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Warranties No Longer Warrant Commissioned Sales Floors

Circuit City passed a critical milestone during its just-passed fiscal second quarter. That’s when, according to president/CEO Alan McCollough, attachment rates of extended service plans sold by the company’s hourly associates exceeded the levels previously attained by its commissioned sales force.

The achievement was a major vindication for McCollough, who had caught heat from the industry and financial community last year for his controversial move to a non-commissioned sales floor. It also bodes well for self-serve retailers like Wal-Mart, online stores like and extended service providers (ESPs), who have tracked the shift of CE share from specialty dealers to mass merchants and direct sellers.

In Part II of TWICE’s report on the extended warranty business, ESPs debate the efficacy of non-commissioned selling, and describe how high attachment rates can be achieved within that retail environment.

Matt Frankel, senior VP/sales, AIG Warranty: The conception that commissioned sales people sell more contracts than salaried employees is false. It’s been proven wrong. AIG has worked with Best Buy for nine years and the growth of their service contract business has been spectacular. It’s all in the execution: If you hire the right people, train them properly and set expectations, there should be no difference in attachment rates between the two selling floor environments. It should be part of the sales process, just like greeting customers at the door. The only difference is in the profits for the retailer that has to pay commissions.

Paul Swenson, president, Aon Innovative Solutions: Traditionally, attachment rates run higher in commissioned environments, but that may be changing. We’re working with all channels to apply new techniques, new technology and a wide-angle approach to assure sufficient attachment rates and value. We’re also taking a new look at extended service plans and related programs to define a more strategic role beyond the legacy benefits to consumers and shareholders. This market is a moving target and demands innovation.

Jeff Unterreiner, director of marketing, Assurant Solutions (representing both Assurant and GE): The retail sales floor has clearly experienced a paradigm shift with key retailers moving away from a commissioned sales environment. Although attachment rates initially declined, we are seeing a return to the levels experienced before the shift. Within our customer base, we are seeing varying degrees of service plan focus. However, where senior management endorses the program, regardless of how it is sold, attachment rate goals will be achieved. Self-serve retailers are adopting enhanced point-of-sale register prompts and focused cashier training to offset the absence of assisted sales.

Danny Hourigan, president, Service Plan Division, NEW Customer Service Companies: Typically we see higher attachments at retailers with a commissioned sales force. However, there are certainly exceptions to this. In fact, we have several clients with non-commissioned sales environments whose attachment rates rival or surpass those of commissioned sales reps. The key to success in these non-commissioned environments is the focus the management team places on the extended service plan program. For the most successful retailers, the management focus begins at the top, runs throughout the entire organization and has become engrained in that retailer’s selling culture.

Regardless of the type of retailer, the one thing any merchant can do to drive sales of extended service plans is to “ask every customer, every time.” In a commissioned sales environment, the sales associate bears the responsibility for offering the service or replacement plan to every customer they serve. In non-commissioned environments, regardless of whether the retailer has sales associates or is self-serve, the best way to offer the service plan to every customer is through a register prompt that is triggered when that customer buys a product that is eligible for the service plan. We know from experience that a well-run, well-managed register prompt program can significantly increase attachment rates for virtually any retailer.

The principle of “ask every customer, every time” applies to online retailers as well. While some e-tailers list the service plan as an “accessory” that can be added to the sale, the most effective means of selling service plans online is to integrate the offer during the checkout process. This simple approach achieves the same results as the register prompt, ensuring that every customer who buys an eligible product has the opportunity to protect their purchase with an extended service plan.

Dan Tafel, general manager/national sales, Service Net: The traditional manner of a commissioned selling floor is the easiest way to insure higher attach rates. A commissioned sales force coupled with a strong performance measurement plan and focus from executive leadership will produce much higher rates.

However, with increasing price pressure from lower cost/direct sources, clients can now employ strategies for self-serve and online selling environments that produce attach rates that rival selling-floor strategies. Self-service strategies are much more effective than a few years ago with simplified, easy-to-understand, more valuable programs that are easy to purchase. And e-commerce sales are much stronger with specific services “mapped” to each product, offering one-click “opt in” purchases at nearly every step through the purchase.

Brett Lassig, executive VP, VAC: There’s more than one approach to the sale of service plans and these different approaches have all been successful so long as the overall program is logical and is supported as necessary by the organizations involved. The important thing is to make the offer — offer a service plan to every customer without exception. This applies equally to the online selling environment.

Michael Costanza, executive VP/sales, Warranty Corp. of America (WaCA): We’ve found that to be successful in retail, we need to be good listeners. A retailer will probably not be too open to a complete paradigm shift, so we have developed solutions for each of these scenarios. The real key is to plan. We offer very specific solutions for creating awareness at the store level, obtaining management sponsorship, building the brand, generating excitement and managing the training so that it is virtually effortless for store management.

Whether a sales rep is compensated or not, he or she needs to be excited about the product, understand what the product can do for the consumer, be given the right tools to succeed, and receive training in a variety of traditional and Web-based formats.

Efficient and innovative seasonal contests work well as do newsletter communications that reach each and every sales person. Sales people need to feel like they are appreciated, they are knowledgeable and that clear expectations are established. WaCA has a variety of turnkey retail solutions and the creative services and training teams to make it happen.