When someone under promises and over delivers, it means that he or she sets the bar low and then exceeds that bar. In a simple example, a delivery company might promise that something will be dropped off by noon, setting the bar, and then tell the driver to make sure that the object is delivered by ten in the morning, thereby exceeding the expectations of the customer. The idea behind this concept is that, by keeping customer expectations low and routinely exceeding them, an individual or company will develop a good reputation.
When someone makes ambitious claims and promises and then fails to live up to them, customers tend to grow irritated, feeling that false advertisements were made. Routinely failing to live up to expectations can make a company look bad, especially when the company itself sets those expectations. Products that are routinely delivered late, projects that are never completed, and deadlines that are never met are a great way to infuriate customers. One way to avoid this problem is to under promise and over deliver.
If, on the other hand, a company makes a promise that is understated, taking all of the factors of the situation into account, and then delivers early or above expectations, customers are left with a good feeling. To do this, a company usually thinks about the task or project at hand, estimates the time in which it can be reasonably completed, and then adds some time to the estimate given to the customer. For example, a business might say that a project will be complete by Friday when it could be finished on Wednesday.
When a company decides to under promise and over deliver, there are a number of advantages. The first is that, when they deliver the finished product early, it pleases the customer, and the customer will speak well of the company in the future. Secondly, in the event that there is a problem or hiccup in the process, the company has a built in buffer, and it doesn't need to panic. In the example above, it might not be able to deliver by its internal target date of Wednesday, but the consumer will definitely get the project by Friday and never be the wiser.
Companies may be encouraged to promise less and deliver more to retain customers and increase customer satisfaction. Those that do also need to be careful about taking this approach, however. It's important to set internal goals that are more demanding than the goals given to customers, and to stick with those.