Some thoughts on how to use warranty to drive sales

warranty on wheels

In a recent webinar, Warranty in Practice – Can a company use warranty to help drive sales?, I talked about the cultural roots of “warranty,” its underlying polices, the laws affecting it, and how in modern times it has evolved from a cost-center to a sales tool. The presentation also touched on ways to use warranty to help increase sales. Here are a few more thoughts on the topic.  

Using warranty to attract new customers 

Your warranty says a great deal about your company in the minds of prospective buyers. Researchers tell us that as competition continues to intensify and products become increasingly complex, prospective buyers view a warranty as a quality signal. They appreciate the costs associated with warranty and believe that a robust offering indicates a high quality product being offered by a high quality firm. While the study focused on consumers, the observations also have relevance in the business-to-business context. These findings strongly suggest that a company can gain a competitive advantage through its warranty.  But how to do it?

First, your products have to be high in quality. A great warranty on a sub-par product will leave a company hemorrhaging money.

Second, because warranty costs come directly off the bottom line, a company must ensure that its warranty program is operating efficiently and effectively. This involves thoroughly and realistically assessing product performance and durability, making reasonably accurate predictions about product failure rates and associated repair, replacement and related costs, and a candid assessment of program administration. The Warranty Maturity Model is a useful tool a company may use to self-evaluate its program, identify deficiencies and make corrections. The Global Warranty and Service Contract Association (of which I am an Officer and Director) offers a Warranty Maturity Model Assessment Program designed for product OEMs.

Third, to be effective in attracting customers your warranty’s terms and conditions – your baseline promise to your customer – must be written in clear and easy to understand language. Even the most customer-centric warranty terms are of little value if potential buyers can’t figure them out. Companies and their lawyers must have the courage to move away from the perceived safe-haven legalese and fine print offer and embrace plain language. “Words that are the most easily understood make the strongest impression; hence, in general, the writer’s vocabulary is made more strong by the use of common words, words of the home and of everyday life, words expressing simple relations.” John F. Genung, Outline of Rhetoric 117-18 (1893). Words-of-art, jargon and unclear language push readers – buyers – away, cause confusion, invite misunderstanding and misinterpretation and breed dispute. Simplicity, on the other hand, breeds clarity and understanding. These in turn promote harmony.

Finally, study what your competitors are doing, adopt those practices that make sense and devise ways to separate yourself from them. Figure out what’s really important to your customers and come up with new and innovative ways to make their lives easier when dealing with a product problem. Who knows your customer’s needs better than you? You design your products, policies and practices around them, do you not? Use your experience and insight not just to develop ad campaigns, but to come up with creative new customer service offerings. Amazon did it when it introduced one-click support on the Kindle Fire HDS and J Crew did it by having its CEO call customers to address and respond to email complaints. Find ways to offer and deliver more of what matters most to your customers than your competitors are doing.

Use every aspect of your warranty program – from the written document to the direct interactions with customers –  to broadcast your strong commitment to providing the highest level customer experience possible. Signal that you as well as your product are of the highest quality.

Warranty as a way to repeat customers

WEDemingMaking the first sale can only take a company so far. Sustained success requires repeat business. So a company must do more than build and sell a quality product. It must also make the ownership experience enjoyable to a point that customers not only come back for more, but spread the word. As noted scholar and business consultant W. Edwards Deming is quoted as saying:  “Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them.” Here, too, I think, the premise applies to commercial buyers and consumers alike. A company can inspire loyalty from buyers in both groups by being there to solve problems when they arise. On this score, a company’s warranty program offers it an opportunity to strike up the tune that will get its customers loudly singing its praises. And in this instant communication and social media age, their voices can be heard far and wide.

We all want to feel good about the items we purchase, whether a new car or flat-screen TV for the family, or that cutting-edge piece of equipment that we expect will help us grow our business and double our revenues. Through advertising and promotion, companies do a bang-up job of getting their products noticed and getting prospective buyers excited to buy and try them. But clever commercials and slick ads don’t do much good when trouble strikes. The giddy excitement that accompanied the purchase becomes but a distant memory when that shiny (and expensive) new car won’t start or that latest-and-greatest iGadget just won’t work right. At these times, how do you stop your now disillusioned customer from excoriating you on their Facebook page and tweeting out their anger and frustration to all the world? How do you keep them from looking at someone else’s product the next time they’re looking to buy what you sell? How do you get them to give you a second chance? This is where your warranty program goes into action. Approached the right way, it can keep those customers coming back and help attract new ones. Approached the wrong way, it can drive your would be customer’s into your competitors’ arms.

tylenolWhat’s the right approach? It starts by recognizing that, by and large, American consumers are very forgiving. The fact Tylenol is still being sold underscores the point. But to capitalize on buyers’ general willing to give a company a second chance you must first earn their trust. To do this you must take your relationship with your customer seriously and be willing to invest in it. This means viewing a product problem as an opportunity to reward your customer for the trust she showed in you by buying your product. Your goals here should be to set yourself apart from your competitors; to show your deep commitment to your customers; and to give them the best you have to offer. So teach your warranty and other customer service people to be welcoming and receptive, not evasive and standoffish. Humanize the experience. Encourage (and permit) them to empathize, to see and understand the situation from your customer’s perspective. (From time-to-time it might even be okay for one of your people to say, “I’m sorry”.) Give them training in how to manage difficult situations and how to manage expectations and to effectively respond to disappointed or angry customers. Have them figure out what your company should, can and will do for the customer – and don’t let them be cheap or shortsighted here – before they tell her what you can’t or won’t do for her. Give your customer the benefit of the doubt whenever you can. Find a fix that works for everyone. It’s there if you look hard enough.

Remember, it is only by investing in the customer experience in the short-term – which will often mean absorbing somewhat higher up front costs – that you can even hope to see long-term dividends from repeat business and positive word-of-mouth “advertising.”

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2 Comments

Filed under Best Practices, Customer Experience, Warranty

2 responses to “Some thoughts on how to use warranty to drive sales

  1. George Spatt

    A very interesting read. This caught my eye because I am in the automobile business. A good example of how a solid warranty can be effective is the Hyundai story. When Hyundai was first imported to the U.S. it suffered from a (justifiably) poor reputation for reliability. However, by introducing the arguably “best” factory warranty in the auto business, along with better quality control, they have turned that reputation around. Their 10 year, 100,000 mile non-transferable, power train warranty is a slight illusion. Most owners keep a car for fewer than 4 years, but the message was the factory felt it would easily last 10. Now, Hyundai and it’s sister Korean import Kia, are treated with almost the same regard as other Asian built, high quality vehicles. The warranty must also be viewed as coming from an entity that will exist throughout the life span of the warranty. Sometimes we incorrectly assume that is the case. Ask the Saab owners who purchased a vehicle with 4 year 50,000 warranty but were left holding the (air)bag. I chuckle when I see some of the lifetime warranties that are seemingly becoming more popular. I wonder if they are talking about their lifetime, or mine.

  2. Great editorial. Contractual warranty fulfillment leads to more sales down the road. Customer peace of mind and brand loyalty begins with solid warranty support of the product sold.

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