The Product Warranty as an Element of Competitive Strategy

When demand and cost conditions favor its use, a promotional warranty may be profitable for both a company and its customers. Because a promotional warranty is more liberal than a protective one, buyers may benefit psychologically and financially by the reduction of uncertainty and risk involved in the purchase decision. For the company, the promotional warranty may be a vital element in its marketing strategy.

In this article, the authors propose and test five management decision rules for determining the effectiveness of promotional warranty policies.