A performance guarantee is a promise made that either a service lives up to certain expectations, or that a service or product will continue to perform well over a stated time period. In the business world, there are many such guarantees: each created in individual ways, defining commitment and extent of future responsibility. In more complex ways, sometimes third parties guarantee performance of something too, especially when employing subcontractors.
For consumers, the performance guarantee might sound something like the following: “We guarantee if you use our exterminator service, you won’t have any more cockroaches or we’ll come back for free.” This is not just an assurance of quality in the initial service, but an assurance of quality in the near future. To save money, the exterminators would also specify a time period, or they might be guaranteeing free service forever, with each new roach encroachment. The goal, though, is to make the customer choose the services of a business because that business promises to stand by its work.
Other guarantees occur. For example, there are many private schools that now guarantee students can finish an undergraduate degree in four years, and if they don’t, they get a fifth year free. This offer can look pretty good when state schools are cutting budgets and classes dramatically, and might make a student lean toward private education, even though it’s more expensive.