2. Difference between Guarantee and
Warranty
A Guarantee
Is usually free
It's a promise to sort out any
defects with a product or service
within a fixed period of time.
It's a legally binding contract,
even if you didn't pay for it.
It must explain how to go about
making a claim in a way that is
easy to understand.
It should add to, not take away
from, your rights under
consumer law.
It works whether or not you have
a warranty.
A Warranty
• A warranty is like an insurance
policy that you must pay a
premium for.
Sometimes it's called an
'extended guarantee'
It might cover a longer period
than a guarantee, and it might
cover a wider range of
problems.
A warranty is a legal contract, so
you can take the company to
court if they don't honour it.
The terms of the contract should
be clear and fair.
Having a warranty doesn't
diminish your rights under
consumer law.
3. Characteristics of an effective
service guarantee
• Unconditional guarantee – promise
should be made without any
conditions.
• Guarantee should contain elements
that are important to customer
• Guarantee should be easy to
understand and communicate
• Easy to invoke and collect
4. examples
• If clients are unhappy they do not pay for
the services.
• FedEx guarantees package delivery by a
certain time
• British Airways introduced a new seat
design in first class, BA advertised
“Comfort guaranteed – or you get 25000
miles”.
5. When to use or not use a
guarantee
• A guarantee is not the right strategy when
• Existing service quality in the firm is poor –
the firm has to fix the quality problems first.
• A guarantee does not fit the company’s
image
• If a company has a good reputation, then a
formal guarantee is unnecessary.
• Guaranteeing that early morning flights in
winter (fog)
• Potential for customers to cheat
• Costs of the guarantee outweigh the benefits
6. • A guarantee is effective when the quality
varies among competitors.
• The first firm with a guarantee can
distinguish itself from competitors.
