Scotts Painting Company paints houses Since Scotts business

Scott’s Painting Company paints houses. Since Scott’s business does not have the name recognition of some of the bigger painting companies, Scott advertises a \"Five-Year Money Back Guarantee\" to indicate to buyers that his service is of high quality. This guarantee is an example of

Solution

Signaling

Research has shown that consumers perceive warranties as a signal of quality. They believe that if a particular product is coming under Money Back Guarantee, it must belong to a high quality type otherwise a manufacturer will not take such a big risk when he is selling a poor quality. This implies that Scott’s business is using signalling as a way to popularize its service.