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Despite the soft patch hit by much of retail in the third quarter, extended service providers are confident that demand for advanced video display technologies and a host of new and improved services will keep sales of CE and warranty products robust through year's end.
The following two-part examination of the service contract business begins with a check of the industry's pulse, followed next issue by a debate over the advantages — if any — of commissioned vs. salaried sales floors.
TWICE: How's business? What's your outlook for the holiday selling season?
Matt Frankel, senior VP/sales, AIG Warranty: CE sales have been pretty good. Despite the uncertain times we live in, people are still buying LCoS, plasma and LCD TVs. I think the fourth quarter will be pretty good as well. It sounds like there will be ample product this time around.
Likewise, despite falling CE prices, people are still buying service contracts, especially on new technology products. Even though TVs that sold for $10,000 several years ago are $3,000 today, that still represents a large investment for most people, and consumers want to protect those investments. Also, as the price of CE products comes down, so has the average cost of service contracts. Their price-value relationship has remained high, which has helped the service contract industry continue to grow.
Paul Swenson, president, Aon Innovative Solutions: Business has been very good in retail, manufacturing and card services. For us, one of the primary reasons is our unique consultative approach that we've put into place with our partnerships. We've developed a synergistic strategy of pulling together the core competencies represented by various partners, enabling the creation of new and improved approaches to direct marketing, point of sale marketing, card services, PRC data, expense reduction and additional services. It's a veritable win-win-win situation.
Overall, the outlook for the fourth quarter remains strong, albeit with slight concern with regard to the speed required to adapt to new technologies with the appropriate products and services. A good example would be the risk and opportunity of providing coverage for LCD and DLP bulbs. They've traditionally been deemed a consumable and not covered under extended service plans, but many retailers are either moving forward with coverage or considering it. We're doing serious analysis along with our partners and bulb manufacturers to make the best decision for customers while simultaneously protecting shareholder interests. Taking the wrong position on issues like this one can produce “ticking time bombs.”
Jeff Unterreiner, director of marketing, Assurant Solutions (representing both Assurant and GE): The Assurant Solutions and GE Consumer Products Alliance is enjoying healthy growth because of our combined strengths to drive organic growth for our existing customers and as well as new customer acquisitions. This trend should continue into 2005. We are benefiting from the introduction of new products and the revenue and profit opportunities they present for both existing clients and prospects. We anticipate the holidays will produce their usual seasonal spike in retail sales, specifically in personal computers and electronics.
Danny Hourigan, president, Service Plan Division, NEW Customer Service Companies: Our consumer electronics business has shown consistent strength throughout the year. These results have been driven by high-tech products such as flat-panel and high-definition televisions, home theaters and desktop and laptop computers, as well as continued consumer acceptance of replacement plans for lower-priced products. Based on the planning meetings we've held with our clients, we are optimistic about fourth-quarter sales. There is a lot of confidence in the marketplace right now.
Dan Tafel, general manager/national sales, Service Net: Service Net's business is growing as a result of our focus on insurance and regulatory expertise. Clients want to recognize the new profit opportunities but don't want the burden of building out their departments with the necessary legal, accounting, and administrative expertise required with these expanded services. We've recently “won over” many new clients such as Sony with our industry expertise in risk management and regulatory compliance.
Some of the new developments include the strongest accidental damage protection program in the industry. We recently introduced new services that cater to the needs of business users, such as expedited onsite service and theft/loss insurance. We're also experiencing tremendous interest in our new digital-imaging program for cameras and camcorders — which, in addition to accidental damage protection, also provides new services such as “Help Desk” and “Express Replacement.”
With the economic rebound firmly in place, we expect sales increases this holiday season to hit highs not seen since 2000. The rapid convergence of products with the PC, widely discussed in the late 1990s, is now beginning to happen with the growth in demand for digital cameras; MP3 players; and “new generation” televisions like plasma, LCD and DLP.
Brett Lassig, executive VP, VAC: Sales of service plans were stronger than ever through the first half of 2004, with sales of existing clients climbing 33 percent above what they were a year ago in the same period. This trend is continuing in the third quarter.
Our fourth quarter outlook is bullish, fueled not only by the exceptional performance of our existing clients, but by the fact that several new clients are beginning to participate in our results in an increasingly significant way as our programs get up and running. They are becoming growing factors in our results as we move toward the fourth quarter.
Michael Costanza, executive VP/sales, Warranty Corp. of America (WaCA): Last January we launched “Integration 2004.” This was the culmination of a long-term strategic plan for integrating the products and services of our five companies in addition to developing IT assets, expanding our facilities, and increasing our sales organization so that we could scale easily with the acquisition of new accounts.
We deployed a consultative approach that allows the retail/e-tail/catalog client to select solutions created specifically for that channel. These products include Dynamic Mapping, Repair Tracker, Digital Lifeline and Business Central3 — all tools that help the client provide exceptional service to the consumer while capturing and managing customer and product data.
The results reflect a remarkable acceptance in the marketplace for this type of innovation and they speak for themselves. Our business increased 40 percent and we signed 25 major clients in the first eight months of the year.
We believe that the fourth quarter will be even more exciting since our sales team has very full schedules as 2004 comes to a close. Our clients are invigorated and so are we.