Basic and extended warranties can reduce risk, a major customer cost. A True B False
The correct answer and explanation is:
Correct Answer: A) True
Explanation:
Basic and extended warranties can reduce risk, making this statement true.
When customers purchase products, they face several risks, including the possibility that the product might break, malfunction, or not meet expectations. These uncertainties contribute to what is known as “perceived risk”—a psychological cost that can influence purchasing decisions. Warranties, both basic and extended, act as tools to minimize that risk by offering assurance of repair, replacement, or service for a specified period.
Basic Warranty:
A basic warranty is usually included at no extra cost and covers the product for a limited time after purchase (e.g., 1 year). It reassures the customer that the manufacturer stands behind the quality of their product, and that defects or failures due to normal use will be addressed.
Extended Warranty:
An extended warranty goes beyond the basic period and may cover additional types of failures or longer durations, often for an extra cost. These warranties provide extra peace of mind, especially for expensive or complex items like electronics, appliances, or vehicles.
How Warranties Reduce Risk:
- Financial Protection: Customers won’t have to pay out-of-pocket for repairs or replacements within the warranty period.
- Product Confidence: Knowing there’s a warranty increases trust in the product’s durability.
- Customer Satisfaction: If something does go wrong, customers are more likely to stay loyal if they receive efficient warranty service.
Conclusion:
Warranties reduce uncertainty and financial risk, which are significant customer concerns. By providing security and assurance, both basic and extended warranties help ease the decision-making process for buyers, making the statement True.