The Redefinition of Warranty

warrdrivessalesOriginally defined as a moral obligation, warranty has evolved into a powerful tool for enhancing the customer experience, which in turn drives sales.  

I recently purchased a wearable fitness-tracking device. After about 7 months it just stopped working. I contacted the manufacturer and did the recommended troubleshooting. When that didn’t fix the problem, I asked for a replacement, expecting push back.

But none came.

The device manufacturer asked for proof-of-purchase to see if I was eligible for warranty coverage. I sent it in and within hours received an email letting me know that a replacement was on its way.

But what really made this a truly great customer experience was that the manufacturer didn’t make me jump through all the hoops laid out in its written warranty to get a replacement. I didn’t have to return the product in its original packaging – which, of course, I no longer had – on my own dime and then wait weeks for a response.

I thanked the manufacturer for how it handled the situation, will do business with this company again, and have recommend the product to friends.

While this is merely a personal anecdote, research tells much the same story: A top-notch warranty program is good business.

Three findings arrived at across the studies explain why warranty has taken on a key role in consumer purchasing decisions. First, consumers view warranties as indicators of product quality, reliability and durability. As products become more complex, and it becomes more challenging to differentiate one from another, warranty has taken on the role of quality signal for both buyer and seller. Second, while consumers’ expectations continue to rise, so, too, have they become willing to pay a premium for products with better warranties. A better warranty assures a customer that a company believes in its product and will be there when things go wrong. Third, consumers consider warranty service a part of the value purchased. Consumers are busy too. They don’t want a lot of down time and hassle when they experience a product problem. They demand quick effective service and reward a company that delivers it.

Companies that have reprogrammed their warranty approach away from treating it as a cost-center and instead focusing on enhancing the customer experience are reaping the rewards. Those that have lagged behind are, well, lagging behind.

GWSCA LogoFor more on this topic, attend my seminar and the other presentations at the Global Warranty and Service Contract Conference, September 16-18, 2015, at the Hilton Palmer House Hotel in Chicago. For more information about the conference or to register, visit:  www.gwsca.org.

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