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Extended warranties are subtle forms of insurance policies that guarantee a product or service's performance, especially after an initial period of time.

While the guarantee promises benefits, the warranty promises that the enjoyment of those benefits will continue. In other words, an extended warranty is like a "guarantee's guarantee," if you will.

A warranty promises that a product will perform the way it is supposed to for a very specific period of time. If your product comes with a guarantee, then consider selling an extended warranty that ensures its continuation.

But if your product is can not be guaranteed for whatever reason, consider a warranty that may take the form of future upgrades, additional benefits, membership programs, points clubs or support service packages.

For example, if you sell computers, you can also offer a buy-back plan. For an additional fee, customers "buy" the privilege and ability to choose to trade in their systems for a better model within a year following their purchase.

The plan, which may appear in the form of an official certificate, coupon or letter, promises them a complete refund of the purchase price that's applied towards their upgrade. If they choose to exercise their option, they only pay the difference when they upgrade to a later model.

The Silent Profit Center As for services, the extended warranty is a little different since services are intangible, do not break down, need repair or depreciate in value.

But they are just as profitable.

Warranties can take the shape of memberships, points clubs, preferred customer programs, priority service packages, extended service packages, prepayment plans, premium services, future discounts or upgrades plans, etc.

In short, warranties are much like service agreements. For example, if you're a consultant you can offer prepaid retainer packages that include several hours of consulting or on-call priority privileges, all at a discounted rate.

On the other hand, if you offer repetitive services such as a hairstylist or a chiropractor, you can offer a number of prepaid visits at a discount. If your cashflow is particular low during a specific month or season, you can arrange your packages so that they renew at that point in time.

The summer is a slow time for snowplowing services. But with prepaid packages, which are sold in the summer and renewing in the summer, it creates an income stream when things slow down.

These programs are often more advantageous to the client for a variety of reasons. And many marketers and businesses shy away from them. But they really don't see it from their client's perspective.

Beyond the obvious price incentive, the benefits of extended warranties include less billing, more convenience, preferred service, faster delivery, extra privileges and many others. Another is the sheer feeling of "belonging" to a special, elite group of people to which higher attention or priority is given.

Join the Club That's why premium programs, or "preferred client clubs," are very popular. They have a mystique and a sense of extra value about them, which is being part of that elite group. As Amex says, "membership has its privileges."

For example, club members might enjoy a members-only 1-800 service number, extra premiums, discounts on joint-ventured partners, express checkout services, special members-only contests and so on.

Online, clients can become members of a private site, access premiums, receive additional web-based services (such as reminder services, automated shipping, real-time support, even special software, like eBay's Toolbar, etc).

But keep in mind that the savings factor in such programs is the greatest motivator. Consumable products translate into repeat sales. Therefore, an extended warranty in this case would be a repeat customer program.

(Also called "rewards programs.")

This could involve a flat discount rate on all purchases made at a particular store during a certain timeframe. What this program also does is to preemptively reduce the possible loss of a client to a competitor.

Bookstores sell avid reader membership programs. For an annual fee, they offer members a fixed discount rate on all subsequent books purchased during the time that the program is in force.

These programs can range from one month to a full year. Costco Price Club is another great example where an annual membership fee is charged but members enjoy wholesale or bulk prices.

Nevertheless, while extended benefits are in and of themselves profit centers, they're also powerful positioning tools since they help to increase your core business at the same time.

People love options and the feeling that they are being taken care of. They also want to reduce the element of risk in the buying process. People want to avoid pain, and that includes the pain that comes with the potential or future loss of a benefit. So, help them feel more secure with the knowledge that they will continue to enjoy your product or service.

Sell them an extended warranty!

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