Warranty decisions and consumer behaviour

Abstract

To demonstrate the quality of the product to the consumers, marketers have increasingly started to use an indirect approach in the form of warranties. Warranties are not the intrinsic cue of the product but they act as extrinsic cues and helps consumers to make an inference of the product quality. In recent years much attention has been focused on the warranties provided on automobiles, laptops and other major consumer expenditure and durable items. Also retailers in the past decade have increasingly started to offer extended warranties on durable goods. These kinds of warranties provide companies with an additional source of revenue as in most of the cases the prices charged for extended warranties is on an average higher than the expected cost of repair. Warranties also appeal to the consumers by reducing their overall perceived risk.