Doing Warranty for the Right Reasons

By Doug Rogers President of Mr. Appliance

Warranty

Take a step back and think about the mix of warranty vs. C.O.D. calls in your business. Are the majority of your service calls warranty or C.O.D.? Of course, depending on the stage and other environmental factors affecting your business, the optimum percentage of each will vary.

Here are a few guidelines to help determine the right mix for your business.

1. Are you consistently booked out for more than three work days with C.O.D. calls? If so, there is no need for warranty work. Warranty work is primarily a tool for customer acquisition. Even though there are other benefits, they seldom outweigh the reduced fee paid for the service rendered. However, if you are not consistently booked up then warranty is an excellent means to fill hole in ones schedule.

2. Does the warranty work focus on your target customer? If you are primarily servicing appliances that won’t be worth repair when the product is out of warranty, there is little benefit in attempting to acquire the customer for life.

3. Is your reduced fee warranty rate reasonable when compared to other forms of customer acquisition costs? For example, if your average C.O.D. job rate is $150 and your reduced fee warranty rate is $65, you would be absorbing an $85 acquisition cost for each warranty call. If your phone book or on-line advertisement cost you $1,000 per month and you receive 10 new C.O.D. calls per month from that ad, your C.O.D. acquisition cost is $100 per-call. In this case, it may make sense to perform the warranty service assuming payment is timely, cash flow is good, and paper work isn’t burdensome.

4. Can you afford the acquisition cost effects on cash flow? Remember, for warranty work you don’t receive payment right away. You have to expense the parts, bill the labor and track payment of labor as well a credit for parts. If you are not organized and up to the task, don’t take the warranty calls.

Obviously, C.O.D. service calls are much more profitable than warranty calls. Try to use your marketing tools to attract the C.O.D. customer first. However, warranty service calls may be necessary, but remember to take a balanced approach.

5. Warranty work is not all negative. Most manufacturers provide training, technical assistance in the field and access to service information for their authorized service centers. While some manufacturers charge an annual fee for access to their technical information many do not but most all restrict access to warranty authorized companies. Being a member of an industry trade association like USA is alternate means to get access and technical information to help you when in a jam.

Try to become authorized with the top shelf manufacturers like Miele, Viking or Bosch for example. Use the warranty call to market to these higher income customers. When on a warranty service call, perform beyond expectations and deliver a first class experience. The customer will remember this when their appliance is out of warranty and it needs service. When your work is done, leave a company sticker under the model number tag. Follow up with the customer with a thank you email, satisfaction survey and quarterly newsletter. Marketing to your warranty customers is a great way to build a faithful base of future customers.

Working with the top manufacturers also strengthens your brand. Evaluate your warranty strategy and determine the best solution for your business. If you choose to do warranty work, balance the calls accordingly and remember your C.O.D. customer is the primary concern.

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