Warranty Wise

Hybrids of Replacement Plans….Be Adaptable

• What works best for your customer?  If you start with that question you are on the right track.
• What can we manage?  Whether you are a retailer, a distributor, a manufacturer or a TPA/Insurance Company, If you ask that question you will not overpromise,  you will know where you need to be and what you need to build?
• What will give us an edge?  If you are adaptable, you will likely have an adaptable Replacement program that works differently for your different customer, products and channels alike.  Don’t be stiff. If you are able to get a bit creative and investigate the ramifications and solutions your customers will appreciate it and support you.

Replacement Plans are a main staple in this day and age.  Make sure you are ready.

Speaking of Replacements, Remember this movie?  I loved the smoking kicker guy.  Watch this video…..

http://www.youtube.com/watch?v=sN7r7nk0-zc&feature=related

Advanced Replacement Option

As far as mail in replacement type of programs go, these are my favorite.  Imagine your wireless phone or your laptop computer goes down and you are in need.  You can’t live without it.  You can’t wait for repair or refurbish.  This type of replacement program is the way to go.  You call the toll free people, explain the issue with the product, and upon determining that your coverage is in place, they will send you the replacement unit, (usually overnight).  Along with the new item, there is a return label.  You take the new product out of the box, put the failed product in the box, seal it, attach the label and send it back…You received your replacement item in advance of the admin or the manufacturer receiving your broken item.  Pretty cool.

My wife shops at Zappos, www.zappos.com and she loves that if she gets the wrong shoes, they have already included a return label, or allow her to print one up on line.  That is another way to go.  Nary a refusal.  Always a customer service opportunity or as Tony Hsieh puts it, “every customer service issue is a branding opportunity”.

What are the considerations for this type of program?

• What will happen if the product is not really defective?  Obviously this can put additional costs and raise loss ratios on the program for the admin/underwriter/manufacturer.  You have to weigh the advantages/disadvantages.
• What should be done with the defective products, (refurbish and resell?).  This can be turned into income if managed correctly, or add up to losses.
• Will you require a credit card as a form of collateral before sending the new product out?
• Does this improve your company’s image?  Does it help build your brand?
• Are your operators set up with the type of systems necessary to handle trouble shooting and make this as seamless as possible?

Get all of those answered, set it up and go.

Advanced Replacements should be in your arsenal of competitive programs…..

Mail In Gift Card or Replacement Item Replacement Plans

These are the most common type of Replacement programs.  Many retailers like them because they do not need to handle the defective product.  The customer calls a toll free number or goes on line, and if the product qualifies for replacement they are given an RA, (Return Authorization). They send in their item, the problem is verified and they are either sent a replacement item or a gift card or check for the amount of original purchase. The gift card or check are used at that retailer.  So the long and short of it is that the retailer does not need to handle defective product or unhappy customers, they simply get to ring up new business.

Things to consider:

• Who will pay to send the defective product in?---this can be a point of contention.  Many companies do pay for shipping.  It is usually only an issue on expensive or heavy items.
• What happens if there is a disagreement about whether or not the product is truly defective, (abuse, misuse acts of God and consumables usually are not covered)---there must be a way set up to clear these.  Best to set this understanding at point of sale.
• How long will it take?----there should be a 24 hour turnaround upon receiving of the product.  Remember, this is a replacement plan, not a repair plan. It is just about validation, adjudication and fulfillment.
• If a gift card fulfillment is set up can you make it so the gift card is only valid at the selling dealer? ---this can be done. I would suggest you make sure it is.

Over the Counter/In Store Replacements Plans

This is my favorite type of replacement plan because it is most simple to explain to the consumer.  They get it.  Oh, if my product malfunctions during the period of coverage I get to come back into your store and get a new one.  Easy.  No objections based upon having to mail it in and wait for a replacement because there is no waiting and no cost of mailing.  This is a built in traffic builder.  They will always buy another replacement plan and more stuff while they are in your store.

Sounds good but there are considerations that you have to weigh.

• How will you verify the product is actually defective?---you must make sure the crew asks the simple questions like what is wrong, when did it happen and how did it happen?  The “defect” may be something as  simple as changing batteries.
• What will you do with the defective product?---do you have space for it?  Will you sell it to a refurbisher for asset recovery?  How will you clearly identify it so that it does not get mixed in with your other product returns, so you do not put it in your inventory.  This can be important for a variety of reasons.  If you are using a TPA how long do they want you to hold the products if at all?
• How will you set up your accounting?---some accounts try to show this as an exchange in their accounting so that they do not have a tax liability.  I think you should consult your tax attorneys about that but it makes sense. If you show the replacement as a straight sale, then you will likely owe tax….This can add up.

Even with these and other issues, the advantages of Over The Counter Replacements are huge. 

Employees love to sell them. People love to buy them. 

Replacement Plan Options

What type of replacement plans do you offer your customers?  Did you decide by what benefitted them the most or what made it the easiest on you and your company?

1.      Over the Counter/In Store

2.      Mail In and Wait for a Replacement or Gift Card?

3.      Advanced Replacement Mail In

4.      Hybrids or combos of the above

This week we will explore a variety of options and terms out there today.  Think about your programs and your competitors programs.  Each have operational advantages and disadvantages.  Each have consumer satisfaction advantages and disadvantages.  Each have benefits and risks.

