The guarantee advantage

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(MoneyWatch) One hundred years ago an advertising flyer proclaimed: "You cannot expect success hunting deer or moose if your feet are not properly dressed. The Maine Hunting Shoe is designed by a hunter who has tramped the Maine woods for the last 18 years. We guarantee them to give perfect satisfaction in every way."

To this day, L.L.Bean, now with annual sales of almost $2 billion, still backs its products with the same quality guarantee. Why? Because risk is part of the sales game, and the more risk you are willing to assume the higher your sales.

Many companies generally perceive unwarranted risk in offering an extraordinary guarantee. Especially when they offer high-ticket services to a relatively small number of clients, even one client asking for its money back could be painful. And so they refuse to guarantee their work. (As one humorist noted, sometimes the road less traveled is less traveled for a reason.)

This is not just about, say, Marriott Hotels and Domino's Pizza. Service companies, which now account for 80 percent of the gross national product, have the greatest opportunity to differentiate themselves through offering a guarantee. Here is a strong case that extraordinary guarantees should be widespread for such professional service firms and technology companies as law offices, management consultancies, advertising agencies, software developers, information technology companies, and even investment bankers.

In truth, it can be an unfair advantage for you. The greater the client's expected aggravation, expense, and time lost, the greater the power of the guarantee. While bad service at a restaurant can ruin your evening, bad service from a law firm can ruin your life.

Here are six examples of companies that differentiate themselves by offering customers satisfaction through extraordinary guarantees.

1. A so-called 1031 exchange company uses a "100 Percent Performance Guarantee." If a client is not satisfied for any reason, they may directly contact the president and request a full and complete, no-hassles refund of their account set-up fee.

2. Bain & Co., a global management consulting firm, offers clients an unconditional guarantee on its services. One client was quoted in The New York Times as saying: "If they fall short of performance, they don't get paid. Period."

3. A management consultant agrees, in writing, not to cash any checks he's received until his clients tell him they're satisfied with the work he's done.

4. An architect offers a simple pledge: If his client isn't happy at any stage of the project, the architect will refund previously paid fees and re-perform the unsatisfactory work -- free of charge. 

5. A small business expert offers participants who attend his workshops a guarantee that speaks volumes for his confidence in his work. There is no set fee for attending the three-day workshop, including all tools and materials. His website explains: "At the end of the weekend, we will pass the hat, and you will be invited to make a contribution based on the value you have received during the weekend as it relates to the impact on your business and your life."

6. A pest control company offers a service guarantee: If the pests return within three months, just call the company and they will come back and keep killing.

But how do you make this work in practice? Find a way to fit the concept of a satisfaction guarantee into your own organization. What will you guarantee? Results? Process? On-time delivery? How will satisfaction be measured at the end of the engagement? Monthly? Quarterly?

My advice is to guarantee satisfaction on a monthly basis. You do not want to get too far down the line and have the customer run into a money problem. They will be tempted to suddenly decide they "aren't satisfied" with your work, so they should get the money back (I have seen this happen more than once.)

Most of your competitors are afraid to offer complete satisfaction. So a strong guarantee can differentiate you and help you stand out in the customer's mind.

[nwsmith100]

As you mentioned, by offering exceptional guarantees, a business is assuming a large part of the risk. In doing this a business must effectively manage that risk. The larger and more complex the business, the greater this risk is. Without proper strategies in place to minimize their exposure to this risk, businesses may very quickly find themselves up against the wall.

To ensure that a business has the ability to deliver on their guarantee, they need to ensure...
• Quality assurance processes for all products and services are in place.
• Appropriate internal and external customer service standards are developed and maintained at all levels in order to monitor and manage customer expectations.
• Pricing strategies have accounted for the probability of this additional risk.
• Guarantee terms and conditions are carefully documented and clearly communicated to all staff, customers and agents.

Business owners also need to acknowledge that failure to deliver on promises and guarantees will have a huge negative impact on their business.

[Wyald]

Your reference to L.L. Bean's satisfaction guarantee reminded me of a problem they once had in Germany. The German competitors challenged the guarantee as "too good to be true." A German court agreed, and L.L. Bean was forbidden to advertise their guarantee in Germany.

L.L. Bean changed their advertising regarding their guaranteed to, "Our Satisfaction Guaranteed is so good it has been banned in Germany."

Regarding another company who's products are sold by independent sales people who are not employees or agents of the company. The Amway Company of Ada Michiga offers a 180 day, 100% satisfaction guaranteed, including shipping costs both ways. They have made this offer since the company began in 1959. Currently, each order a customer receives has the return authorization form along with a postage paid return label in the box with the goods. All that is required is for the customer to check off the reason for returning the goods, put the pre-filled out form in the box, slap the label on the side of the box and set it out for the mailman. They receive a check for their purchase in a bout 10 days. This includes any shipping charges and taxes paid.

$10.9 Billion in worldwide sales in 2011 shows that people do love a great guarantee. With only a fraction of a single percent in returned goods, customers are highly satisfied as well.