As merchants look for any opportunity to create a competitive advantage and boost top-line sales, product protection plans are emerging as an essential element of their retail strategy.
“Warranty is this really interesting place. [When it’s done right, it represents] a huge value-add to merchants. It drives revenue, it drives loyalty, it’s a high value to consumers. If it’s sold for the right price, the expectations are clear and it’s easy to file a claim, it’s a win-win-win,” Clyde CEO and founder Brandon Gell told Karen Webster.
Doing it right, of course, isn’t a given. The essential challenge of the warranty space is solving a math problem – building a warranty that’s priced right and is backed up by a claims process that prioritizes customer satisfaction in the event that something goes wrong with the product. The second half of that equation can cost merchants money, internal resources and time. Bad processes are borne out of a desire to speed through the claims process as quickly and as cheaply as possible without ensuring customer satisfaction. That, unfortunately, is one way to solve that math problem – but it’s obviously not a good solution.
The right solution is the one that works for the consumer, said Gell, and technology-enabled tools are key to creating an experience that is flexible, omnichannel and tailored to consumers’ specific needs by segment — all without breaking the bank.
The Movable, Multichannel Protection Experience
Every brand is different and every consumer is different in terms of what works with an extended warranty or product protection offer. A flexible experience for merchants to custom-build their own experience is essential.
“The key is the ability to test this with little to no effort to find the ‘sweet spot’ for each unique merchant. We’ve seen changes ranging from small tweaks in language to moving it further up in the purchasing funnel resulting in a jump of 5 percent to 25 percent attachment,” Gell said. That type of data can then be used to help merchants correctly position offers for their customers.
And that applies to both online and offline environments, said Gell. Online involves a lot of deducted upfront engineering work and subsequent optimization. In-store, there is an element of employee training, because without it, no warranty program will ever go anywhere, no matter how well-designed.
That means there is an incentive to partner with merchants, as warranties unsold in stores don’t make any money. There’s a mutual incentive there, Gell noted.
The Expanding Opportunity
The third element of the extended warranty process is reaching out to and converting consumers post-checkout. But as Gell noted, the point of sale — regardless of whether it’s in-store or online — has the highest potential in terms of converting consumers when appropriately incentivized.
With the expansion of the warranty business, those incentives are lining up increasingly often. Everyone in the space knows of electronics as a place where warranties sell, for example, but it’s expanding into many other areas. Over the next year or so, Gell expects to see warranties being applicable to the general consumer segment.
“We are seeing that it’s not about category, it’s about price point,” he said. “And we see that on both sides of the spectrum, from $30,000 watch purchases to $60 headphones. Ultimately, if the warranty is the right cost for the consumer, it’s a great thing to buy.”
Extended warranties and protection plans are also key to building customer confidence, which can go a long way toward ensuring a successful transaction. Just making the offer tends to enhance consumers’ perception of the product they are considering buying, because the seller is perceived as willing to stand behind it.
The trick lies in gathering the right data and building the right model that will make sense to the consumer, noted Gell — and realizing that this is not a one-time job, and being ready to tweak and perfect that model to see what works and what doesn’t. The key to building a warranty model, he said, is to keep learning new lessons and then “put them back into the product.”
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