23 Sep 2011

Guaranteed! But at what cost…

It’s standard practice to have a guarantee for many products and services. For some in business it’s the thing which sets them apart from their competition, for others it’s a legal compliance issue which they prefer wasn’t there.
What does it cost your business and how should you handle it?
Being a service nut I like the way it can make your business stand out from the crowd, compliance or not… so handling guarantees becomes a major issue you solidly stand behind, giving every customer ‘peace of mind’ in knowing you will be there with them if ANY issue arises.
Over the period of a year or three it can be easy to look at the cost of supplying services to fulfill your guarantee obligations to keep your ‘customers happy and fulfill your legal obligations. In the intervening ‘learning phase’ it may be a case of  guessing how much guarantees might cost. Here are a few points you might consider in the process.
  • Is there a consistent percentage of sales which you can attribute to guarantees?
  • What is the time taken by staff in providing guarantees?
  • What is the cost of providing the staff to do these tasks?
  • Is this time significant enough to impact on other aspects of  your business… e.g. making profits from std sales.
  • How much will the cost eat into your profit margin?
  • What will you need to add to your operating costs to take into account this ‘cost of doing business’?
  • How will the cost variation affect your average dollar sale and will that still make your business competitive?
I’m sure there will be other questions to ask in the process as you explore guarantees and their impacts further. The main thing is to be very mindful that guarantees have a cost, learn to live with that and allow for it in your forward planning.


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