Everything Retailers Always Wanted To Know About Extended Service Plans (But Didn't Know To Ask)2/02/2014 07:00:00 PM Eastern
The following is excerpted from “Protection Plans: A Retailer’s Guide to Choosing a Warranty Partner,” produced jointly by the Consumer Electronics Association (CEA) and extended-service plan provider SquareTrade.
In an ever-competitive environment, retailers now have a tremendous opportunity to turn a common customer pain point – extended-service plans – into a surprisingly positive experience.
Consumers’ relationship with technology has evolved dramatically over the last few years, impacting how protection plans are viewed, what attributes and benefits are most compelling, and how they are most effectively sold. Three trends are at work here:
• Consumers allocate more money to technology than ever before, and use consumer electronics devices more heavily than ever before. We depend on our devices to keep us organized, informed, entertained and connected. And no one can stand being without a device for very long;
• Consumers research purchases, companies and their reputation more than ever before; and
• We have become an increasingly mobile society: Consumers bring their devices everywhere, making them increasingly at risk for damage.
With that in mind, here are some points for retailers to consider in selecting a warranty partner and merchandising their service plan offerings.
Brand Recognition: Most consumers (70 percent) want to know about the company behind their protection plan and 57 percent say the protection plan brand’s reputation plays an important role in purchase decisions.
Consumer Considerations: While price is still important, other factors have entered into the buying decision, including speedy replacements, past experiences, trusted reputation, and clear communication of the plan purchase.
Accidental Damage: The majority of consumers are likely to purchase a protection plan if it covers common catastrophic accidents like drop damage and submerges. Remind the consumer of risk scenarios, the cost to replace an unsubsidized phone or tablet, and the peace of mind a protection plan provides.
Consumer Research: Customer reviews and third-party endorsement of a protection plan company plays a critical role in overcoming customer concerns. Indeed, three-quarters (76 percent) of consumers say the research they do beforehand positively impacts their warranty purchase decision.
However, the role of the sales associate continues to have a big impact, with 37 percent of consumers saying they purchased a protection plan after a salesperson suggested it.
Clear, transparent and consistent communication about the protection plans offered also bolsters customer confidence.
Transparency: Concerns over coverage loopholes and fine print deter over half (53 percent) of consumers from purchasing protection plans. In addition, nearly one in three (31 percent) experienced poor customer service and consider the claims process too difficult.
Consumer doubt about customer service for protection plans can be addressed by service plan providers through better training and screening of customer care agents; easing the claims process; increasing response times; providing clear contract terms; and offering replacement services.
Indeed, 79 percent of consumers say they want better communication from protection plan providers and 68 percent want less fine print.
Millennials Are The Sweet Spot: Protection plan purchasers are equally likely to be male or female. However, consumers ages 18 to 33 (i.e., the millennial generation) are more likely to purchase protection plans. In fact, when broken out by generation, 55 percent of recent service plan purchases were made by millennials, 26 percent were made by Gen Xers, and only 15 percent were made by the one-time most coveted baby boomers.
To maximize millennial purchases, retailers should to highlight the need to protect high-priced items that are central to their social and professional lives, as product cost is the most important motivator for over half (56 percent) of this group.
In addition, retailers should stress the affordability of protection plans, especially for high-priced devices, and emphasize device vulnerability and the speed of product replacement when promoting plans.
In Conclusion: CEA research shows consumers are not only open to buying protection plans but want to buy them to protect their most important possession – their mobile devices. But in addition to tablets and smartphones, half of CE warranty purchasers said they would be likely to purchase a warranty for eight of 16 key CE products including TVs if they were to purchase a CE product today.
But the market for protection plans is almost as diverse and evolving as the devices they protect. As a retailer, it is important to acknowledge the choices swirling around consumers.
With one in five consumers purchasing a protection plan in the last two years, the challenge for retailers lies beyond purchase justification; consumers must also be convinced of their devices’ value and vulnerabilities, as well as the reputation of their protection plan provider.
Consumers often choose not to purchase warranties because they’ve been burned by warranty companies in the past. They perceive too many loopholes in plan coverage, have had a bad customer service experience, and believe the claims process might be too difficult. The successful retailer will bypass these pitfalls in the path to purchase by offering protection plans from a reassuring, trusted, reputable provider with exceptional customer service.
For more information, email the CEA market research staff at firstname.lastname@example.org.