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.

Every Service Opportunity is a Branding Opportunity

Zappos.  Tony Hseih.  The company.  The leader.  I wish all companies understood that one of the greatest ways to make fans out of your customers is to treat them right when something is wrong.  At Zappos, they are all on the same page.  If a customer gets some shoes they don’t like for any reason, they get to return them.  Seriously.  Simple.  My wife loves these guys.  Tony says, “Every phone call is a branding opportunity”.  Makes sense to me.

Translate that into our industry when products fail.  Are we doing everything we can to make sure the customer is made whole and happy if their covered product goes down?  If we are always looking at saving a buck instead of investing what we should to insure that their problem is turned into another future selling opportunity, then shame on us.

I have a client that is recently in the middle of a “fine print” battle.  What a waste of time.  The TPA is using a clause in the “What is not covered” section about custom installs to refuse removal and reinstallation charges for any installed items….This is upsetting the people that sell these.  How will they then continue to sell them with vigor?  They won’t.  I wish all companies would understand ahead of time that this is a bad idea.

Make the selling and servicing employees happy and you will make the customers happy.

Brand your warranties as phenomenal.

What controls do you have built in to your ESP Program? Recovery for Retailers

The long term beauty of having success at selling extended plans is that your customers will not leave you when their products fail or wear out.  That’s right.  Since they have a plan they will come back to you for their repair or replacement.  If you are a self servicing dealer, then the repair is another source of income. If you are a retailer that sold replacement plans then the customer will come back to you for their new product and that “second sale” is a another source of income.  Both of these are excellent profit centers if your staff is diligent about the process of obtaining authorization.  Both of these are additional expenses if they don’t.

Put another way, when you sell an ESP you either pay a premium to a TPA to pass on the risk and they put the money in reserve, or you run your own program and you put the money in reserve. Either way, that reserve fund is there to fulfill the promise to repair or replace the product for the customer at the time of the claim.  Unfortunately, I find all too often that the retail staffs find it convenient to just replace it without obtaining a authorization, (do an over the counter exchange). This means you paid a premium, yet you are still paying for the replacement.  Big time lame.  How do you control this?

1.  Require it.  No RA, No pay. Period

2.  Make sure the process is simple and fast. (1 to 3 minutes total) If the process takes too long or is too complicated they will not do it for a variety of real reasons.

3.  Secret Shop it. Verification is a clean and necessary step.

4.  Adjudication is Advantageous.  Verify your reimbursements.

Don’t overlook the importance of the back end of PPP plans. It pays to set up a little Control.

Revolving Door Syndrome

Let’s say you are a membership store, or co-op, or just a really smart retailer that has done an admirable job teaching your staff that the customer is never wrong.  That “No” is not in their vocabulary.  It becomes not only counter-logical for some to offer ESP’s as we have addressed in the last couple of blogs, but it also “programs” your customers to abuse you and your managers to perpetuate it. To come back for eternity and demand a new item.  You know what I mean/

 

I call this the “Revolving Door Syndrome”.

How do we get out of here?

When a customer comes in with a failed product passed the manufacturer warranty, or without a receipt, here is what you have the managers say to the customers;

“First off Miss Customer, I want you to know I am going to take care of you and exchange your item because I value your business.  However here is how this works.  When we buy our products from our manufacturers we explain to them that we expect them to stand behind their products just like we stand behind what we sell. That if their products fail during the warranty period we expect full credit before we will issue them another purchase order. If they do not agree to this we do not sell their products. However, we must show them proof of purchase and return dates to get this credit.  Now, since you do not have your receipt I can not get credit. I am still going to exchange this for you, but I would like you to take a ___ year PPP with this so if this item should fail again passed the original warranty, or you should lose your receipt, we will both get taken care of.  You will get a new product and I will get reimbursed by the Warranty Company.  Make sense?

I have been doing this for years and stopped many revolving doors with this message. Will 100% of your customers buy into this?  Heck no. But a large percentage will and that is good for your business.  Your employees will see a little nuance as well and this can be educational and motivational knowing their managers will go an extra mile and still try to help sell more Extended Service Plans.

Why do you think returns or warranty support cost you money?

What do I mean by that you ask?  Do you know what your customers spend again when they have a positive return, exchange or warranty experience?  This is a monster metric.  Seriously, why would you give a customer a hard time when they are dissatisfied with the product they purchased?  You really want to exacerbate their dissatisfaction simply with a product to the point that they change their focus of dissatisfaction from the product to you or your entire company?

 

Seriously.  Protect your brand and good image.  I suggest that for a period of time, you actually measure, by customer, what the value of their return was, opposed to how much they turned around and spent when you treated them with respect……Make sense?  I can guarantee you that returns only cost you money when you are obstinate, defensive, or negative about them. Giving the customer a positive experience when they are dissatisfied with the product will put them in the mood to find something else to purchase from you.  The question is, if you do you not track that, when will you start?  You don’t have to take my word for it, you can prove it to yourself.

 

I once worked at a company that the difference was over 50%.....50%.  Treated them right, when we got them back in the store and up-sold them by over 50%.  I Love returns…..Think about it.  If you are self servicing, or sell products covered by Extended Service Plans, especially in-store replacement plans, then you are guaranteed they come back to you when there is an issue.  They would go no where else.  Customer Retention.  I Love returns.