Product Design Research

Client

The client is a multinational fluid power manufacturer that markets through an internal sales force and a network of independent distributors.  Customers are primarily in the mining, pulp and paper, food processing, and water purification industries.  The corporation has positioned itself as a high quality product manufacturer that provides excellent customer service.

Challenge

Due to changing competitive practices and increasing pump maintenance costs, the corporation was evaluating modifications to its warranty policies.  Its product warranties were significantly more generous than those offered by the competition.  Decreasing profit margins and new types of product applications mandated that the warranties be reevaluated.

Research Application

The corporation contracted with McGrath Marketing to assess the impact of warranty changes with its sales force, distributors, and major customers.  A series of focus groups was held with the company’s sales management and sales force.  Due to the wide geographic dispersion of the corporation’s distributors and customers, executive interviews were held in person for those in Wisconsin and Illinois and by telephone for those that resided outside of this area. 

The results of the research indicated that across the board warranty changes would negatively impact the corporation’s reputation primarily with its customers in the mining and pulp and paper industries.  Companies in these industries typically demanded a longer life span for their equipment due to an unchanging manufacturing process.  Food processing customers were less resistant to changes due to the short life cycle of their products meant frequent equipment changes.  Companies in these industries made fewer warranty claims.  A review of the company sales data by McGrath Marketing revealed that food-processing customers were increasing as a percentage of the corporation’s customers; this trend was very likely to continue.

Outcome

The research results supported a revised equipment warranty policy.  The warranty period was shorted, with an optional extended period made available at an additional cost.

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