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.