The Hindu Business Line : Companies use extended warranty to woo customers

New Delhi, Aug. 20 Faced with inflationary pressures and low margins, companies are stretching out the warranty periods to lure customers. Besides acting as a potent sales tool, companies say extended warranty is generating repeat buys.

Industry observers note that long-term warranty acts as a parallel sales channel. In the mass market segment, particularly, the economic value of product generates sales. Earlier, it was restricted to durables but now various categories like automobiles, modular furniture, kitchens, and mobile phones too are coming with extended warranty.

Marketing guru, Mr Paco Underhill, told Business Line that “The key to sell a product is to transmit the value through a brand promise. An instrument like warranty acts as a mechanism to pull the customer into its folds with a promise of total customer satisfaction”.

On offer

LG has introduced a special freedom offer on all 19-inch and 22-inch LCD monitor models. Under this, on purchase of an LG LCD monitor from mid-August till September-end, customers are entitled to extended warranty of two years.

Says Mr R. Manikandan, Business Group Head, Monitors and Optical Storage Devices, “While these products come with standard three-year warranty, during this promotional period the customers can avail an additional two years of extended warranty.”

Asked if these kinds of offers drive up sales, he said, “Reliability of products certainly generates repeat buys. It may not be the same products but certainly from the same brand umbrella”

Carmakers say

Car makers are also following similar strategies at a time when interest rates are moving upwards, affecting sales. Beginning March this fiscal, General Motors has been offering its customers a warranty of three years or 45,000 km on Chevrolet brand of vehicles under its ‘cashless ownership programmes.’

Similarly, Hyundai Motors India which sells the highest number of cars after Maruti Suzuki, has also been wooing customers by providing a warranty of two years and unlimited kilometres. “We offer warranty of unlimited kilometers in two years on models like Santro, i10, Getz and Verna. In the case of Sonata, it is as high as four years or 80,000 km,” said a Hyundai official.

Extended scheme

The company launched an extended warranty scheme under which it provides a warranty on many of its models either on certain components or on all parts for a period of five years or 1,00,000 km, whichever is earlier.

Echoing the opinion, a city-based Maruti dealer said, “While the company offers it for two years, customers are usually willing to pay an additional amount that provides them the warranty for three years and in certain cases, up to four years also.”

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