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….

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

Non Typical Extended Products

It is obvious you can buy extended plans for everything from consumer electronics to appliances to vehicles of any shape and size.  You can buy whole home packages.  You can buy replacement plans and repair plans. You can buy maintenance plans for business and home alike. 

What products would you like to see more often? Here are some on my short list

Door replacements

Wall patches

Tile Grout Removal and Replacement.

Sewer and Drain

Air Conditioning and Heating

Water Systems and Timers

It seems that these items cause me more time and money than any CE product in my home.

What would you like to see?

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?

Consumer Reports August 11 “Repair or Replace It ?”

Take a look at the CR 8-11. I appreciate the input from the consumers and the writers that put this data together however unscientific and incomplete it is. It is an interesting read.  Great advice on what to hold onto and repair versus what to replace.  The guide to timelines is interesting. 

My concern is they still stick to their old Extended Warranties are not a good financial investment except for laptop computers.  They use the median cost of repair as $150 versus the median price of an extended warranty at $142.  Well math is math.  That is about a 5% difference in favor of buying warranties.

 

They neglect to tie in some data they recite to the value of extended warranties. They point out that 13% of the people complained about parts availability.  22 percent complain about lengthy repairs.  13 % had bad repairs.  14% had excessive cost.  Guess what, with extended service plans, these issues are handled expediently and generally speaking, if an item cannot be repaired it is replaced. Most extended plans do not have deductibles and are given priority.

This adds up to peace of mind, convenience and time saving, and those benefits are priceless.

 Consumer Reports should consider all the input and study the variety of extended warranties now available.   Our industry has matured and offers phenomenal value.

You may be able to find the article at http://www.consumerreports.org

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…..