Please review my AWA

by **biswajit.banerjee** Sat Apr 13, 2013 2:53 pm

MGMAT CAT Exam #4
The following appeared in a memo to executives at a company that manufactures industrial equipment:

"We are spending too much on free customer service after a sale has been made; we need to limit our warranty to two years in order to improve our profit margins. The current lifetime warranty can lead to costs decades into a product's life cycle. Also, we pay our customer service employees a premium because they must possess expert skills across the entirety of our very diverse product line, including products we no longer sell."

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The statement that the company is spending too much on free customer service after a sale has been made and hence they should restrict the service to 2 years of warranty is not entirely convincing. The conclusion is not properly supported by facts and is based on quite a few assumptions.

First of all, it fails to explain the nature of product the company sells in the market. If the company had a monopoly on the market and did not face any competition from other companies, then the decision would hold some ground. However, just cutting on the free service with out considering market condition may prompt new customers to look for other companies. This will have an adverse impact on the sales and profit on the company.

Secondly, the cost incurred towards the payment of the skilled experts has been shown as another reason for considering the decision. While doing so, the company fails to adopt any innovative options that would cut the manpower, yet able to provide, if not better, but the similar level of customer services for life time. It is not explicitly mentioned whether any of the latest techniques that are being used by many companies, such as Social media, Online chat, customer call centers etc are being already used or is being considered.

Lastly, the details about the training, nature and quality of service manual etc are not discussed in enhancing the service of the product.
They could substantially cut down on the cost incurred on free service if they focused on quality customer training, improving the content on the service manual etc.

As evident from the above points, the decision taken by the company has too many grey areas that need a urgent consideration in order to come to a conclusion.