that stem from manufacturing defects? In addition to discussing what’s covered, it’s also a good idea to clearly lay out everything that’s not covered.
- Consider Extended Warranties
Finally, warranties can be a way to increase revenue for specific products. If the product is something that’s higher priced and built to last, tiered extended warranties are savvy from a business point of view. Just be sure to crunch the numbers so you know how to structure the various tiers.
Use Warranties Wisely
Make sure you take some time to think through all of the positives and negatives when considering a warranty. Don’t get pressured into offering one just because you think it’s what you should do. There’s a lot that goes with making a promise and the primary objective should be to establish trust with your audience.