Guarantees

The assurance given by a manufacturer to replace, exchange or refund the good if it is not functioning properly or not up to the expectations of the buyer. Guarantees may be general or specific. In the general guaranty the manufacturer promises to return for replacement, exchange or return for any reason. Other companies offer specific guarantees. Guarantees reduce the buyer’s perceived risk. Guarantees are most effective in two situations. The first is where the company or the product is nor well known. The second situation is where the product’s quality is superior to the competition. The company can gain by guaranteeing superior performance, knowing that competitors cannot match its guarantee.