Warranty servicing strategies to improve customer satisfaction

Abstract

Customer satisfaction with a purchased product depends on its performance under warranty and during the remainder of its useful life. Dissatisfaction with an item is important to a manufacturer since it can lead to the loss of potential customers through the negative word‐of‐mouth effect as well as existing customers switching to a competitor. In this paper, we define satisfaction in terms of the likelihood of a customer not switching to a different manufacturer when a new item needs to be purchased. Manufacturers can use specific servicing strategies to reduce warranty costs and this topic has already been addressed in the literature without considering the effect of customer dissatisfaction. In this paper, we propose particular strategies that will increase customer satisfaction and we discuss methods for obtaining the optimal parameters of these strategies.