Product/Service Management LAP 4 Promises, Promises Warranties and Guarantees

Objectives Describe types of warranties and guarantees. Explain the purposes and benefits of warranties and guarantees.

Describe types of warranties and guarantees. Objective

Six months ago, Bryan bought a new laptop.Six months ago, Bryan bought a new laptop. Now, the laptop isn’t functioning properly.Now, the laptop isn’t functioning properly. What should Bryan do now?What should Bryan do now? Check the laptop’s warranty.Check the laptop’s warranty. Contact the manufacturer and/or retailer to get the laptop fixed.Contact the manufacturer and/or retailer to get the laptop fixed.

What Is a Warranty? A promise made by the seller to the customer that the seller will repair or replace a product that does not perform as expected

Warranties: Stated or Understood? Express warrantiesExpress warranties  Expressed in a specific statement concerning product quality  May be written statements or oral promises

Warranties: Stated or Understood? Implied warrantiesImplied warranties Are unwritten, unstated, and simply understood by the customer and the sellerAre unwritten, unstated, and simply understood by the customer and the seller Imply that the product will perform as expectedImply that the product will perform as expected

Warranties: What Do They Promise? Full warranties  Cover the entire product

Full Warranties Reasonable time to fix No time limits on implied warranties Problem uncorrected in a reasonable time? Refund or replacement Warrantor contacted for repairs

Warranties: What Do They Promise? Limited warrantiesLimited warranties  Do not contain the provisions of full warranties  May cover certain repairs, specific parts, or a particular time period

What Is a Guarantee? A promise that the seller will refund the purchase price if the product does not perform as expected

Characteristics of Good Guarantees UnconditionalUnconditional UnderstandableUnderstandable Easy for the customer to implementEasy for the customer to implement Easy for the customer to collectEasy for the customer to collect

Explain the purposes and benefits of warranties and guarantees. Objective

Why Offer Warranties and Guarantees? To reassure prospective customers To protect the producer and seller To gain repeat customers To increase sales

Why Offer Warranties and Guarantees? To use as a promotional tool To use as a competitive tool To use as an image builder

Customer Benefits Reduced anxiety about purchases Free repairs Service information Legal recourse

Business Benefits A customer-oriented focusA customer-oriented focus Establishment of clear standardsEstablishment of clear standards Feedback from customersFeedback from customers Increased profitsIncreased profits PROFIT$

The Magnuson-Moss Warranty Act Protects consumers who buy products that have warranties or guaranteesProtects consumers who buy products that have warranties or guarantees Makes warranties stronger and easier to understandMakes warranties stronger and easier to understand Covers all consumer productsCovers all consumer products Requires business to provide product informationRequires business to provide product information Applies to products that cost more than $15 (FTC regulated)Applies to products that cost more than $15 (FTC regulated)

The Magnuson-Moss Warranty Act Warranties must:Warranties must:  Be clearly expressed  Be easy to understand  Give the name of the warrantor

The Magnuson-Moss Warranty Act Warranties must state:Warranties must state:  What the company responsible will do if a product is defective  How long a period the warranty covers  Whether the warranty covers the whole product

The Magnuson-Moss Warranty Act Warranties must define:Warranties must define:  The buyer’s responsibilities  Procedures for using the warranty  Any expenses that may be involved

The Magnuson-Moss Warranty Act Copies of written warranties must be available where the warrantied products are sold.

The Magnuson-Moss Warranty Act Today’s courts recognize express and implied warranties.

What major purchases have you made? Did they come with warranties/guarantees? Is the coverage appropriate? What would be suitable? Why?

Everything that BeBop Fine Attire sells is “satisfaction guaranteed.” Some customers, such as Mindy, appear to be abusing the guarantee. BeBop’s manager decided not to sell anything to Mindy ever again.

Are the manager’s actions ethical? Is it fair? What would you do?

Acknowledgments Original Developers: Christopher C. Burke, April J. Miller, MBAResearch Version 1.0 Copyright © 2012 MBA Research and Curriculum Center

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