While a chief reason for selling service plans remains the bottom-line profit these programs generate for dealers, says Danny Hourigan, president of the Service Plan division of NEW Customer Service Companies, "there are now several other compelling reasons to sell service plans, including customer loyalty, expectations and acceptance.
"A recent consumer study we conducted," Hourigan says, "revealed that consumers who bought service plans were more loyal to the retailer than those who didn't—even if they never used the service plan."
Today's consumers, he adds, given the higher tickets and increasing technical complexity of products, "expect that a retailer will support them after the sale, and this includes service as well as technical troubleshooting. A well-conceived service plan program provides the perfect solution to these expectations. Additionally, many consumers have minimal free time, and a service plan provides them with a simple solution in the event they need support or service." Hourigan says that the influence of such publications as Consumer Reports, "which now recommends the purchase of service plans for certain products," has also made a difference in warranty sales, and adds, "I believe this level of consumer acceptance will get even stronger in the future, and smart retailers will capitalize on this trend.