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….

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….

Dare to be Different—Hold on to What you Got

Square Trade made the extended warranty business about price….different in perceived value.

Harbor Freight made their extended warranty business about over the counter replacements on tools…different in convenience for people that need a tool to get the job done.

Hyundai made their purchases include IUI, (Involuntary Unemployment Insurance) where you can get relief of payments if you lose your job….different in Peace of Mind.

Assurion enables Verizon and others to put the mobile phone coverage right on the bills….difference in affordability and close rates.

Many companies now offer accidental damage on your tools, laptops or other products…different in your oops coverage….

What else can be done to make your program different?   Don’t let anybody tell you that you can’t offer what you think your customer needs.  It can be priced. It can be administrated.

Want to make a difference?  Always build your programs to the benefit of making a difference in your customers’ lives….that will enable you to get new customers, but as importantly hold on to the ones you got!

This may be a stretch, but I have always dug this video by Bon Jovi I found on You Tube.  Oldy but a goody.   

http://www.youtube.com/watch?v=lDK9QqIzhwk

What Makes a Mobile Phone Warranty Worth the Money?

Convenience and Peace of Mind.

If your phone quits working and you are like me, a traveling kind of guy, then you are bummed.  It is nice to know I can make one call, and receive my replacement phone the next day.  Or can I?  I would be interested in knowing what your coverage was, your experience when you needed a repair or replacement, what the situation was, what the deductibles were and how the overall gig was.

There are such a variety of options now.

You can buy a phone with a contract and a monthly addition to your bill such as http://www.asurion.com/ as commonly sold in Verizon.

You can buy a phone without a contract and a monthly bill and have the coverage separate or included in your bill such as http://www.globalwarrantygroup.com/ as found in many storefronts throughout the USA

You can buy a prepaid phone with a typical extended plan over the counter or mail in offered by virtually everybody or even at http://www.squaretrade.com/

You can buy a membership in a phone coverage group such as found at http://front.protectcell.com/

What do you use and how satisfied are you?

The Warranty Concepts Annual Awards

The WCAA’s.  What do you think of the sound of that?  There are industry awards for advertising, best products, best apps, best movies, best shows, best plays, best music of many genres.  I could go on.

 

What about our industry?  I am going to start our awards today. I will bring them up at the CES show this week to many of my industry friends.  Haven’t decided on the criteria. Have not decided on the rewards.  Have not decided on the awards categories.

 

Here’s a few ideas to start:

 

• Best Publication
• Best New Program
• Best TPA
• Best Insurance Company
• Best In House Program
• Best Training Program
• Best Application
• Best Service Network
• Most Consumer Friendly
• Best Warranty Association
• Best State Agency

 

I am looking for input and sponsors and this project starts today.

 

I will give a monthly or quarterly update.

CBS Sunday Morning on 11-28-10 questions the value of Extended Warranties

Once again, a news agency has decided to regurgitate Consumer Reports in opinions that buying Extended Service Plans is not a good investment.   This is not new nor is it news.  I am amazed it showed up on my favorite Sunday Morning show on CBS.

 

Here is what I say…..Extended Service plans can be an unnecessary investment…..They can be a fabulous investment.  Duh.  If your product breaks and you get it repaired or replaced then that is a good investment. No argument.  On the flip side, even if you do not use the extended plan, (meaning the product actually doesn't fail), you still have the peace of mind knowing that if it were to fail you would not be out any more money or inconvenience….That is really the message they miss…..convenience, time saving and peace of mind.  It is not all about simple dollars and sense. In fact if it was, they way it works is the risk is spread out amongst those that do invest in the coverage and they pay very little for a lot. 

 

Yes, there are bad companies that hide behind fine print and take the money and run, but overall, the industry is driven through retail and manufacturing and neither of those “Branded” industries can afford to tell people no.  They have their eyes open for you.  Their mission is to build brand and reputation and extended plans help them do that….

 

Here are just a few things that many people are happy to own ESP or other creative coverage upon:

 

• Accidental Damage on Wireless, power tools and laptop type products.
• Loss of Job coverage on Autos.
• Weather damage coverage rolled into warranties on things like RV awnings and Covers.
• Simple over the counter replacement plans on inexpensive items that likely have short life span.  These are super convenient and very popular….

 

I could go on, but it doesn’t take a rocket scientist to know that if your product has no moving parts and is in a controlled environment that the likelihood of using the ESP is slim, but I am tired of News that is no News and does not reflect the other side of the story.

I.U.I.

IUI.  That is a new acronym that would not have been invented had we not had the crazy housing foreclosure issue and the subsequent effect on our economies and employment. IUI stands for Involuntary Unemployment Insurance.

This concept has been made famous by Hyundai or others.  They have done well to offer it as a built in advantage of buying one of their cars.  It goes something like, “if you lose your job and you can’t make the payments we will forgive your commitment and take it back”.

I also had the chance to work with a great guy named Harry Brix from American Wireless who suggested putting it out as a benefit to people that bought wireless phones with the two year commitments.  Great idea for this industry.

The math is pretty simple. In easiest terms you look at how many people of your overall base may lose their jobs.  Multiply that percentage by what the cost would be to buy out whatever contracts they may have from the banks or finance companies.  You either charge extra for that, or build it into the price.  Either way, you pop that into a reserve fund that you build out of each sale.  You don’t touch the reserves until the covered units are PIF, (Paid in Full).  Of course, you can pay an insurance company to manage that and should even check on particular compliance issues in each state, but this is not a difficult thing to do.

We need more creative new insurance ideas that benefit consumers and companies alike. I.U.I. is a win win.  The product companies sell more stuff because they offer true peace of mind during a challenging time and the consumers win because unless they are self employed, they may not be in control of their own employment destiny.