1. Extended Product Features
Chapter 32
Extended Product Features

2. Warranties 32.1 After finishing this section you will know:
The different types of warranties
The importance of warranties to product planning
Additional extended product features
The major provisions of product safety legislation
Consumer responsibilities and rights related to product performance

3. Warranties
Warranty- promise, or guarantee, given to a customer that a product will meet certain standards
Usually a framed series of promises
Most limit the time or coverage which limits the seller’s liability
Example: 3 years or 36,000 miles

4. Guarantee Guarantee- another name for a warranty
Guarantee is used in: promotional phrases such as “money-back guarantee”

5. Express Warranties
Express warranty- explicitly stated, in writing or spoken words, to induce a customer to buy
Can appear in a number of places: on the packaging, in the product literature, in an advertisement, or as part of a point-of-purchase display

6. Express Warranties
Must be easily accessible to customers before purchase
Must be clearly worded so customers can understand terms

7. Express Warranties There are two types of written warranties:
Full warranty- guarantees that if a product is found to be defective within the warranty period, it will be repaired or replaced at no cost to the customer

8. Express Warranties
Limited warranty- may exclude certain parts of the product from coverage or require the customer to bear some of the expense for repairs resulting from defects
Example: manufacturer will pay for replacement parts, but charge for labor or shipping

9. Implied Warranties
Implied warranty- exists automatically by state law whenever a purchase takes place

10. Implied Warranties There are two types of implied warranties:
Warranty of merchantability- a promise from the seller that the product sold is fit for its intended purpose
Example: coffee maker will make coffee or a washing machine will wash clothes

11. Implied Warranties
Warranty of fitness for a particular purpose- when the seller advises a customer that a product is suitable for a particular use and the customer acts on that advice

12. Warranty Disclaimers
Disclaimer- a statement that contains exceptions to and exclusions from a warranty

13. Role of Warranties in Product Planning
Warranties are significant to a business because they:
Force a company to focus on customer needs
Set clear standards of performance
Generate customer feedback
Encourage quality control
Boost promotional efforts

14. Role of Warranties in Product Planning
Extended warranties or service contracts- provide repairs or preventative maintenance for a specified length of time beyond a product’s normal warranty period
Customers pay extra these contracts at the time or purchase

15. Role of Warranties in Product Planning
Beneficial to both businesses and customers
Businesses profit by- receiving the extra money on the original sale of the product
Customers benefit from- the assurance of long-term satisfaction with their purchase
Disadvantages to service contracts- only 12-20% of people who buy extra service protection ever use it

16. Other Extended Product Features
Product planners must constantly evaluate a product’s extended features from a customer’s viewpoint. They should be able to answer yes to the following questions:
Was the product delivered on time?
If installation was necessary, was it done properly?

17. Other Extended Product Features
Was the bill for the good or service accurate and timely?
If needed, was the service provided promptly, courteously, and correctly?
If needed, were technical assistance and training provided?
Were directions clearly written?

18. Consumer Laws and Agencies: Federal Statutes
Magnuson-Moss Consumer Product Warranty Act of governs warranties for all products costing $15 or more
Consumer Product Safety Act of monitors the safety of more than 11,000 nonfood items

19. Consumer Laws and Agencies: Federal Statutes
When products are found to be defective or dangerous the Consumer Product Safety Commission can:
Require warning labels to be attached to the product
Recall the product and order repairs
Prohibit the product’s sale

20. Consumer Laws and Agencies: Federal Statutes
Food, Drug, and Cosmetic Act of assures that products will be safe, meaning pure, wholesome, and effective, as well as informatively labeled and truthfully advertised

21. Consumer Laws and Agencies: State Statutes
Lemon laws- protects consumers from poorly built cars
Out of service for at least 30 days within the first year of ownership of a new car
Four attempts have been made to fix the same problem
Owners are entitled to a refund or a comparable replacement car

22. Consumer Laws and Agencies: State Statutes
Arbitration programs- an impartial third party decides the crucial issues of the lemon law
Can save time and money by avoiding a lawsuit
Often the arbitrators’ decisions are not binding
Car owner can sue the carmaker if not satisfied

23. Consumer Rights and Responsibilities
Consumers should take the following steps when they have not been adequately protected by a warranty:
Contact the business that sold the product or the product manufacturer
If the problem is still unresolved, contact the local, state, or federal offices that can assist with customer complaints
If the problem is still not resolved, take legal action

24. Consumer Rights and Responsibilities
Consumers can sue manufacturers or retailers on at least three (3) grounds:
Breach of federal law (written warranty)
Breach of state law (implied warranty)
Negligence- failure to take proper or reasonable care
Class-action suits- filed by more than one party such as consumers, cities, or states against manufacturers for making unsafe products

