Marketing question regarding guarantees

Hi SD,

At Costco today, I overheard someone say “We guarantee this product is better than any competitor’s. If you’re unsatisfied, your money back, no questions asked.”

This made me think. Is a money back guarantee a smart idea? Here are my thoughts:

  1. Can this system be abused? Do people use product, and then pretend to be unsatisfied and get their money back? Is the complaint and refund process ever worth it for the consumer?

  2. From a marketing standpoint, does a guarantee that your product is superior ever backfire? I hear these guarantees an awful lot. Many companies don’t hesitate to claim that their product is superior to all competing products. Obviously, not everyone can be the best. Consumers will eventually come to a consensus of which companies’ products are higher in quality and which are lower. Doesn’t this reflect poorly on those companies whose products end up ranking lower in quality?

In other words, if everyone and their mother guarantees that their product is the “best you’ve ever tasted/used”, someone has to be wrong. Wouldn’t the risk of overstating the value of your product outweigh the benefit of having a reputation of standing behind your products?

People do like companies who stand behind their products. But that rings hollow if the product doesn’t rise to the standards set by its company.

These money-back guarantees seem like a no-win situation. What are the chances a product is the best you’ve ever used/tasted? Very small, especially if you have sampled other products/foods similar to it. And if you don’t like it, it’s not like the company took your money and hoodwinked you into believing them. Now you can get a refund, no questions asked! They’re putting their reputation on the line, with a big chance to lose money. The payoff is very small and tenuous. It seems really dumb.

What am I missing? I am just a lowly consumer. Marketing wizards must like this tactic for some reason. I just can’t figure it out.



Some suppliers, Amazon for example, will give you your money back for a limited period without any specific reason for the return. In the UK, Marks and Spencer, a major department store will refund or exchange. "At M&S we offer a ‘goodwill’ returns policy which gives you 35 days to return or exchange an item bought online or in store with a valid receipt or parcel summary document, subject to Terms and Conditions. As it is a discretionary policy, there are some exclusions"

The exclusions are things like flowers, food and underwear.

Both companies do it in the full knowledge that people will take advantage. I know a woman who has twice bought an expensive dress from M&S and returned it after the party. Presumably the stores think the marketing benefit outweighs the costs.

All I can add is that 30-day minimum money back guarantees have been the norm in the US pretty much everywhere for the last 20-25 years now, so they must not be a money loser.

Marshall Field was one of the first. As recorded in his biography, he thought the marketing benefit outweighed the costs.

Return rates are low, and it is believed that more people will decide to purchase based on the guarantee than will return an item.

In a lot of cases there will be a bunch of ‘ifs and buts’ in the terms of the guarantee, but for large retailers a no questions asked policy is increasing in popularity.

Yes it can be abused, and will be. The only question is how much. But most large companies feel that the loss from abuse is outweighed by other factors.

I had a friend that worked the return counter at Walmart when they guaranteed their meat, deli, bakery and a few other store brand items at a 200% guarantee. He told me there were people that routinely bought $40 legs of lamb, left them out in the sun and then brought them back the next day for $80. Wasn’t much Walmart could do about it except the limit the number of returns in a certain time period and then get rid of the double your money policy.

I’ve bought cigars in the past that state mail back your unused portion for a fresh pack if you’re unsatisfied with the product. I have bought them and one or two out of the five were brittle, or cracked or wouldn’t draw. I smoke 3 or 4 good ones and returned the bad ones to get 5 new ones. Since I had to return the defective ones, I used the guarantee as intended. It wouldn’t make a lot of sense for me to intentionally sacrifice a good cigar, go to the trouble of mailing it, and then wait for the mail to make a profit of 4 cigars, but you could do it.

I routinely return milk because my local store guarantees it to be fresh to the date stamped. If it turns before then, I get it replaced. Of course that could be abused, by putting old milk in a new container that’s not expired yet. But who is going to do all of that for $2, and even if they did, the store trying to catch the fraud isn’t worth offending potentially honest customers over two bucks.

I’ve always wondered about mattresses that they sell on TV and you’re guaranteed to love it and they’ll even give you a 90 day in home trial for free. So you sleep on the bed for three months, and send it back, paying nothing. What do they do with a used mattress after you refuse to buy it?

There are companies like this one that track customer returns across multiple retailers. If a customer is identified as a frequent returner, they may be considered to be abusing the privilege and future sales might be contingent on returns being disallowed.

This reminds me of that Lucille Ball episode where Lucy devised a scheme to return cans of baked beans for the double-your-money-back guarantee. Is double your money back very common? I’m not sure I’ve ever seen it myself.

In the old days, the leading department stores in every city adopted this policy. So did Sears and L. L. Bean and lots of other stores. One thing almost all of them had in common was size. Small, local stores ran at lower profit margins because they couldn’t take advantage of economies of scale. The bigger stores, and the ones with catalogs, depended on volume and that gave them an extra percent or two in margins. They could afford the costs of these guarantees just a bit better and a bit is all that was needed.

Even so, something changed after WWII. Nearly every store that had these guarantees gave up their policies because of the abuses. It’s not clear whether that was an actual change in the culture or that they were now competing more against other stores of the same size and so lost that bit of margin that made it work.

