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📝 Intro

Toyota offers a 10 year warranty for its cars.

This well above average warranty acts as a reinforcing signal for the high quality and reliability that Toyota is known for.

But does the signal also work for unknown brands? Are 100 year warranties credible and effective, or are they suspicious and insincere?

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Use exceptionally strong warranties to signal high product quality

Impacted metrics: Customer acquisition
Channels: Warranty | Product | Ads
For: B2C. Can be tested for B2B
Research date: December 2021

📈 Recommendation

Offer an exceptionally strong warranty for your product to increase quality perceptions (e.g. 5 years for a phone case, 25 years for a mattress).

This is particularly useful if people are unfamiliar with your brand.

To maximize the effect, accompany it with a third-party endorsement (e.g. “Best Treadmill” by Consumer Reports, “Best Buy” by Which?)

🎓 Findings

• Exceptionally strong warranties increase people’s quality perceptions of products and make them more likely to buy. These are warranties that are well above the norm or longer than the expected product’s life.

• The positive effect works mainly on people that feel they know the product category well. When people feel unfamiliar with the product category (e.g. they’re cautiously exploring buying an electric car for the first time) the effect may be slightly negative.

  • The negative effect disappears if the product also has a third-party organization quality endorsement

• For example, in experiments, people said they were:

  • 34.8% more likely to buy a Flint & Tinder hoodie when it had a 10-year warranty (vs no warranty) if they felt very knowledgeable about the product (8 on a scale of 0 to 9)

  • 16.6% more likely to buy Falken tires when they had an 80,000 miles warranty (vs 30,000 miles, which is typical) if they felt they had decent knowledge about the product (6 on a scale of 0 to 9)

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🧠 Why it works

• We believe a company wouldn’t offer a strong warranty for a low quality product. They would not want to risk their financial or brand reputation.

• When we feel that we know enough about the product category, we don’t analyze warranty information in depth and take it at face value (e.g. that’s many years, sounds great!).

• When we feel unsure about what we’re buying, we tend to be more analytical thinkers. In this context, wild warranty claims (e.g. 10 year warranty for a pair of flip flops) seem like an insincere exaggeration, unless there are other signals to back up the product's claimed high quality.

• The difference depends on how much we feel we know about the product category, not how much we actually know.

✋ Limitations

• This study focused on warranties and third-party endorsements as quality signals, but did not combine them with other signals. In practice, other quality signals (e.g. a high price, stylish product videos) are also usually present. A 10 year warranty for sneakers sold at a low price with bad quality packaging may be a suspicious red flag rather than a plus.

• Other signals might be able to substitute the complementary effect of third-party endorsements - such as customer reviews or ratings. However, this was not tested.

🏢 Companies using this

• Saddleback Leather offers a 100 year warranty for most of its products, with the slogan “They’ll fight over it when you’re dead”.

• The Linen Works has a 50 year warranty for Bed Linen

• Avocado Mattress gives a 25 year warranty on their mattresses and makes heavy use of third-party endorsements

⚡ Steps to implement

• If your product is of durable quality, consider offering an ‘over the top’ warranty.

• The vast majority of customers will be unlikely to claim it, but model the financial implications in case a good number do, to ensure it’s a sustainable promise.

• If your target market is unfamiliar with your type of product, back up the warranty with additional quality signals such as a third-party organization endorsement to make it more credible.

🔍 Study type

Lab and online experiments. United States

📖 Research

Dutta, S., Banerjee, S., Johnson, A., & Biswas, A. (December 2021). Overcoming the challenge of low familiarity: Can a weakly familiar brand signal quality with exceptionally strong warranty?. Journal of Business Research.

[Link to paper]

🏫 Affiliations

Mike Ilitch School of Business, Wayne State University; College of Business and Economics, California State University; and Franklin P. Perdue School of Business, Salisbury University. United States

Remember: This is a new scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.

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