Guarantees, Warranties and Customer Satisfaction.

Most of us involved in the consulting or business advisory industry are prepared to stand over our work. We act with integrity and honesty without having to think about it. We give either explicit or implicit guarantees or warranties about what we can deliver. And if there is a rogue element within the industry that does not live by this creed, professional indemnity insurance can assure our clients that if something unplanned arises, which causes them some loss, the insurance company will compensate the client.

In most industries, there is a similar set of guarantees or warranties that provide assurance to customers that the providers stand over their products, will replace them if defective, or offer a refund if the customer is dissatisfied. This gives the customer comfort when making purchase decisions, particularly for high priced items. Again, this is what you might expect.

My expectations have been dashed on two separate occasions in recent months wherein suppliers of expensive products have relied on small print within their contracts or their guarantees and warranties to negate the value of said warranties, or they have simply said it’s not their problem. Customer satisfaction was not the driver for their businesses and the net result was a dissatisfied customer that will not be buying their products again. They simply did not understand the concept of lifetime value (LTV) of a customer. Not only have they lost me as a customer, they may also lose a lot of other customers to whom I am happy to relate my story.

The first provider involved here is Volkswagen. I bought a new car from them in 2011 and the car has low mileage, regular servicing, and it is treated with kid gloves. According to reports in the media and on the Internet, Volkswagen is aware of a defective part in the exhaust system, called an EGR valve. Basically, this valve regulates the flow of exhaust gases into the combustion chamber in the engine. Apparently, they are prone to failure even in low mileage cars like mine with just 25,000 miles on the clock. The problem here is that the replacement cost of this valve, including fitting, is close to $1,000.

Technically speaking, the car has passed its standard warranty period, so I am not entitled to a warranty on the part. However, there are two considerations here. Firstly, with a low mileage car doing less than 5,000 miles a year, you would expect Volkswagen to provide some measure of a goodwill warranty. Secondly, if media reports and blogs about Volkswagen knowing that this part is prone to failure, then you would expect that they would step up to the plate and offer at least part payment for the repair. I understand that a recall to fix this known problem would cost Volkswagen millions of dollars. Unfortunately they did not want to listen to my complaint and I spent my last ever $1,000 on a Volkswagen product.

The second provider of an expensive product was a well-known bedding supplier. Almost 4 years ago, I bought a new mattress for my bed as the old one had developed a dimple that I fell into every night and this caused severe back pain and made sleeping difficult. I chose the new mattress for its comfort and in particular because it offered a ten-year warranty. My understanding at the time of purchase was that, if the mattress did not function properly during the 10-year warranty period, it would be replaced under warranty. This gave me the confidence to spend a little more than $2,000 on the product.

Four years later, there is a dimple in the mattress again and I made a warranty claim. The first problem is that the same mattress is now $2,500. The second problem is that the bedding retailer produces the small print in the warranty, and which was never discussed during the original purchase. Whereas I expected that the manufacturer and retailer would replace like for like if the product proved defective during the warranty period, this was not the case.

So what happened? Well firstly, they invoked a depreciation policy that wrote off 10% of the value of the mattress for each year I had it. Therefore, the maximum warranty was now $1,200. The replacement mattress was now $2,500. Therefore, I was expected to come up with $1,300 to get a like-for-like replacement of a mattress that had already proved defective. Go figure.

The point here is not to take a trip through my domestic affairs. It is in fact my intention to highlight the fact that not every business behaves with the same level of integrity, honesty and pride in what they offer to consumers or businesses. When I reflect on the way I operate my own business, it is some distance from the experiences I have related to you in this blog article. I don’t hide behind small print. I don’t ignore known problems and hope they simply go away. I do have a strong focus on lifetime customer value. Any guarantees or warranties I offer are explicit, easy to understand, and flexible enough that they can be extended to cover the expectations of my clients.

Niall Strickland