Final answer:
Performance obligations are promises made by sellers to transfer goods or services to a customer. Business often use money-back guarantees and warranties to reassure customers of product quality and encourage purchases. Such commitments are essential for online and mail-order sales where customers can't physically examine products before buying.
Step-by-step explanation:
Promises to transfer goods or services to a customer are referred to as performance obligations. In the context of the goods market, sellers often provide forms of reassurance, such as money-back guarantees, warranties, and service contracts. These are forms of promises of quality, offering a level of customer protection that encourages purchases by alleviating concerns about the uncertainty of product satisfaction. Such strategies are particularly important for sellers who operate through mail-order catalogs or online platforms, as customers do not have the opportunity to inspect the products beforehand. Even without explicit policies, some businesses practice unstated guarantees, where they may offer refunds or exchanges to maintain customer satisfaction and loyalty.