By Entrepreneur Staff


Guarantees Definition:

A pledge, usually in writing, given by a company to any customers that something is of specified quality, content, benefit or that it will provide satisfaction or will perform or produce in a specified manner. A guarantee also outlines what will happen should the buyer not be satisfied with his purchase.

When you're casting about for ways to boost customer service, don't neglect product or service guarantees. Guarantees are one of the most powerful marketing statements you can make, especially for new companies.

While helping to build customer loyalty, guarantees also lead to excellent feedback. Customers demanding guarantee payouts point directly to weaknesses in the system. And while you may have to pay to make things right for disgruntled customers, in return, you'll be purchasing invaluable information about where things are going wrong.

Ideally, a good guarantee is unconditional, easy to understand, meaningful, easy to invoke, and quick to pay off. As an example, look at the guarantee offered by cataloger Lands' End, which says its products are "Guaranteed. Period." Additional words in the guarantee advise buyers that this means they can return anything at any time for any reason. That information is very comforting to a customer.

A meaningful guarantee has to really repay a customer for the trouble your product or service caused. Even a 100-percent refund may not do that if the cost of the product is small compared to the inconvenience, for instance, when a leaky ballpoint pen ruins an expensive suit.

Before you decide whether your guarantee should be unconditional or specific, money-back or more, ask your customers what's important to them. Xerox Corp. once considered offering buyers of its office copiers a 90-day, unconditional, money-back guarantee. It sounded great until Xerox asked customers what they wanted. Most corporate purchasing agents said they didn't want the money back--that would just make them look like they'd made a mistake buying a Xerox. What they really wanted was a guarantee of a replacement if any problem cropped up. So Xerox crafted a guarantee to replace any copier that had a major service problem within three years of purchase.

More from Expansion Financing


A financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital

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Angel Investor

An individual who invests his or her own money in an entrepreneurial company

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Friends/Family Financing

Monies, usually in the form a loan, that a business owner gets from either family members or friends in order to help finance their startup or growing business

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Government Grants

An award of financial assistance in the form of money by the federal government to an eligible grantee with no expectation that the funds will be paid back. The term does not include technical assistance which provides services instead of money, or other assistance in the form of revenue sharing, loans, loan guarantees, interest subsidies, insurance, or direct appropriations

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