I knew someone who had some equipment in a trailer running off of a car battery, which in turn was attached to a battery charger.

The charger, which was not intended to be run continuously as a sort of power supply, would fail after a week or three. Or possibly they were just engineered to work a total of a few hundred hours over their lifetime, which would be suitable for the usual use of the item.

This was for a seasonal business that ran a couple months a year, and over those months he’d return as ‘defective’ and get a new charger maybe half a dozen times. The store kept giving him a new one on the same guaranteed purchase. He saw nothing wrong with this, and I couldn’t say it was illegal, but it can’t have been a money-making proposition for the store.

I buy a certain kind of boot from a large online retailer.

They guarantee that if the soles wear out before the “uppers” wear out, they will “repair or replace” the boots.

The uppers *never *wear out before the soles. The uppers hardly ever take the beating that the soles do.

So every year I box up my old ones and the company sends me a new pair. (They never tried to repair them.)

I think the company is betting that there are so few people like me who would go to the trouble of returning boots to them, that the policy is worth having and using in their ads.

Jack Benny did this shtick too, very much in-character for him. (For the benefit of you younger dopers who didn’t know Jack Benny, his TV personna was a well-to-do but frugal stingy miser.) He is seen munching from a bowl full of peanuts, while dictating a letter to his servant Rochester, describing in elaborate detail how unsatisfactory the peanuts are. Afterward, he muses, “Gee, I just love these satisfaction or double-your-money-back offers.”

From an old thread of several years ago, I find this relevant post:

My personal story:

I bought a used HP DeskJet printer, circa 1991, which was back in the days when DeskJet printers didn’t have model numbers because there was only one model, and “DeskJet” was the model. It is a monochrome printer only. A few years afterward, HP came out with a revised model of the ink cartridge, which cost not-quite-twice-as-much but supposedly could print twice as much before quitting. Well, that style of cartridge NEVER worked well in my printer, not even unto this very day. It would print anywhere from just a few pages to about half-the-cartridge then quit. After a few years, they discontinued the original model of those cartridges, so I’ve been stuck having to use the newer ones ever since.

So I took a few back to the dealer where I bought them. He exchanged a few, but also remarked that he had to eat the cost of those himself. After a few such exchanges, he invited me to not come back to his shop again.

(I never did learn if other HP DeskJet users had similar problems or if there was something about my printer that was causing that.)

REI used to replace an item if it had problems no matter how old it was. But it got abused so now they limit it to 1 year after purchase.

I returned a rain coat after a few years without any receipt and I got a new one.

I bought a coat from Sears when I was young and lost a bunch of weight and never wore it. I kept it in my closet for ten years. Then one day I came across it, it still had the tags. I took it back to Sears and was honest, and said, “Can you give me anything”? The clerk looked up the item, found it was still in inventory and said, I can exchange it or give you the price on the ticket? I got the money.

It’s a lot easier now for retailers and manufacturers to track customer transactions, so if you abuse the return process one too many times, you may be instructed to take your business elsewhere.

“Best” is such a subjective term I’m sure there’s someone out there who thinks a particular product is the “best.” The real problem comes when you fail to hit the standard of “good enough.”

There’s a local supermarket here named Hannaford, who has a double your money back guarantee. If you’re not satisfied with one of their products, they will refund double your money.

I took them up on this offer once, when I bought some ground beef that didn’t smell great when I opened it. They refunded double my money with no problem.

IIRC, companies can say their product is “best” without problems but if they say it’s "better’, they had better prove it.

I used to work for the company that owns Sperry, the original boat shoe company. Those shoes came with a true lifetime warranty and they had procedures documented for how to deal with issues for very old merchandise. Those procedures basically amounted to ‘just give them anything reasonable they ask for’. A documented case was a doctor that bought a pair in the 1970’s and was furious when they wore out so he called in demanding a replacement (this was in 2000). They gave him a brand new pair that also kept the same warranty even though that had long been discontinued for everyone else.

I have a small collection of Victorinox Swiss Army knives that I love and keep one with me at all times. They also have a lifetime warranty. Any time one of them develops the smallest flaw, I send them back to their service center in Connecticut for a $5 return shipping fee. They always just give me a brand new one although I think you can insist that they recondition your existing one if it has sentimental value.

LL Bean also has a very generous return policy that I am going to use in the near future. I bought one of their leather bomber jackets about 5 years ago. The overall quality of the leather and other key components is superb but they made a mistake with the liner. It started developing small rips in the first year and those have grown ever since. I want to keep the jacket for life especially because it is well broken in and otherwise excellent but they are going to have to fix the liner because it is faulty.

My uncle had a very nice but long discontinued Daisy air rifle from the 1960’s that he uses to keep pests away from his porch. It finally developed a leak in the air cylinder so he sent it back after 35+ years with a note to fix it. They not only found a way to fix it, they reconditioned the entire thing to be like new again.

Believe it or not, it doesn’t cost companies much to run such programs and the benefits are huge. Most people can’t even be bothered to send in rebate coupons for things they buy this week let alone follow-up on warranties from decades ago but many companies really will honor them if you are bold enough to make a claim. It is good and fairly cheap PR for them because it makes them sound trustworthy by word of mouth. That is very difficult to buy just through ads.

No, both are examples of puffery. (leads to .pdf)