Warranty: Through Good Times and Bad
One sales trend that Donnie Prather, owner ADI (Appliance Distributors Inc.) in Lexington, Ky., noticed is that consumers are looking to “budget for their future repairs,” which includes buying warranties. He successfully sells warranties on refrigerators at almost a one-to-one ratio due to the food-loss protection plan and coverage of the compressor and labor. His staff closes on warranty sales about half the time on ranges, washers and dishwashers. A general rule in selling plans, he said, is to give consumers as much information as possible. That includes telling them how many manufacturers have cut back their terms. “No more five years on the sealed [refrigeration] system, no more five years sealed system/labor, no more food loss protection,” he said.
ADI’s product protection plans, for example, would pay five food losses over the term of the contract. That type of security speaks volumes to certain customers, as does the shock value of knowing the $1,400 refrigerator they just purchased has one-year parts and labor, Prather said.
“From an independent dealer aspect, warranty sales allow us to make up some margin where we have to short-sell the price of the appliance to compete with the big-box stores,” he said. “If you have to sell a range at 10 percent over cost to meet the big-box store’s price, we can sell the plan to go along with it and make up a lot of margin that helps us cover our operating costs.”