Designing an Optimal Warranty Scheme and Strategy

Abstract

This study has been conducted with a view to provide an insight on the importance of different features in a warranty scheme of domestic appliances. It also investigates the possible effects of different income levels on the utility that a consumer derives from different features of a warranty scheme for domestic appliances. The warranty features were chosen on the basis of a thorough screening of warranty schemes of different companies as well as an in-depth interview of owners.

The study has been conducted in three phases. The first phase consists of literature survey. It helped in defining the concept of warranty, the role it plays in consumer buying behaviour, terms and conditions usually provided by domestic appliance companies, and the effect the warranty schemes have on consumer's perception of financial risk. The second phase consists of selecting products and warranty features; conducting pilot study with few company executives and consumers; applying conjoint analysis technique (keeping in mind the multi-attribute nature of warranty scheme), designing orthogonal plan-cards; determining the sample size; and finally collecting the data. The last phase of the study deals with analyzing the data through conjoint analysis subroutine of Statistical Package for Social Sciences(SPSS), and then using Analysis of Variance (ANOVA) to draw inferences.

The strategic implications of survey findings are discussed next. The objective of the company should be to try recovering the minimum cost during the warranty period. It should also develop a quick response policy and mechanism(s) for redressal of complaints.

The study also gives some directions for further research. This study should have been conducted on a much wider scale, but due to time and money constraints, the survey has been confined to only three domestic appliances- Television, Washing Machine and Refrigerator and, in Lucknow. To be able to arrive at more generalized findings, the study could cover other product categories (e.g., Blender, Microwave Oven, Music Systems, etc.) including consumer surveys in few other cities as well.