Warranty Wise

Back from another Trip

So funny. I just got back from another trip and what voice mail did I get, “hey man are you ever home?  All I ever read in your blog is you are going somewhere like Vegas or New York or Bike riding in the Sierras?  Yes, you may have noticed that I took a little vacation….Bike pedals worked just fine…..

While I was away, I stayed in touch with my contacts asking about a plethora of positions on insurance and underwriting for the bike industry….what a challenge….it seems that if we want to sell accidental damage there may be a challenge unless it is sold as an augmentation to a service plan or replacement plan.  If we want to sell maintenance there is not a challenge.  We can take the approach of having the customer join a bike repair membership program that if the part of the bike breaks the part or the entire bike will be replaced for free as long as they understand that they replacement part or bike belongs to the membership, not them……then we have to ask, what do we do about consumables like tires and things like intertubes?

What a trip…what to do….

Here is what I think.

IBD’s, (Independent Bike Dealers) need to offer maintenance….they need to offer it all.  Big retailers should offer the same plans they offer on Consumer Electronics, but with two options, either with or without consumables coverages…..

I’ll be getting going on pricing now so if you want anything else added in chime in soon.  There are 15 million bikes sold each year in the USA alone.....Think we can tap into this?

My Pedal Broke last weekend

Talk about timing.  I was in Tahoe this last weekend for three days of downhill rides. One at Downieville, CA (a 17 mile downhill rippin ride), another at Hole in the Ground near Donner Pass, CA, (a gorgeous ride in a beautiful canyon all over granite with Sierra vistas) and the other called Mr. Toads on the South Shore of Lake Tahoe, CA, where we rode from Oneidas road at 6500 feet elevation up 8 miles to Armstrong pass at 8800 feet, hung a right and rode up another 2 miles up 600 feet along the Tahoe Rim trail before we descended down the famous Mr Toads Wild Ride and Saxton Creek back to Oneidas, (down granite waterfall, natural and man made stairs, and gnarly banked sweeping turns).  Wow doesn’t even come close…Awesome…..

Guess what. A pin and a spring of my Time pedals broke and disappeared.  Fortunately I discovered it before I ascended. The good news was there was a bike store nearby.  The bad news is they did not have the pin and spring I needed to repair the pedal.  I had to buy a new set.  My direct replacement was $199.99.  I only had a C Note so I had to buy the lower end model.

What would have happened if I had a replacement plan with accidental damage?  I could have called and got authorization for replacement, got the better pedals and have been in good shape….Did my bike store offer me a comprehensive replacement plan?  No.  Did the selling bike store offer me a pedal replacement plan?  No…

The bike industry is begging for our industry to help out.  This industry does $16B a year….

No Visible Bike Warranty Programs at Interbike

We attended Interbike this week… www.interbike.com

Fantastic show….Exciting show….lots of flashy carbon fiber racing bikes….new lighter versions of our favorite mountain bikes…tremendous electric bike selections…..hosts of other versions of things on wheels….most noticeably to me besides the e-bikes was the attention to the women’s market. This industry seems to have taken notice and is spending a lot of money to relate and serve the female industry…Smart.

What was missing was a focus on customer service programs and warranty programs…There is a huge opportunity here….I did not see booths with warranties, service center advisors, software for service, pretty much nothing in this regard.  When I ask myself why, the only answer I can come up with is that the industry is focused mostly on the independents and they make their money doing service and repair…..Even some big boys like Sports Authority and REI do their own service, but nevertheless, why has this not been developed and marketed in a big way? Maybe everyone assumes that bikes can be fixed by consumers?  This can’t be.

Why are there no replacement plans for the big retailers that do not do service?

Why are there no service plans for people that are traveling with their bikes and need a reputable service center?  Who manages this network?

Why are there no maintenance agreements for people out there to offer or buy?

I think I may take this bike opportunity for a ride…anyone want to tandem with me?

Drafting a Warranty, ESP or Maintenance Program Business Plan

• P&L’s
• Cash Flow and Balance Sheet
• Revs and Forecasts
• Ops
• Insurance
• G&A
• S&M
• Summaries and Recaps
• Etc.

All this stuff has to be  looked at.  Most importantly though:

Are you offering a warranty you should if you are looking at an OEM program? Does it give the purchasers confidence to buy your product?

Are you offering a warranty that people want to buy if you are offering an extended warranty program? Is it the right coverage at the right price?

Are you offering a maintenance program that insures the business or consumer you are serving can keep on operating?

Yes, you should not be in the business if it doesn’t pencil out so drafting a business plan and in depth financials are important, but why bother penciling it out if your programs won’t sell…

What is your vision to make your warranty program a benefit and how will you differentiate yourself from your competition?  What will it look like?

Warranty programs can be powerful….This is where you want to start before you can even put a pencil to the paper with financials.

This month, we will be taking a closer look at some great ideas and what financial questions have to be asked to make them work….

Guarantee = Commitment

In Warranty Week this week http://www.warrantyweek.com/  there is a discussion about the blurring of Warranty and Insurance.  Simply put, warranty is generally thought of as protections against defects or failures and insurance as protections against damages or accidents.  I think that is pretty universally understood though most customers will try and bend it to work in their favor which is also universally understood….that is why God made fine print!  Just kidding.

Here are a couple of words that should not be misinterpreted by those that use them….Guarantee and Commitment.  When one stands behind their word with a guarantee or a commitment, there better be no difference.

