Offering Guarantees and Warranties

Increase sales and earn customers' trust by offering risk-free purchases

By Constance Gustke

Warranties and guarantees are written promises to your customers. They attest to a product's quality or durability. Complete satisfaction, 100 percent money-back guarantees can also increase sales, sometimes dramatically. After Tom Monaghan, the founder of Domino Pizza, created his pledge "Pizza delivered in 30 minutes, or it's free," his once-failing business began to flourish. The 30-minute pledge was later ditched over safe-driving concerns, but the die was cast. Other ways that warranties and guarantees can help you include:

Making a purchase low-risk or risk-free
Increasing perceived value
Giving you instant credibility as a company to trust
Adding convenience for buyers

Despite these attributes, many small business owners don't offer warranties or guarantees. They're afraid their products will be returned. But, studies show that only 1 to 2 percent of all customers actually end up demanding a refund. With little to lose, and much to gain through increased sales, crafting an effective guarantee can serve as a strong marketing tool that forges a bond with customers.

Focus on your strengths

Decipher your quantifiable strengths. For example, does your company offer a specific percentage of savings over the competition, does it perform installations within a certain amount of time or does it offer the widest selection of products in your area?
Try: Use the SWOT (Strengths, Weaknesses, Opportunities, Threats) Index to identify your company's strengths and base your warranty on them.

Hard guarantees vs. soft guarantees

A hard guarantee makes a promise based on specific results. A soft guarantee promises general results, such as satisfaction guaranteed. Generally, the latter are less effective and difficult to benchmark. By promising specific results, such as a 100 percent money-back guarantee if a product fails within 60 days, you are far more likely to win over customers.
Try: Find examples of hard and soft guarantees at SCORE.

Keep it simple

Keep your guarantee or warranty brief - no more than three paragraphs. Use language that is readily understood by the general public and avoid technical or industry jargon.
Try: For a modest fee, download a customizable warranty form (PDF) from EDocDesign.com.

Measure results early on

Test two different versions of your guarantee to see how well it works, say experts. You can measure results in sales. For example, you can offer a lifetime guarantee in one ad and a 90-day version in another. Then see which works best. After you've gathered results, you can launch an extensive ad campaign using your new guarantee as a cornerstone.
Try: Try a direct-mail marketing campaign to test your guarantees and use a marketing ROI calculator from Marketing Today to determine which guarantee pulls the best results.

Full or limited warranty

The Magnuson-Moss Warranty Act dictates that any warranty for a consumer item priced higher than $10 must indicate if it's a full or limited warranty.
Try: See if your warranty fits the criteria for a full warranty, or if it must be labeled a limited warranty, at SmallBusinessNotes.com.

Create a warranty card

Ask customers to fill in a postage-paid warranty card when they make a purchase or have them register online. A warranty card gives you the opportunity to collect contact information, demographic information and shopping habits of your customers.
Try: View a warranty card template at QuestionPro.com.

Investigate whether your competitor offer warranties or guarantees, and if so, what type of warranties.
Beware of putting clauses in parentheses. They can be misconstrued as underhanded.
State terms in clear, concise language.
Offering less than 30-day guarantees can make customers reconsider a purchase.
Do not use a warranty or guarantee as a promotional tool by promising more than you can deliver.