4 Tips for Building an Effective Warranty Program for Your Small Business

Don't let a mistake or product defect hurt your business. Go above and beyond to make things right for unsatisfied customers.
Mistakes are inevitable. Elevate your customer service by fixing those mistakes with a warranty program. (Photo: Rawpixel.com/Shutterstock)

Have you ever purchased a product or paid for a service that failed to meet your expectations? If so, you understand how frustrating and disappointing it is to feel your money was wasted — and how unlikely you are to trust that business again.

As a small business owner, giving customers a positive experience with your brand is of utmost importance. In fact, your brand’s survival often depends on providing top-notch service and gaining customer loyalty. One inexpensive way to build trust with consumers is to provide a guarantee, or warranty, on the products and/or services you sell.

To learn more about creating an effective warranty program for your small business, NCR Silver spoke with Bob Godlasky, mentor for SCORE and the Center for Entrepreneurship at California State University, Fullerton, and Travis Lindsay, entrepreneur in residence for the CSUF Startup Incubator.

Exceed the client’s expectations

For any entrepreneur, and especially for small business owners, keeping customers happy is a top priority.

“Before thinking about warranties, first understand and respect that relations with customers are golden gifts,” said Godlasky. “Create a company culture where every employee is empowered to [help] the customer. Customer satisfaction should be a job requirement for everyone on the team.”

If you do end up needing to take back a product or redo a service on occasion, “do it gladly and with enthusiasm,” Lindsay advised. “Replacing a customer is much more expensive than fixing your mistake.”

More than simply resolving the problem, find ways to exceed your customer expectations. Show them that you genuinely care about their concerns and are willing to go above and beyond to make things right.

Imagine you run an auto repair shop, for example. If a customer returns because the leak you fixed last week is back, don’t just correct the problem and send them on their way. Go the extra mile and wash or detail the car while it’s in your shop.

Related: Customer Service: To Make it Memorable, Make it Surprising

Understand mistakes are just a part of doing business

Nobody is perfect. Regardless of how conscientious a person you are and how much you strive to do right by your customers, things will still go wrong on occasion, said Lindsay.

“Unfortunately, mistakes will happen and products will fail unexpectedly,” he said. “This is just a reality that you cannot avoid, no matter how diligent you are in the manufacture of your product or how much care you put into your services. Knowing this simple truth will help you understand that when a product is returned, it is not a personal attack.”


No matter how angry a customer may be, try to remember it is not a personal attack on you. (Photo: Pressmaster/Shutterstock)

When you give customers a guarantee, your top objective is to “satisfy the customer at any reasonable cost,” said Godlasky. As such, he advised business owners to plan for the inevitable and calculate for potential defects and returns in their pricing strategy.

It’s also a good practice to reassess your warranty program from time to time, said Lindsay. “To do this effectively you will need to keep metrics on your warranty program. This means tracking stats like the number and cost of returns/replacements,” he said.

Related: The Benefits of Failure and How to Learn From It

Get the manufacturer involved

As a veteran of the retail space, Godlasky said if you do have to take back a failed product, be sure to notify the manufacturer or vendor who sold it to you. Just as you have a responsibility to your customers, these vendors have a responsibility to you and can help lower the cost burden associated with the return.

“Get them to share the expense of replacing the part or the product,” he said. “They should make you whole in the return or exchange process.”

A bookstore, for example, may sell thousands of books each year. A percentage of those sales will inevitably get returned due to damages or defects, or simply because the customer ended up not wanting the book.

“The bookstore will refund the purchase to the customer then turn around and receive a refund from their vendor,” said Lindsay. “It is simply a cost of doing business.”

Put it in writing

To avoid confusion and keep customers from taking advantage of your warranty program, put your policies in writing and have your small business attorney review them. Outline exactly what your guarantee covers — and what it doesn’t.

Related: 10 Tips for Crafting an Effective Return Policy (and Enforcing It)

Having a well-thought-out guarantee policy will help you navigate sticky situations with angry customers and make refunds and exchanges less painful, said Godlasky, “and that can differentiate you from competitors and give you a competitive advantage.”

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