If you are a business owner in search of a cheap, flexible, and inexpensive way to differentiate your products from the competition, perhaps you should create a product warranty.
Warranties: An Overview
When you offer a warranty on your product, you assure your customer that the product is not defective at the time of purchase – and, if it does happen to show defects, that you promise to repair or replace it. If you feel really confident in your goods, you can try an extended warranty. Extended warranties are extra packages that the customer has to pay for in addition to their initial purchase, but the extension promises to protect against any defects that take place for a period of time after the initial purchase. There are more types of warranties available. For a full listing, check out the Canadian Consumer Handbook.
There is a chance that offering a warranty on your products can be a financial hassle. If your products break down or are otherwise defective, your customers can trigger the warranty and request repairs or a replacement. These cost money and, just as critically, time. However, the opportunity cost for basic warranties is actually fairly low. Many business owners are unaware that some provinces and territories enforce an “implied warranty” on every sale, unless specifically noted as otherwise in the sales contract (read more about it on the Government of Canada website). Nearly all business warranties are strategically priced such that the insuring company earns more in extra sales/extended warranty purchases than it pays out in repairs. Make sure you crunch the numbers to ensure the warranty doesn’t present a financial burden.
Customers don’t just receive financial protection from warranties. When you stamp a warranty on a product, it offers customers peace of mind about the quality of product they receive, even if they have never done business with you before and have no reason to trust you over any other product seller. Extended warranties give even more peace of mind, and consumers know that they don’t have to waste time finding a repair guy or searching for a replacement product. Even though many argue that extended warranties are for suckers, an extended warranty is probably no less “rigged” in favor of the seller than any insurance product. Other benefits include:
- Increased likelihood of repeat sales
- Good warranties can offset poor customer reviews or a less-than-stellar reputation
- Sets the expectation that you care about the customer’s experience, not just profit
Best Way to Communicate Your Warranties
If you decide to offer a warranty, it’s best to clearly state what you cover, what you don’t, and any other appropriate guidelines your customer should know. If there are circumstances that should void a warranty, those need to be communicated clearly. Make sure you communicate whether you offer a warranty or a return policy. If you don’t want to offer a product warranty, remember to express that clearly in any sales contract (and it’s not a bad idea to put it on your website and other marketing material). This avoids any later legal complications related to implied warranty protection. The main idea is to think like one of your customers. If you believe you can offer real peace of mind, improve loyalty, and generate a positive impression of your company and its goods, then maybe it’s time to consider a new product warranty or extended warranty.