WHAT ARE GRADES AND STANDARDS?• Standards are • Grades are ratings statements that assigned to specify a product’s products that tell to size, contents, what extent and/or quality; used standards are met as a basis for comparing or judging goods or services
INTERRELATIONSHIP BETWEEN GRADES AND STANDARDS• Standards are set. Each product is rated against these preset standards and assigned a grade. Products that don’t meet the lowest standard are scrapped, reworked or sold at a discounted price.• Example: School grading system – standards are set. You have to do this to earn an “A” in this class. Your work is compared to the standards and your grade is determined.
WHY ARE STANDARDS USED?• Standards are used to establish uniform, consistent products.• Example: CD’s made in the USA, Japan, and Mexico all have to fit into the same disc player
GRADES AND STANDARDS CAN INDICATE…• How the product • How much the can be used product will cost its • Ex. Grades on milk buyer and motor oil • Ex. Buyers will pay• Where the product more for top grade will be sold • Who the user • Ex. Gap, Inc. places can/should be higher quality clothes • Ex. Movie ratings at the Gap and their indicate the lower grade clothing audience: G, PG, at Old Navy PG13, and R
GRADES AND STANDARDS AID BUYING AND SELLING• Their use speeds up the process because consumers can buy products without having to inspect• Consumers rely on grades and standards for product information
GRADES AND STANDARDS IN GLOBAL TRADE• The ISO 9000 are international standards for quality• This standard guarantees that manufacturers have meet certain requirements for producing and shipping their products
WHO SETS GRADES AND STANDARDS?• Government agencies • Businesses • Ex. FDA – food and • Ex. McDonalds buns drugs, FCA – have an exact size and communication, County color, Ford requires Health Dept. - suppliers to meet restaurants certain standards when• Trade and making “Q1” parts. professional organizations (to promote product safety) • Ex. AAA - motels
TYPES OF GRADES AND STANDARDS• Read handout and answer review questions #1-9
WHAT IS A WARRANTY?• Warranty is a defined promise made by the seller to the consumer that the seller will repair or replace a product that does not perform as expected
TYPES OF WARRANTIES Express Warranty Implied Warranty• Defined as promises • Defined as an expressed in a specific unwritten, unstated statement concerning warranty understood the quality of the by the consumer and product the seller that a • Can be written or oral product will perform as expected • The product will do what it is designed and recommended to do
TYPES OF WARRANTIES Full Warranty Limited Warranty• Defined as warranties • Defined as warranties that cover the entire that do not contain the product provisions of full • If the product doesn’t work warranties, may cover it must be made good in a reasonable time if not the only certain repairs or customer can choose a specific parts replacement or refund • No time limits on implied warranties • The customer need only notify the warrantor in order to obtain repairs
WHAT IS A GUARANTEE?• Defined as a promise made by the seller to the consumer that the seller will refund the consumer’s purchase price if the product doesn’t perform as expected.• AKA – “Money-back guarantees”• While warranties usually apply to goods, guarantees are given for both goods and services
CHARACTERISTICS OF A EFFECTIVE GUARANTEE• Unconditional • Easy for the • No conditions for the customer to customer to meet implement• Understandable • Not a lot of forms, • Clear language and people to see , and no difficulty different locations understanding the • Easy for the promises customer to collect • When possible money should be refunded on the spot
PURPOSES OF WARRANTIES AND GUARANTEES• To reassure • To use as a prospective promotional tool customers • To use as a• To protect the competitive tool producer and seller • To use as a image• To gain repeat builder customers• To increase sales
BENEFITS OF WARRANTIES AND GUARANTEES Consumer Benefits Business Benefits• Reduced anxiety • A customer-oriented about purchases focus• Free repairs • Establishment of clear• Service information standards• Legal recourse • Feedback from customers • Increased profits
WHY ARE WARRANTIES AND GUARANTEES REGULATED AND CONTROLLED BY THE LAW?• They can cause problems for producers • Consumers misuse the product • Customers expect problems to be fixed that are not under warranty• There have been times when companies have “guaranteed” their products without living up t the terms of the warranty or guarantee and the customer was cheated.
MAGNUSON-MOSS WARRANTY ACT OF 1975• This Act provides guidelines for businesses offering warranties and guarantees with their product. • Protects consumers • Makes warranties stronger & easier for consumers to understand • Covers all consumer products & requires marketers to provide product information to consumers even before they make the purchase • FTC has the authority to regulate warranties on products tat sell for more than $15
PRODUCT LIABILITY• Product liability is the • 3 major types of area of law in which claims: manufacturers, • manufacturing defect distributors, suppliers, • design defect retailers, and others • a failure to warn (also who make products known as marketing available to the defects) public are held responsible for the injuries those products cause.
PRODUCT RECALLS• A product recall is a • Recalls are costly to a request to return to company because the maker a batch they often entail or an entire replacing the recalled product or paying for production run of a damage caused by product, usually due use, although possibly to the discovery of less costly than safety issues. The consequential costs recall is an effort to caused by damage to limit liability (which brand name and can cause costly reduced trust in the legal penalties and manufacturer damage in reputation)
PRODUCT RECALL AGENCIES• US Coast Guard: Marine • Food and Drug vehicles and related Administration (FDA): Food, products (e.g. boats, pharmaceutical drugs, personal watercraft, life health supplements, jackets) cosmetics.• Consumer Product Safety • United States Department Commission (CPSC): of Agriculture (USDA): Meat, Consumer products (e.g. poultry, eggs. toys, household goods, • National Highway Traffic bicycles, off-road vehicles, Safety Administration etc.) (NHTSA): On-road vehicles• Environmental Protection and related products (e.g. Agency (EPA): Pesticides, cars, trucks, vans, fertilizers, and anything recreational vehicles, harmful to the environment motorcycles, tires,• Federal Aviation motorcycle helmets, Administration (FAA): childrens safety seats) Aircraft
RECALL ACTIVITY• Use the Internet to locate information about a recent case involving the Consumer Product Safety Commission (CPSC). Record the following information: • Name of the company • Nature of the product safety issue • Outcome of the case • You will present your findings to the class
RECALL ACTIVITY 1• Use the Internet, newspapers, or magazines and search for an article that discusses a specific product recall. Provide the following in a summary of the article:• Title of the article• Author of the article• Article publication• Summarize the article in approximately 100 words• Based on the information in the article, discuss whether or not you believe this recall was covered under the product’s warranty
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