What’s the Point of a Warranty, Anyway?

The idea of a product warranty is fairly simple: a company “warrants” that, should their product fail in a specified period of time and circumstances, they will repair or replace it. But the implication of the product warranty is far more subtle: it tells the consumer what level of reliability they should expect. In short, a warranty is all about confidence. But when does a warranty become a confidence game?

Typical retail products are backed by warranties ranging from a few months to a few years. Some products, such as cars and major appliances, are warranted for far longer. Products generally carry a warranty that matches their expected lifetime, and consumers have come to expect that products will last roughly this long.

But there can be quite a bit of gamesmanship in product warranties. Companies can “one up” their competitors by offering longer warranties, a typical tactic for up-and-coming car manufacturers, for example. A longer warranty is a promise to consumers that product quality has improved, as well as a security blanket in case this is untrue.

Companies also game the terms of their warranties. It is not uncommon to find that the “10 year warranty” on a new car only covers the engine and transmission, or that the 3 year warranty offered by Apple only includes one year of technical support. But the generous length of coverage is what gets attention, regardless of the terms and conditions.

Companies know this, and sometimes they offer warranties that they never expect to be called on to meet. Consider the incredible shrieking warranties on hard disk drives in the wake of the Thai flooding disaster. Seagate and Western Digital did not suddenly begin to cut corners on drive quality. Rather, they simply decided that they could no longer afford the extra cost of drive replacement and shrunk the warranty to match.

A recent example in my hands was a compact fluorescent (CFL) floodlight that carried a 4 year warranty from GE. It failed after just 41 days of occasional use in my kitchen, not the 6000 hours promised on the package. But the terms of the warranty made it clear that the company never expected to replace the product: I would have to mail it to Cleveland at my own expense, along with my original sales receipt, in hopes of receiving a replacement. This replacement transaction would probably cost far more than the bulb itself, so it is clear that the warranty was just a bunch of hot air.

I rarely purchase extended warranties for products, and never even consider offbrand or store offered warranty products. These are generally a scam, with vendors hoping that customers will forget or misplace warranty materials before a claim is needed. The only exception for me is AppleCare, which I happily purchased on my MacBook Pro after having the logic board replaced in my previous Apple computer. I even purchased the new AppleCare+ package for my iPhone 4S, since I really can’t survive without a phone.

What does this say about warranties and consumer expectations? Clearly, companies know that customers put a great deal of faith in product warranties, whether deserved or not. And customers have come to expect that a product with a longer warranty will offer a longer useful life. Sadly, this is often not the case, and many companies never expects to live up to the expectations they set right on the package.