Monday, December 29, 2008

Business Lessons – a few thoughts on Warranty

Often in business manufacturers offer a warranty or a guarantee on workmanship. If it thought the longer the warranty the more confidence the manufacturer has in the quality, durability and reliability of their product. A warranty is nothing more than guarantee in workmanship stating for so many months or years we will repair or replace this item baring extreme abuse if it fails. 

Some company’s have even figured out how to use this as a marketing tool and a revenue generating source much like insurance companies. What the will do is knowing the mean time between failure is say 5 years. They will offer a one year warranty initially. Then there will offer you the option to extend the warranty at some fixed rate for so many years. Essentially what they are doing is banking a reserve such that when the item fails there is a cash reserve to cover the parts and/or repairs.  Some auto mobile makers even offer lifetime warranties (provided you maintain the item at their dealership) 

So as a service business how might you use this concept to help you improve your reputation since your product is your intellectual capital? One option – depending would be you implement a solution and within a certain period of time should something not go right you take the time at your cost to make it right. Let’s say you design a network and you overlook a drop – you add the drop you missed at your cost.  Sure it will cut into your profits a little but it will do more to improve your credibility with the client and never forget they are the reason you are in business. 

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