What type of costs relate to product problems arising after customer delivery?

External failure costs are associated with product problems that occur after the goods have been delivered to the customer. These costs arise when a product fails to meet quality standards or customer expectations after the point of sale, leading to issues such as returns, warranty claims, repairs, or replacements.

When customers experience problems with a product they have already purchased, the company bears additional costs to rectify these issues. This may include handling complaints, processing returns, and shipping replacement products, which can significantly impact profitability and customer satisfaction.

The focus of external failure costs is on costs incurred due to failures that happen in the marketplace. By addressing these types of costs, organizations can identify opportunities for improvement in product quality and customer service, which not only reduces financial burdens but also enhances brand reputation and loyalty. Thus, understanding and managing external failure costs are crucial for a company's long-term success.