Balancing the Financial Benefits of Your Extended Warranty Programs against the Customers’ Perception of Your Brand

Published by Michael Shene, VP Business Development, After, Inc. on March 1st, 2016.

There’s a delicate balance between the revenue / profits generated from your extended warranty programs, and the perceived value of the product.  Leveraging warranty analytics can help you effectively price an extended service plan program such that it builds strong customer relationships as well as deliver a strong financial performance.

Based solely upon the perceived financial benefits, manufacturers often rush into the design, development, and launch of an extended service plan program – disregarding the potential consequences to the perception of their brand.  Let’s take a look at a couple of the pitfalls:

• If the products are priced too high or too low – customers may not see the value in the product associated with the manufacturer’s warranty.
• If the terms, coverage, claims process, and service network associated with the product are too limited or difficult to execute – the program designed to build strong customer relationships could have the reverse effect.

To make things worse, the explosion of social media can magnify the impact of negative experiences with your extended service plan program, turning a single poor experience into a wave of bad publicity.

If a customer buys a private label contract at the point of sale (Lowe’s / Home Depot) – they often associate that ESP with the manufacturer of the product.  It’s important to understand the distinctions and work closely with your retail partners such that the customer clearly understands what they are buying and who is ultimately responsible.

In order to avoid some of these missteps, a few items to focus on include:

• Invest in the appropriate support systems and resources up front. Otherwise, the profits from your extended service plan program will be offset by defecting customers.  Negative experiences with customer care, claims, and service providers can quickly turn brand advocates into detractors.
• When pricing your extended service plan products – clearly understand ALL of the components associated with the product structure.  Claims validation, administration, and underwriting costs with an unbiased outside partner can provide you with a valuable, competitive product to your customers.

With the appropriate level of diligence, analysis, and customer awareness – it is possible to design and develop an extended service plan product that drives dollars to the bottom line, while delivering on your brand promise to the customer.  After, Inc. is uniquely qualified to help you strike the balance between product, process and profitability.  If you would like to speak with After, Inc. about your program, please give us a call at 800-374-4728.