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Warranty : Viral Marketing & the Warranty Industry

Warranty execs get in touch with consumer habits.

May 2010 By Nancy Klosek
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Warranty Briefs

Warrantech, LEDs America, Partner

Warrantech Consumer Product Service announced a new contract with LEDs America, a designer and manufacturer of energy-saving LED-O lighting products.

A first for Warrantech, the LEDs America contract empowers Warrantech to serve as the administrator of the new LEDs America program, and it will provide three- and five-year service contract coverage on all LED-O product lines.

Outlook: Strong Overall 2010 ESP Sales Climate Favors New & Higher-Ticket CE Categories

Moving into the second half of 2010, extended warranty attachment sales have been “excellent” in the traditionally strong laptop computer and flat-panel TV categories, said Matt Frankel, president of Chartis Insurance’s Warranty Division. But there’s a bonus ahead in the next few months for ESP-pitching dealers, he added, with the market introduction of new CE categories like 3DTV and the Apple iPad.

“Customers are looking for the additional security, and looking to keep products they already own working,” he said. “They want to buy a large-screen TV for their family, and not have the worry of near-future repair costs.” Warranty sales are also strong in the smartphone category, where higher tickets often entail a larger up-front investment.

But new categories, he added, are ripe for ESP attachment. He said he expects iPad extended warranty sales to be strong “out of the box,” because no history exists about product performance and lifecycle. Similarly, Frankel said he also expects good ESP attachment rates for 3DTVs—not because the technology is unproven, but because of the sets’ generally higher price-points versus 2D set pricing.

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What methods do warranty companies use to get feedback about consumers and what they are receptive to in an attempted warranty sale—other than that which is provided by their dealer clients? Does viral marketing play a part—or will it play a larger part in how warranty companies obtain customer information in the future? Here's the weigh-in from a sampling of executives:

Keith Meier, senior vice president & general manager, extended services, Assurant:

We continue to look for more direct feedback in addition to our dealers. We're using online surveys and focus groups. Then we can bring that research back to our clients to create some of the next-generation products and programs.

We want to get out in front of identifying trends in today's environment and then share that information with our dealers, rather than only receive information about what is happening today in stores.

We're also working with clients to identify ways to work with them on social networking initiatives. This will allow us to touch more people in an easy fashion and get some timely messages out more easily than before.

Our work with clients in this regard will be case by case—that's typically how we design things, because our clients' environments are all different. It's a component of our Strategic Performance Management program where we identify the best ways to drive growth through a particular client's structure and culture.

Jamie Breneman, senior director of marketing, NEW:

NEW is making a strong effort to interact with consumers and initiate a dialogue about the evolution of our industry and educate them on how extended warranties and service plans can increase their level of product enjoyment, help families avoid unexpected spending, and give them extra peace of mind. Over the last year, we have created an online presence and made use of social media tools to enhance our direct-to-consumer outreach. With posts on Facebook, tweets on Twitter and entries on our consumer blog, The Savvy Shopper, we are able to quickly and easily share consumer tips as well as company and industry news.

Through these channels, we have also conducted two consumer surveys to gain feedback and insight from consumers about their perceptions of extended service plans.

At CES in January, we conducted a survey that revealed nearly a third of participants purchased an extended service plan and nearly half of all respondents encountered product failure or needed product support. One of the greatest key findings we achieved was that 80 percent of survey respondents indicated that they are motivated to buy an extended service plan in the future for protection from unexpected repair costs and their No. 1 reason is because they want to protect themselves from unexpected costs.

 

Companies Mentioned:
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COMMENTS

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Most Recent Comments:
Alan - Posted on August 08, 2010
Cell phones and physical damage aside; this industry was never created out of a need. The extended service plans for consumer electronics, appliances, outdoor equipment , etc were created on one premise alone - that the rate of failure will be low enough to handle whatever claims arise and that actuarial computations as such will return significant profit for the retailer and the plan administrator. There is NO consumer survey published that wholeheartedly endorses service contracts. In fact, based on the surveys published by organizations such as Consumer Reports (sorry their integrity can't be impugned), if the rate of acceptance of extended service contracts were equivalent to an election, the voters against would have not only won in a landslide, but the landslide would have been so great that the issue wouldn't surface again for 25 years.

In general, an industry that offers +4 years on an appliance when the appliance lasts anywhere from 8-18 years (btw the +4 years has never changed - where's the research to support a consumer need?). the industry that offered +2,3 or 4 years on tube tvs - which lasted 15, the industry that offered "picture tube only" warranties - a blatant ripoff, (no - lcd and plasma tv have a low rate of failure as well), the industry that offers "replacement plans" on power tools that add +1 year to a 3, 5, 7 or even 10 year warranty - how absurd, the industry that offers service contracts of +1 or +2 years on bicycles - where bikes can literally last forever - where phys damage is not covered - what is so impt about years 2,3 on a bike??? On and on. There's not enough space here for the absurdities of most of the plans and the HYPOCRISY or how they are sold at retail.

This comment is not to bemoan profits; it is to counter half-truths and hypocrisy that is endemic to an entire industry.
Click here to view archived comments...
Archived Comments:
Alan - Posted on August 08, 2010
Cell phones and physical damage aside; this industry was never created out of a need. The extended service plans for consumer electronics, appliances, outdoor equipment , etc were created on one premise alone - that the rate of failure will be low enough to handle whatever claims arise and that actuarial computations as such will return significant profit for the retailer and the plan administrator. There is NO consumer survey published that wholeheartedly endorses service contracts. In fact, based on the surveys published by organizations such as Consumer Reports (sorry their integrity can't be impugned), if the rate of acceptance of extended service contracts were equivalent to an election, the voters against would have not only won in a landslide, but the landslide would have been so great that the issue wouldn't surface again for 25 years.

In general, an industry that offers +4 years on an appliance when the appliance lasts anywhere from 8-18 years (btw the +4 years has never changed - where's the research to support a consumer need?). the industry that offered +2,3 or 4 years on tube tvs - which lasted 15, the industry that offered "picture tube only" warranties - a blatant ripoff, (no - lcd and plasma tv have a low rate of failure as well), the industry that offers "replacement plans" on power tools that add +1 year to a 3, 5, 7 or even 10 year warranty - how absurd, the industry that offers service contracts of +1 or +2 years on bicycles - where bikes can literally last forever - where phys damage is not covered - what is so impt about years 2,3 on a bike??? On and on. There's not enough space here for the absurdities of most of the plans and the HYPOCRISY or how they are sold at retail.

This comment is not to bemoan profits; it is to counter half-truths and hypocrisy that is endemic to an entire industry.