25. Consumer Rights and Responsibilities
Businesses can minimize liability lawsuits during product planning:
Examine product design and see what could go wrong
Test products thoroughly
Special attention to package design and providing warnings on the package
Encourage customers to be responsible

26. Assignment
Page 592
Reviewing Key Terms #1-5

27. Credit 32.2 After finishing this section you will know:
The importance of credit
The five sources of consumer credit
The four types of credit accounts extended to consumers
How businesses use trade credit
The most important credit legislation

28. Credit and Its Importance
Credit- allows businesses or individuals to obtain products or money in exchange for a promise to pay later
Used by businesses to buy goods and services

29. Consumer Credit
Process to follow to obtain credit through banks, department stores, or oil companies:
Fill out credit application
Sources of income
Credit history
Issued a card and are bound to a credit agreement

30. Consumer Credit
Credit limit- pre-approved dollar amount which customers can use to purchase items on credit which is based on ability to pay and credit history
Limits range from $250 to thousands
Purchases go through a computerized pre-approval process prior to the purchase
Assures the customer hasn’t exceeded their credit limit

31. Different types of Consumer Credit
Bank credit cards- VISA, MasterCard, and Discover sponsor but do not issue cards through banks
Annual fees- are sometimes charged- a flat yearly charge similar to a membership fee
Variable rate- rates change with the prime interest rate controlled by the government
Fixed rate- rates are not tied to prime and change less often

32. Different types of Consumer Credit
Gold or platinum cards- issued to people earning higher incomes
Titanium- card with the highest prestige
Standard or classic cards- issued to people with lesser incomes and may carry a higher APR

33. Different types of Consumer Credit
Store and gasoline credit cards- some businesses are large enough to offer their own credit cards
Examples: Sears, Target, Sunoco
Individual company handles the processing and billing of all customer purchases
Usually no annual fee, but a higher rate of interest is charged

34. Different types of Consumer Credit
Travel and entertainment cards- American Express, Discover, and Diners Club require payments to be made in full each month in addition to annual fees or service charges
Also charge retailers a service fee when they submit customers’ charge slips
These cards are not accepted everywhere

35. Different types of Consumer Credit
Rebate cards- offer rewards or incentives to use their credit
Rewards are often granted in the form of: cash, airline miles, or long distance service
Those who use credit cards for convenience and pay the balance every month- may find the best deal in rebate cards

36. Different types of Consumer Credit
Affinity cards- credit cards issued by issuing banks to show your loyalties to a sports team, university, charity, or organization

37. Different types of Consumer Credit
Debit card- look like credit cards and allow the funds to be directly withdrawn from a checking account to the place of purchase
Appears as a withdrawal or “Debit” on your bank statement

38. Different types of Consumer Credit
Special customer cards- part of product planning that are offered to frequent shoppers
Allows customers to receive- reduced prices on items purchased or reward certificates for cash discounts on future purchases
Provides customers with an incentive to shop at the store

39. Different types of Consumer Credit
Secured and unsecured loans
Secured- something of value, such as property is pledged as collateral
Unsecured- a written promise to repay a loan

40. Types of Accounts
Regular charge accounts or 30-day accounts- allows customers to charge purchases during a month and pay the balance in full within 30 days after they are billed
There is no finance charge as long as the balance is paid on time

41. Types of Accounts
Installment accounts- allow for payment over a period of time
Normally used for large purchases such as college education, automobiles, or furniture

42. Types of Accounts
Revolving accounts- the retailer determines the credit limit and when payments are due
Payments are usually a percentage on the balance owed or a minimum dollar amount

43. Types of Accounts
Budget accounts- allow time for the payment of a purchased item over a certain time period without a finance charge
Example: 60 days same as cash, 90 days interest free

44. Business Credit Money is lent for goods or services
Does not involve the use of credit cards
Credit memorandums, letters of credit, and credit drafts are used in trade credit situations

45. Legislation Affecting Credit
Truth in Lending Act of requires that lenders disclose information about annual percentage rates, the name of the company, and the amount financed
Fair Credit Reporting Act of lenders must report the name and address of the credit bureau that was used by the lender when consumer credit is denied

46. Legislation Affecting Credit
Equal Credit Opportunity Acts of 1975 and set guidelines for the review of applications for credit and prohibited the discrimination based upon age, gender, race, religion, or marital status
Fair Debt Collection Act of prevents businesses from harassing or abusing bad-debt customers in order to collect from them

47. Legislation Affecting Credit
Credit and Charge Card Disclosure Act of helps consumers by requiring credit card issuers to provide information about card costs

48. Assignment
Page 598
Reviewing Key Terms #1-5