Consumer electronics sales are projected to jump to $155 billion in 2007, according the Consumer Electronics Association (CEA) (see p. 14), and the TV market is setting all-time revenue records as consumers grab up flat-panel televisions as fast as they can be produced.
What does this mean for retailers? Opportunity. And I'm not just talking about product sales. Along with their products, many consumers will purchase extended service plans (ESPs) which not only offer product protection to the customer but also potential profits to the retailer.
In today's digital age, electronics are a common part of our day-to-day lives. A significant portion are purchased for (and by) children and teenagers, including video game systems, digital music players, cellphones, digital cameras, portable DVD players and handheld video game systems, as well as laptop and desktop computers. According to a report published by The NPD Group in January, 62 percent of kids ages 11 to 14 are using cellphones, and 75 percent have access to the Internet.
Along with this major increase in the purchase of electronics products comes the possibility that something may go wrong with our electronic "toys."
Luckily for consumers — and especially for parents who are doling out thousands of dollars on these gadgets — the cost of these products has started to come down in recent years. But due to the advanced features on these devices, the need for service and technical support still remains. Electronics products, especially in the hands of kids, often break, are lost or experience problems after the original manufacturer's warranty expires.
Most electronics products come with a manufacturer's warranty that only covers defects in workmanship and materials. These warranties take effect on the date of purchase and usually expire after one year. In recent years, some manufacturers' warranties have been whittled down to only 90 days of coverage, or have eliminated coverage for labor costs on repairs. Because of these changes in manufacturers' warranties, the purchase of an extended service plan for a child's electronics may be a good idea.
Anyone who has ever bought an appliance, computer or television is aware that extended warranties or service plans are almost always offered at the time of sale. Purchasing one of these service plans is definitely a good idea for big ticket, complex items such as LCD TVs which could cost a small fortune to repair should something go wrong. But as prices continue to drop on many smaller electronic devices, consumers may feel conflicted about the value of an ESP.
Here is the real opportunity for retailers. An ESP has the power to enhance the customer experience by supporting the products retailers sell with unprecedented, unparalleled protection. While customers may initially hesitate about adding cost to their initial purchase, they can be shown that a small investment at the time of purchase can save them big headaches and big expenses later if something goes wrong, as is often the case with sensitive consumer products that depend on microchip technology.
The job of the retailer is to explain that an ESP can provide peace of mind and added value for a relatively small price, and that ESPs can offer important benefits that manufacturers' warranties do not. These include coverage for accidental damage or replacement if the product fails a certain number of times (a "no lemon" policy).
Another benefit of ESPs is that they save customers time and hassle if there's a problem with the product. Service plan holders can be put in direct contact with qualified technical experts who are familiar with the product and can either provide technical support or can tell the customer exactly where to take the item when a problem arises. This spares the customer from having to find someone to fix the problem on their own. Some plans will offer to ship a replacement product directly to the customer, repair or replace the item at the store where the product was originally purchased, or exchange the item for a store credit.
All of this leads to an excellent customer experience within your retail chain. Moreover, because there is a commission on each contract that it sells, retailers make additional profit.
Bottom line? ESPs are a win-win opportunity for everyone involved. The consumer gets peace of mind while the retailer benefits from an enhanced customer experience and increased sales and profits.