A Customized Two-Dimensional Warranty Menu Design for Customers with Heterogeneous Usage Rates

Abstract

Traditionally, a two-dimensional (2D) warranty is characterized by a single 2D warranty region with age limit as the x-axis and usage limit as the y-axis. However, customers with heterogeneous usage rate have various perceptions on the same 2D warranty region, which leads to dissatisfaction on warranty policy. This study proposes a customized 2D warranty menu for customers with heterogeneous usage rates to increase customers' satisfaction on after-sales service. Customers are classified into several categories according to their usage rates, and the optimal 2D warranty regions in the menu are designed considering both the manufacturer's total expected warranty cost and heterogeneous customers' perceptions on the designed 2D warranty menu. We define an attractiveness index to quantify a customer's perception on the 2D warranty region based on his usage rate. Meanwhile, design principles and procedures of designing the appropriate 2D warranty menu are proposed. By adopting the proposed menu, customer population has a better perception than a single region. Meanwhile, the manufacturer is more competitive by providing the proposed menu with a same total expected warranty cost.