Guarantee

What is a guarantee?

In the field of customer service, a guarantee is a commitment a company makes to its customers about the quality or benefits they can expect as a result of purchasing one of its products or services. The guarantee should also include a conditional clause explaining what steps the company will take if the pledge is not met.

Companies and small business owners use these pledges to foster trust in their brand name. The goal is that a strong quality guarantee will convert potential shoppers into buyers. When used properly, it can also transform a new customer into a repeat one - for life.

This statement is also commonly known as a customer guarantee, service pledge, or quality guarantee.

Example of a customer guarantee

The footwear company Chaco is direct in their pledge to customers, posted on their website:

“We stand behind our products. If a product fails because of a defect in materials or the quality of workmanship, we will repair or replace it free of charge.”

The page then continues on to detail what cases are covered by this promise or not.

Its statement is succinct, confident, and precise, three key criteria of an excellent customer guarantee.

Pros and cons of a customer guarantee

Some advantages to implementing a customer quality guarantee when starting your business include:

Fostering brand loyalty: Delight your customers by delivering stellar service and showing that you’re true to the word of your pledge. Not only are they likely to become a repeat client, they may even take to social media to share how happy they are with your response.
Boost sales: A quality guarantee (e.g. the ever-popular “100% satisfaction guaranteed”) shows that you have faith in your own products and services, helping potential buyers feel more secure in their decision to buy.
Collect feedback: Generally users will follow up on a pledge only when they’re frustrated with the quality of a product or feel their expectations for its value are unmet. Understanding what went wrong can help you troubleshoot and avoid similar situations in the future.

There can also be disadvantages to instituting a customer quality guarantee:

Cash flow impact: It can be stabilizing to your business’ cash flow if you have to suddenly refund an expensive item.
Legal repercussions: In the United States, common language used in customer guarantees, such as “Satisfaction Guarantee,” is regulated by the Federal Trade Commission. Make sure to clearly outline the conditions of what you can be held responsible for under the terms of your pledge.
Exploitative consumers: Ideally, quality guarantees are only ever used by customers who genuinely feel they have been short changed by a product or service. Unfortunately, there are occasionally those who take advantage of a generous policy. You can experiment with different tactics (e.g. a short interview with the customer, the wording of your guarantee, creating a financial buffer for these cases, etc.) to minimize the impact.

It’s also worth noting that customer guarantees have become so commonplace, they can sometimes fade into the background for browsing customers. This raises the stakes for finding a unique offer or messaging for your guarantee.

Common types of customer guarantees

Here are four types of quality satisfaction guarantees that you are likely to see:

Lifetime guarantee (also known as a forever guarantee)
Free trial guarantee (also known as a risk-free or a ‘try before you buy’ guarantee)
Lowest price guarantee
100% satisfaction guarantee (also known as a 100% happiness guarantee)

Guarantee vs warranty

Guarantee and warranty are terms often used interchangeably but they have distinct meanings in the context of consumer protection and product quality. Here are the key differences between the two:

A guarantee is a promise or assurance made by a manufacturer or seller regarding the quality, durability, or performance of a product. It's a commitment that the product will meet specified standards and if it doesn't, the manufacturer or seller may take certain actions, such as repairing or replacing the product or providing a refund.

A warranty is a written agreement or contract provided by the manufacturer or seller that outlines the terms and conditions under which they will repair, replace or refund a product if it fails to meet certain standards or specifications within a specified period.

Guarantees are often more informal and can vary in their terms. They may be verbal or written and they are generally seen as a commitment to customer satisfaction or a pledge to stand behind the product's quality. Warranties are more formal and are typically documented in writing. They provide specific details about the coverage, duration, and conditions under which the manufacturer or seller will address issues with the product.

Guarantees are generally not as legally binding as warranties. They may rely more on the reputation of the manufacturer or seller and their commitment to customer satisfaction. Warranties are legally binding contracts and consumers may have legal rights to enforce the terms specified in the warranty.

Guarantees may not always specify a fixed duration and they can vary in terms of how long the commitment to product quality or satisfaction lasts. Warranties typically have a specified duration, such as one year, three years, or a lifetime, during which the manufacturer or seller agrees to address issues covered by the warranty.

Guarantees may be broad and cover overall customer satisfaction or specific aspects of the product's performance. Warranties often have specific terms outlining the coverage, limitations, and exclusions, providing clarity on what issues are included or excluded from the warranty.

Types of guarantees

Guarantees come in various forms and they are often used to assure consumers of the quality, performance, or satisfaction associated with a product or service. Here are some common types of guarantees:

Satisfaction guarantee

This type of guarantee promises that customers will be satisfied with the product or service. If the customer is not satisfied, they may be eligible for a refund, replacement or another form of compensation.

Money-back guarantee

A money-back guarantee assures customers that they can receive a full or partial refund if they are not satisfied with the product or service within a specified period. This type of guarantee is common in industries such as retail and software.

Performance guarantee

A performance guarantee assures customers that a product will meet certain performance standards. If the product fails to perform as promised, the manufacturer or seller may offer repairs, replacements or other remedies.

Lifetime guarantee

A lifetime guarantee pledges that the product will be free from defects or faults for the entire lifespan of the product. This type of guarantee is often used for durable goods and can contribute to a product's long-term appeal.

Quality guarantee

A quality guarantee assures customers that the product is made with high standards of craftsmanship and materials. If the product falls short of these standards, the guarantee may cover repairs, replacements or refunds.

Service guarantee

In the service industry, a service guarantee may assure customers of the quality and satisfaction associated with the provided service. If the customer is not satisfied, the service provider may offer to redo the service or provide compensation.

Product replacement guarantee

Some guarantees focus specifically on product replacement. If the product is found to be defective or fails to meet certain criteria, the manufacturer or seller commits to replacing the item.

Limited guarantee

A limited guarantee may have specific conditions and limitations. It outlines the scope of coverage and any exclusions, providing clarity on what aspects of the product or service are guaranteed.

Spare parts guarantee

This type of guarantee ensures the availability of spare parts for a product over a certain period. It can be important for consumers who want assurance that they can easily obtain replacement parts if needed.

Sustainable or eco-friendly guarantee

Guarantees in this category may assure customers that the product is produced in an environmentally friendly manner or that it meets specific sustainability criteria.

Legal guarantee

A legal guarantee is a commitment by a seller or manufacturer, mandated by consumer protection laws, to ensure that a product meets specified standards of quality, performance and durability. If the product fails to meet these standards within a designated period, the consumer is entitled to remedies such as repairs, replacements, or refunds, as outlined by the applicable legal provisions.

Financial guarantee

A financial guarantee is a commitment made by one party to assume responsibility for another party's financial obligation in the event of default or non-performance. It assures a creditor that they will receive payment or compensation, providing a level of security and reducing the risk associated with financial transactions. Financial guarantees are often used in loans, contracts or investment agreements to enhance confidence in the fulfillment of financial obligations.

Banking guarantee

A banking guarantee is a commitment issued by a bank on behalf of a customer, assuring a third party that the customer will fulfill their financial obligations as per agreed terms. It serves as a form of security in business transactions, mitigating risk for the beneficiary. Commonly used in international trade and contracts, a banking guarantee provides assurance to parties involved that financial obligations will be met, fostering trust in business relationships.