If a customer is told you will guarantee anything for any period of time, you are committed….End of story.  They have to be able to trust you….. If you start to put exceptions that “protect” you from standing behind your word, you have lost credibility and there is no fine print or incident that will let you regain that trust.

I guarantee it.

Safe and Secure

What makes an extended warranty  or warranty program secure?

Is it the size of the insurance company?

Is it the excess reserves?

Is it regulation of that state?

Is it the systems?

Yes….all the above matterm but what matters most is a complete understanding of, and devotion to, the needs of your customer, and how your company is nothing without that customer….

One customer at a time.

One policy at a time.

Safe and Secure.

What Happens When There is Unrest?

In a service industry such as warranty and extended warranty administration and insurance, what happens when one company buys another, when another company has its president and VP of sales fired, when others are looking to raise money and another launches?

Opportunity for some.

Unrest for others.

Those that have opportunity are the stable players and the ones that operate with integrity.

Those that suffer unrest are the people that have entrusted their customers to the companies in our industry….Our customers.  The retailers, associations and manufacturers that rely on us to deliver customer satisfaction.

Can you imagine if you just decided to do business with a TPA, did due diligence, signed an agreement, started integration, cancelled your current contract and suddenly heard that the people you dealt with in the company are gone and you are not sure who is at the helm?  Not really comfortable.  What would you do?

Our industry is not a product.  It is a service. It is relationships.  What does it mean when those relationships change companies or go away?

Unrest and Instability for the ones that have the most to lose….

Kind of Helter Skelter…..

Check out this You Tube video of U2 performing “Helter Skelter” by the Beatles back when the boys were long hairs….pretty cool.

http://www.youtube.com/watch?v=sLmqjcYtH3c

Selling ESP with DPS

Going back to my early days of sales I was fortunate enough to be trained by a guy name Jules Gilbert.  His partner in training Jack taught us that sales was an honorable profession.  What that means is if you learn your products and practice your trade with the customers best interest at all times, you are being honorable and deserve the same respect as any other profession.

They used a visit to the doctor’s office as an example and taught us Diagnostic Prescriptive Selling…D.P.S.

Think about it, if you visit a doctor he doesn’t prescribe a medicine or procedure without asking a few questions.  If he did you would think him a whack job.  He or she asks, what is wrong, how did it happen, how long have you felt like that, does it run in the family, on and on.  As you answer their questions they are diagnosing your condition or need.  That enables them to prescribe the correct fix. Some do it better than others just like in any profession, but generally there is a trust and respect because if this process….

Selling of ESP and the associated products is no different.  If a customer comes in for a computer and you don’t ask what they are using it for, what happened to the last one, what their environment is and a host of other questions and just try to sell them whatever you want instead of what they need, they will consider you a whack job and walk out. You do ask a series of questions so you can diagnose what they need and prescribe the appropriate product to benefit them the most….that is the right way of honorable selling and if you do that you will earn respect and sell lots of ESP to boot.

Practice DPS as a general way of selling….it works…..as a reminder, have a look at this Jackson Browne video…..even if it isn’t about selling it is a great tune with Doctor in it…..maybe it will remind you to use DPS.

http://www.youtube.com/watch?v=pCTYxIsLThA

Wear and Tear Fear

I was asked last week by numerous potential customers about our ESP program we were introducing at a show I was at, “what happens if the drill just wears out”, or “are you just going to tell me that I wore it out and that it lasted beyond its intended use”?  I am dumbfounded by this question?  I would expect, “what if I drop it?” I would expect, “what if it is used for rental or commercially”?  I would expect, “what happens if it gets wet”?  I would not expect, “are you going to cover it if it wears out?”

Our industry better be careful.  If the reputation is that we are not even going to cover wear and tear we have a problem. Isn’t that a benefit of buying an Extended Plan?  Yes, sudden failure, and unexpected problems are a must, but how can we even think it is ok to say something like, “sorry that is not covered, you used it up”.

How can we continue to expand our dealer base if there is a Fear about Wear and Tear?  Come on Industry….

Listen to this as a reminder, Jimmy and Robert and the band performing "Wear and Tear".  Found it on You Tube….

http://www.youtube.com/watch?v=HJ3nLZ_J04c

Go Show or No Show

I am at a trade show this week in Boston.  Many in our business attend trade shows to expose themselves to dealers or retailers.  It amazes me that in 2011 we still find myriad people that still do not offer ESP programs.  As we ask them why they have never offered plans we usually hear three reasons….1) Consumer Reports says they are a rip off, or  2) they have heard it is too hard to get paid for service, and 3) that they are afraid of upsetting their customers if we act like a “typical insurance company and give them the run around”.

For this reason alone shows are worth attending….

The biggest challenge our industry faces is to repair these viewpoints.  Only we can do that The best way to do that is to do things right.

When given the opportunity to explain the advantages of offering Extended Plans, the show attendees learn the many benefits such as adding to revenue and bottom line, satisfying and retaining customers…..

However, with all that said, we still need to earn their trust and the only way of doing that is to do things right at all times….otherwise we are killing our industry.

Have a listen to these songs as a reminder to not let people walk on by your booth without engaging them….Repairing our industry reputation starts with one dealer at a time!

Here is Walk On by U2

http://www.youtube.com/watch?v=gwKEdFoUB0o&ob=av2e

and “Walk On By” sung by Dionne Warwick

http://www.youtube.com/watch?v=07cS50j46T0