I’ve often wondered how some companies can offer a lifetime warranty on a product that doesn’t cost that much. It would seem like the expense of handling those warranty claims over time could easily exceed the value of the product. For instance, I have a pair of hiking socks that cost $18. After about six months of use, they started to tear in the back. So I looked at the manufacturer’s website, and they offer a lifetime exchange policy. But here’s the rub: you have to pay for shipping the item back to them, and include a bunch of backup documentation about when you bought them, what’s wrong, etc. Given that a basic priority mail package runs about $7 in postage, I would be spending nearly half the cost of the product, plus probably an hour of my time, just to get it replaced.

With the above in mind, I bet that no more than 20% of customers with defective products ever bother to exchange them. Is this the company’s fault? Not really. From their perspective, it’s only fair for the customer to bear some of the cost of the exchange process. After all, the company is paying to ship the replacement product back to the consumer, plus the logistical cost of processing the return. And with so few returns actually being submitted, even a lifetime warranty ends up being quite affordable for the seller.

However, this situation can become dangerous for the vendor. While I think I’m being reasonable in my analysis, the fact that the warranty on my socks is basically useless has lowered my perception of the brand. I probably won’t buy these again, since I know that if they break, I’ll have to toss them and buy another pair.

So what’s the answer here? I propose that companies selling low-cost goods offer an alternate warranty option. Instead of having to send back the product, give customers a choice of receiving a merchandise credit good for some portion of the purchase price, with the percentage declining based on how long ago they bought it. This could be applied to a replacement or another item from that company. Of course, the seller would need to put something in place to prevent fraud, like making sure people don’t file more than one claim per item, and limiting how many claims a person can file each year.

I think a lot of customers would be thrilled with the option to receive a credit voucher, even though it wouldn’t cover the full purchase price. In my case, a credit for say 50% of the cost (since the issue arose during the first year) would have led me to buy another pair of hiking socks — while giving me the confidence to purchase more from the brand.