EXTENDED WARRANTIES, SERVICE CONTRACTS, AND MAINTENANCE AGREEMENTS—A MARKETING OPPORTUNITY?

Abstract

AB Product warranties, in general, have not been employed by marketers as an important strategic tool, yet the business in extended warranties, service contracts, and maintenance agreements appears to be booming. But why? This article examines current practices, discusses critical issues raised in prior studies and the authors' recent research, and presents suggestions for the marketing of service and maintenance agreements. There is evidence to suggest that the long‐term market potential of many current offerings may be limited; however, careful consideration in defining the prime target markets and designing new types of agreements can help ensure success. The purpose of this article is threefold: first, to offer a brief review of current practices, which profiles the diversity of offerings and corporate philosophies; second, to discuss critical issues raised in prior studies and in our research; and finally, to present suggestions for the marketing of such offerings.