Putting a Fresh Face on Warranties

Mike Frosch
Industry vet Mike Frosch looks to help retailers differentiate

Mike Frosch, a 25-year warranty industry veteran, is now an entrepreneur looking to put a fresh face on the warranty business with his newly formed company, Personal Safeguards Group (PSG). He has seen plenty of opportunity in the market for a firm that focuses on supporting dealers and vendors in driving customer acquisition and retention through an approach that helps them develop differentiated factory warranty and extended warranty strategies.

On the retail side, customers need good reasons beyond mere protection to buy a warranty, Frosch said, especially with consumer electronics becoming less expensive with each product generation and warranties that consumers feel are not worth the price of protection.

“Here’s an example: for a $299 laptop, a three-year accidental damage warranty is $199. It’s very difficult to get someone to spend that kind of money,” he said.

“You have to think about what extra you can offer to a consumer, what benefit will be more closely aligned to what they’ll need.” That could include things like identity theft protection, or free virus removal for a computer.

The industry, he said, suffers from a “me-too” rut.

“If you think of the extended warranty business, you basically have a handful of very good providers, but a lot of them are doing the same things. You have customer who’ll switch from Provider A to B, and maybe they’ll get a better deal because they’ll save on their fee. But they’ll get basically the same results, and haven’t really changed anything because they’re all doing the same thing within the same structure.”

Frosch said he is passionate about customer care at the point of sale and well beyond. He is not a fan of the handoffs that happen through the history of a product’s lifespan, saying the warranty industry is too diffuse and segmented; integrated solutions are needed.

“The customer should not have a different experience depending upon how old the product is. If your customer care company is one you use as a retailer or a manufacturer from day one, why not just have them take care of the customer through the entire experience? I wanted to assemble anorganization that suggests,

‘Why don’t I become an agnostic provider of the best components and solutions for each individual need?’ There should be no handoffs. Give the customer the best experience you possibly can, because you want them back in the store later.”

PSG also focuses on factory warranties. “There are OEMs just coming into the U.S., and they’re in need of extensive help coming into new markets. What do you do on day one to take care of the customer early on, and what do you want that customer experience to be? How do you want the portal to look where they can register a product and where you can establish and build a relationship with them? There is no one size fits all.”

For retailers, building loyalty has always been paramount.

“The retailer needs to think about the entirety of building the product as opposed to using the same product or continuing to change warranty providers. They’re not selling toasters,” Frosch said. “This is a service that has a long-lasting effect – a tremendous impact on the relationship with the consumer. When you sell them something, and they needservice in the future, it should be perfect, smooth and of wonderful quality.”

The need is especially acute for online extended warranty sales, Frosch said.

“Very few companies are doing well selling warranties online compared to what sells in the retail model. The products really need to mirror what the consumer is looking for.”

Frosch views PSG’s role as multi-faceted: a broker between buyer and seller, and as an adviser on the configuration of warranty products.

“People are looking for help and guidance and suggestions and ideas,” he said. “They may be on their second or third or fourth provider, but they’re basically getting the same results they had before. So they’re looking at what could be done differently. To do that, you need to be outside the box, as opposed to being in the box, where you’ll have one perspective. It’s very customizable and collaborative.

“What I care about is customer retention, acquisition of new customers and growing for my clients. Those are the three drivers. I just happen to use factory and extended warranties as parts of those drivers.”

Related story: Warranty Veteran Frosch Founds PSG

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  • seligrabbit

    Mike I believe you to be SPOT on! We are preparing for a new offer to our customers that includes a bundle of some things including the "parts and plastic coverage". Too many of our competitors are stuck in the rut of chasing the premium and forgetting the customer is THE most important asset we have. It must be a comfortable place for them to be and we must deliver a quality customer service experience!

  • Customersrule

    Congratulations Mike and best of luck in your new venture. As someone who not only sold your AON Group plans in the past (Wiz) and who has sold others’ plans and has worked for a major plan administrator, consider this:

    It appears as though Square Trade is trying to put a fresh face on the industry; witness the transparency of the Staples plans as such:
     no “submersion” restriction for water damage
     time of service guarantee
     emphasis on customer satisfaction
     simplicity of presentation with NO mouse print deceptions

    Even with plans such as these there are still undeniable facts about the state and history of the industry which the insiders know and are sometimes reported in summary by consumer organizations:
    1. An extended warranty per say is still insurance; the retailers have always tried to mask this.
    2. The entire industry is based (non damage plans) on products failing in very small numbers.
    3. The entire industry is based on offering a service in the years of least risk; some things never change – as in + 4 year plans for white goods.

    4. The entire industry is based on 20-30% of consumers who are ignorant of actuarial risk, statistics and probability of failure. (btw, also ignorant of who the Sec’y of State is, that the Earth revolves around the Sun and so on).

    5. There are still plenty of big box stores with old school mentalities where the importance of service plan sales exceeds that of product and customer satisfaction.

    6. Based on low product failure rates, extended service plans are not needed at all; in fact, if these didn’t exist (give credit to the entrepreneurs), the retailers may well just HAVE to compete on service alone.

    7. “The customer should not have a different experience depending upon how old the product is;” you’re absolutely right – service plans, though, only protect the consumer in the periods of least risk for product failure.

    8. Those sales people and clerks “pitching” the plans consistently misstate plan benefits and the administration of the plans. Consumers who buy the plans, do not know that many stores “wash their hands” of the plans after the sale and dump them to a third party. Even Best Buy employees have no idea what the status of a product in repair is as the systems are not integrated.

    9. The “$199 plan for a 3-year accidental damage warranty for a $299” is actually TWO years from date of purchase at many retailers, and is indeed a terrible offering which that offer itself insults the intelligence of the consumer. Similar plans are sold at $99 for 2-years without damage – this “1-year extended warranty” is deceptive itself as the product comes with 1-year thus:

    10. The “masking” of the manufacturer warranty has always been prevalent; the associate explaining the manufacturer warranty more often than not, misstates (even legally) certain terms of it.

    11. “Normal wear and tear” is itself a deceptive term as electronics are exposed to elements during normal wear and tear and are even occasionally dropped.

    12. The consumer, many times, would get better service going directly through a manufacturer rather than a 3rd party.

    13. With Gorilla Glass and cell phone encasements becoming much stronger, service plans on cell phones are becoming moot; many consumers file complaints when plans are used as they are stuck in a repair or replacement process they didn’t expect.

    14. Retailers still offer, out of managerial emphasis and robotic behavior, blatantly deceptive plans such as these examples:
     On power tools where manufacturer warranties are 2,3,5,7 and 10 years and the plans begin after.
     3 or 4 year plans from date of purchase on lawn movers with 2 and 3 year warranties.
     Protection plans on toys, where the plans do not cover damage (what else happens?).
     2-year and 3-year plans from date of purchase, where the manufacturer warranty is masked.
     Accidental damage plans where full water submersion is not covered; retailers and service centers often “put customers on trial” regarding this.
     Fix or replace plans where the replacement is at “market value;” for technology, this represents a severe drop from price paid.

    One just needs to spend a few hours reading the breadth and depth of complaints on the major websites and blogs to uncover many of these.

    Granted, I suppose you may gain some things to ponder here in your quest to make a better product. Anything that actually benefits the consumer is welcome. Increasing customer satisfaction in the brick and mortar consumer electronics/appliance industry is now a survival tactic.

    Alan Cooper
    Training and Development Professional/Retail and Consumer Services