Warrant Your Use of Product Warranties

Researchers at Wayne State University, California State University-Los Angeles, and Salisbury University say that with low familiarity brands, a warranty which is extraordinarily strong provides a competitive advantage.
     For their studies, the researchers used as examples of low-familiarity brands Falken tires carrying an 80,000-mile warranty and Flint & Tinder hoodies carrying a 10-year warranty. These met the researchers’ criteria for an exceptionally strong warranty. Such a warranty substantially exceeds the typical warranty for the product category, consumers’ expectation of the product’s longevity, consumers’ expectation about how long they might use the product, and consumers’ expectation of how long other consumers might use the product. Compared to a standard warranty, the augmented one increased study participants’ quality ratings and interest in purchasing the items.
     The reason for the effect is that consumers tend to be highly uncertain about the quality of an unfamiliar brand, and the strong warranty acts as a signal of quality. The study findings indicate there’s a condition on this effect: The consumer must believe they have relatively high knowledge about the product category—tires or hoodies, for example. The consumer’s actual product category knowledge is not what matters directly. It is instead the consumer’s self-assessed knowledge—their subjective expertise—that helps determine an extraordinarily warranty’s effect on quality perceptions.
     The researchers do not claim that extraordinarily strong warranties will aid sales of well-known brands. In fact, studies at NEOMA Business School and The Korea Development Bank found that a familiar store or brand which offers no warranty is signaling that the superb quality of the item makes a warranty unnecessary.
     This works because of the functions a warranty serves for the shopper. Shoppers usually prefer a product or store when it provides a warranty. However, people don’t buy a product principally because of the warranty. Researchers at University of Chicago and University of Singapore found that warranties are more likely to influence purchases when presented in one or both of two ways: 

• “The warranty is like an insurance policy, letting you know that if anything goes wrong, your costs to make things right will be zero.” 
• “The warranty avoids you worrying that you’ve made a bad purchase decision”

     Shoppers usually think of the warranty more in terms of insurance against loss than in terms of assurance of product quality. When you exude quality, consider whether you want to even bring up the warranty unless the shopper asks you about one.

Note: My thanks to Prof. Sujay Dutta of Wayne State University for editing my text in this blog post about the study in which he was the lead researcher.  

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Know When No Warranty Is Best