“Would you like fries with that?” was often the way selling extended warrantees was described by consumer technology retailers. And for old-style and expensive mechanical devices such as CD/DVD players and VCRs, buying an extended warranty made perfect sense to consumers – assuming the consumer trusted the issuer of the warranty.
“Protection plans used to be the black sheep of the retail industry,” admits Karl Wiley, president and CEO of Allstate Protection Plans. But, Wiley notes name-brand companies such as Allstate have turned “what was once a difficult service category dominated by unbranded, unaccountable providers and horrible service into one that is now a true value-add for consumers.”
Not only have the warranty vendors changed, but so have the reasons consumers now opt for or even demand them. According to Brandon Gell, CEO of five-year-old extended warranty start-up Clyde, which works with both consumer tech retailers and product vendors such as Shark Ninja and Dyson to create customized extended warranty programs, extended warranties offer benefits manufacturer limited warranties don’t, such as accidents, wear-and-tear, power surges, and even theft or loss. “You’re on a run and your headphone falls out and it falls into a puddle, or you step on it, or it just hits the ground and breaks, we want to be able to cover that,” Gell explains.
These IRL concerns are driving greater consumer interest in add-on coverage. Wiley claims that over the last three years, 61% of U.S. consumers purchased a protection plan “with a strong preference for providers they recognize and trust,” and 76% of Allstate’s customers have purchased more than one plan across multiple retail partners. EWs “are actively sought out by consumers and used by retailers as a way to help their customers get the most out of the products they buy,” Wiley insists.
Buy Low, Sell Smart
If you’re getting a bit short-sheeted by vendors for promotions, extended warranties can be sold as a bundled discount with specific high-profile devices to help differentiate your wares from your competitors.
Perhaps more importantly, extended warranties avoid the inventory worries that now haunt consumer tech retailers. “Warranties are a no-inventory, extremely high-margin product that you can sell,” Gell explains. With Q4 revenues a huge question mark, Gell says any seasonal shortfall “could be made up for with Clyde.”
“Online, customers are offered the option to add protection in a variety of moments during the purchase flow including on a product page, interstitial, shopping cart, or at checkout,” echoes Wiley. “Most online retailers host a protection plan landing page that includes the same information included in an in-store brochure. Our API tools enable integration into every major retail system out there and can be customized to meet any retailer’s specific needs.”
Quick Settlements, High CSAT
Not only do today’s extended warranties cover more, thanks to technology they cover more quickly, each in their own way, reducing or eliminating another long-standing extended warranty consumer pain point, helping to increase your customer satisfaction and loyalty.
“It’ll take 60 seconds to file a claim, and we’ll auto-adjudicate your resolution so you will get a resolution instantly,” Gell explains, “and that can be in various forms. But typically, we’re replacing that product with a promo code or something like that. So no more checks being sent to your house or something like that. It’s like a promo code or Venmo.”
“Allstate Protection Plans is a repair-first service provider,” Wiley counters, “which is both a better customer experience – they get to keep the item they purchased in the first place, and better for the environment – less landfill. Customers can now file a claim online from anywhere 24/7. Most claims take 10 minutes or less and many are approved instantly. In cases where we do end up issuing a payment to a customer, those payments are almost always issued the same day the claim is approved.”
Finally, extended warranties could ease economic concerns during this uncertain holiday season for both retailers and consumers, which may be their greatest selling point. “During times of economic uncertainty, many customers feel it is even more important to purchase protection plans – paying a small premium up front offers security and peace of mind knowing that a major repair expense doesn’t hit them at a time that they really can’t afford it,” Wiley opines. “For retailers, protection plans generally offer high margins relative to physical products, take up zero physical space, and from a cash flow perspective they get paid prior to paying their supplier, not the other way around.”
Adds Gell: “This is a great way to make up on some of those softer sales, increase your average order value, increase conversion, and just drive a really high profit and revenue.”