Optimizing the warranty period by cuckoo meta-heuristic algorithm in heterogeneous customers’ population

Authors

1 Kish International campus, University of Tehran, Kish Island, 71778-5777, Iran

2 Tehran University, Gisha bridge, Jalale ale ahmad blvd, Tehran, 6311-14155, Iran

Abstract

Warranty is now an integral part of each product. Since its length is directly related to the cost of production, it should
be set in such a way that it would maximize revenue generation and customers’ satisfaction. Furthermore, based on
the behavior of customers, it is assumed that increasing the warranty period to earn the trust of more customers leads
to more sales until the market is saturated. We should bear in mind that different groups of consumers have different
consumption behaviors and that performance of the product has a direct impact on the failure rate over the life of the
product. Therefore, the optimum duration for every group is different. In fact, we cannot present different warranty
periods for various customer groups. In conclusion, using cuckoo meta-heuristic optimization algorithm, we try to find
a common period for the entire population. Results with high convergence offer a term length that will maximize the
aforementioned goals simultaneously. The study was tested using real data from Appliance Company. The results
indicate a significant increase in sales when the optimization approach was applied; it provides a longer warranty
through increased revenue from selling, not only reducing profit margins but also increasing it.

Keywords