Should Your Company Offer Customers Warranties?

When you make a high-ticket purchase—whether it’s a house, new car, or even something as simple as a power tool—you’re generally offered some sort of warranty with the purchase. And while you probably have a personal take on whether or not you pay for warranties, have you ever considered offering them with your own company’s products?


The Benefits of Warranties

By definition, a warranty is “a written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time.”

While the advantages of warranties are clear for the consumer, what sort of benefits do they offer the business?

  • Additional revenue. Sometimes warranties come standard with products, but many times businesses actually sell additional warranty coverage to customers. This creates an additional stream of revenue.
  • Competitive edge. When you’re in a heated battle for customers with a close competitor, any little advantage helps. Offering a generous warranty may be enough to give you the edge you’re looking for.
  • Long-term customer loyalty. Offering a warranty communicates to customers that you believe in your products and stand by them. One of the indirect effects here is long-term customer loyalty.

Some products are conducive to warranties, whereas it doesn’t make sense for other products. Cars are a great example of products that should be accompanied by warranties. Premier Automotive Group’s powertrain warranty for life instills confidence in the brand and makes customers feel like they’re getting more value and peace of mind with what is an incredibly important purchase.

On the other hand, it would be ineffective for an office supply store to offer a lifetime warranty on a roll of tape. The product is both cheap and dispensable—so there’s no point.




3 Tips for Maximizing the Value of Warranties

When you offer warranties to customers, you’re making an investment. In order to make the investment work, you have to see a return on the time, effort, and risk you put forth.

The following 3 tips will help you maximize this return.


1. Be Strategic With How You Offer the Warranty

Are you going to offer the warranty standard with the product, or will it be something that customers can add for an additional cost? Will the warranty only be offered for customers who join a membership club, or will it be available to anyone?

There’s strategy behind how a warranty is offered. You may have to play around with it until you find the right approach.


2. Only Include Elements You Can Afford to Support

You don’t have to offer customers a warranty, and you should only do so if it makes financial sense for your business. Only include elements that you can reasonably afford to support. The last thing you want is for a bunch of customers to come to you with an issue that negatively affects your bottom line.


3. Establish a Clear, Concrete Time Frame

The terms of a warranty should be very clear. Otherwise you’ll end up facing frustrated customers and legal action.

Perhaps the most important detail is the time frame. Customers should know exactly when a warranty starts and ends, as well as what (if anything) voids the warranty. The more transparent you are on the front end, the fewer issues you’ll deal with in the future.



Run the Numbers

You have to be the final judge of whether warranties would benefit your business. Do your due diligence, crunch the numbers, and figure out what the break-even point is. If they doesn’t have a positive impact on your bottom line, don’t offer warranties. But, as many other brands have discovered over the years, you’ll likely see a positive return.