Charlie Cook's MArketing for Success Insider's Club


Service Contract Anyone?

Author: Tom Borg   |   September 15th, 2010

The other day I was in my local electronics store and during the transaction the salesperson asked me if I wanted to purchase a service contract. I politely declined.

Have you noticed the many companies selling service contracts for their products or service?

Some of the companies using service contracts are automobile dealerships, appliance stores, heating and cooling contractors. These are just a few of the companies that offer service contracts. There are many more.

There are two schools of thought on service contracts. The first is that it gives the customer the opportunity to buy added protection against potential defects in the product or service that the customer service contractcompany is selling.

The second school of thought is that service contracts are not necessary. They are simply an excuse for sloppy workmanship, and at the same time very profitable for the company selling them. The one who loses is the customer.

The late Ron Zemke, one of the most respected individuals in the field of customer service training and development, believed that the future will bring a trend for people to buy only products which are unconditionally guaranteed. Consumers will be unwilling to tolerate the service contract mentality.

It’s my opinion that companies should unconditionally stand behind the products and services that they sell. They should not try to charge the customer more for a so-called ‘service contract.” Yes, from time to time a product will fail or service will not be up to the proper standards.

However, rather than charging the customer more money with a service contract, why not just give them what they paid for in the first place? The companies and organizations that will be most successful will be the ones that set the pace in this area. People want quality and service that they can depend on–without having to pay for a service contract.

Can you imagine a scenario of medical doctors selling service contracts? Think about it. Let’s say they were going to do a heart transplant. For an additional $5000, they would guarantee the heart for two full years! Apply this strategy to restaurants. For an extra $5 they would guarantee clean tableware, fish grilled to perfection, and, of course, a very courteous waitress or waiter.

Switch now to hair stylists. For an extra $20, they would guarantee a punctual appointment with a cut and style done the way you like it. Who knows, for an extra $5 they might not even smoke cigarettes just before your appointment with them, and might even display some current magazines in the waiting area.

Yes, I know I’m stretching things a bit with the suggestion of service contracts for doctors, waitresses, and hair stylists. It wouldn’t be practical. Why? Because we expect that they are providing the best service possible to begin with, although many of them don’t and we simply put up with it or take our business elsewhere.

The point I’d like to make is that most businesses (including new car dealers) should guarantee great service and full satisfaction without customers having to buy a service contract.

Service contracts simply don’t make sense for the consumer. The company that implements a strategy guaranteeing uncondi­tional quality and service at no extra charge will demonstrate to its competitors that this approach can be a key factor in keeping customers loyal indefinitely and the operation profitable and successful.


About Tom Borg
Related Resources

More Posts by Tom Borg

To discover the easy and inexpensive ways anyone can attract more clients and maximize their profits, sign up for your FREE Profit Now Report.

Join the Discussion!

What do you think? We value your input. Share your comments, advice or ask a question.