"EXCEPTIONAL GUARANTEES".

"Everybody offers some kind of vaguely-worded guarantee these days," says pricing expert Eric Mitchell. "But only a few companies offer exceptional guarantees--promises that really stand out. All the others are really just promising what customers expected in the first place."

Mitchell, the president and founder of the Professional Pricing Society, argues that a high-profile guarantee usually has the same effect as a deep price cut. "Conceptually, a guarantee reduces the buyer's perception of risk, just like a lower price. The difference is, only a tiny number of people will ever make a claim, so guarantees cost much less than a discount."

Exceptional guarantees are also an effective way for an "insurgent" to challenge the market leader, Mitchell adds. "Sometimes companies get into a war over who's offering the most powerful guarantee, and the standard for performance rises for everybody," he notes. "But that's still a lot better than a price war."

We asked Mitchell to describe how to develop an "exceptional guarantee" campaign. His advice:

* Be brief and clear: "Exceptional guarantees make the customer feel comfortable right away," says Mitchell. "If the language is unclear, or if there are lots of terms and conditions, people won't stop to figure out what you've promised. They'll just ignore your guarantee."

* Make a big splash: Most companies under-promote their guarantees, says Mitchell. "They promise something important, but then whisper it so no one will notice." A great guarantee should make an "in-your-face statement" about how strongly the company feels about its quality standards, he argues. "Unfortunately, the hardest job I have is convincing CEOs to approve aggressive guarantees."

* Beat the competition: Most guarantees simply increase a buyer's comfort level. But if there are lots of competitors in the market, says Mitchell, a guarantee can also set a company apart from the pack. "One of my favorite guarantees is the Hampton Inn's promise that they'll give you a free night if you're unhappy for any reason. Hampton Inn stands out because other hotels don't make that kind of promise."

* Make the refund process pleasant: When Home Depot tracked purchase patterns of people who asked for refunds, Mitchell reports, the results were an eye-opener: Supposedly "unhappy" buyers were significantly more loyal to Home Depot and spent more on future purchases. "Sure, a few people will try to cheat the system. But most of the time a dissatisfied customer is a selling opportunity."

* Offer satisfaction, not cash: Aggressive guarantees don't have to be expensive, Mitchell notes. "Most people would much rather have you solve their problem--and solve it right away--than get money back." No- cost upgrades, free seminar registration, and service contract extensions are common techniques for "making the customer whole," he says. "You can afford to be very generous about these offers because they cost almost nothing."

* Look for patterns: Managers don't like to dwell on unhappy customers, but a strong guarantee can uncover serious glitches in products and services, Mitchell points out. "If a lot of claims can be traced back to one employee, for example, maybe it's time for that person to think about a career change."

Eric Mitchell, president, Professional Pricing Society, 3277 Roswell Rd., Atlanta, Ga. 30305; 770/509-9933. E-mail: mitchell@pricing- advisor.com.