Sean Stapleton, president and CEO of
Warrantech/AMT Warranty will be presenting at the 2015 Warranty Chain
Management Conference on March 11 in Miami. The following is an excerpt from Warranty Week in anticipation
of the event.
The technology is changing. The need for
repairs is changing. Even the concept of ownership is changing. And the way
people shop is changing. Two industry experts describe how they see these
changes impacting warranty and service contracts.
At
this year's Warranty Chain Management Conference, attendees are
immediately going to be challenged to face the changes that new technology is
forcing upon our industry.
It's going to be a bit upsetting, especially to those who like the status quo.
Rather than hearing about the latest best practices in the break/fix business,
and how everything is slowly going to get incrementally better, attendees are
going to be told how driverless vehicles will challenge the whole idea of
automobile ownership, and how comparison shopping apps that seek out the lowest
prices have made it tough to earn a living in retail.
A
pair of warranty industry experts will deliver a one-two punch of keynote
presentations at the WCM Conference on March 11 in Miami, about the impact of
disruptive technologies upon warranty. We spoke with both of them this week
about their presentations.
John Estrada opens the morning session with a talk about how driverless
transportation will change warranty and service contracts, followed by AMT
Warranty's Sean Stapleton talking about how warranty and service contracts can
help save retail from its downward spiral, by making value and customer
relationships as important as low prices.
WCM's
Morning Schedule
In the WCM program, Stapleton's 45-minute presentation is called
"Combating the Retail Pandemic," a title he said he came up with
a few months ago when the Ebola scare reached the United States. They're
by no means the same thing, but in economic terms, the current state of the
retail environment provokes a comparable level of fear for many veteran
merchants whose iconic organizations are facing possible extinction.
"I certainly wanted to grab everyone's attention, but more importantly I
felt that the title set the stage for a discussion about a very serious and
widespread situation for retailers and manufacturers," he said. "A
pandemic is a disease that has a disastrous impact felt both locally and
globally." And he said that many colleagues and friends in the retail
industry are dealing with a profound change in both customers and the marketplace
where a low price seems to be the main determining factor for product
purchases. So they lose the sale, or they get the sale but lose money anyway.
In other words, the sales slump that's hurting many of them comes not just in
terms of revenue but also in terms of profitability. "Margin erosion has
impacted retailers in ways never seen before," he said. Price will always
be a factor when a product is purchased, he added. This is nothing new –
the modern difference is the ease by which customers can obtain pricing
comparisons and make purchases through multiple sources.
The
Great Recession
Stapleton said some people blame the current retail challenges on the lingering
effects of the Great Recession – the decline of household income, aging baby
boomers, rising unemployment, or falling home values. Others say it's the lack
of innovation, or the lack of exciting new "must-have" products.
"The reality is that there has been product innovation: smart phones, 4K
and Ultra HD, wearable’s, advanced car tech, and highly functional tablets. You
look at the growth the CEA expects for these segments, and it's
tremendous. So the innovative products do exist."
Meanwhile, the economy may not be as strong as we would all like, but it's not
as bad as some people make it out to be, he said. The U.S. Census
Bureau pegs the January-to-January sales gain at 3.3%, which isn't great
but also isn't dismal. Total retail sales for the November-to-January holiday
period were up 3.8% from the same period a year ago. The U.S. unemployment rate
is now down to 5.7% and the median price of existing home sales is up 6.2%
since last year. So what is it?
Ironically, he said, in an era where retailers are perhaps more connected with
their customers than ever before, thanks to social media and big data, those
connections are more superficial than ever.
"The heart of what I'm going to discuss is that many retailers and
manufacturers are just not achieving a high level of loyalty and commitment
from their customers," he said. "Part of the problem is that we're
living in the 'Age of Like.' We see this play out on Facebook every day, with
users happily clicking the thumbs up icon for just about anything they see.
However, that's where the customer commitment often ends. 'Like' should not be
our collective goal. To be successful we need to aspire to win the love of our
customers. The reality is that overall we aren't seeing the same level of
affinity for brands that we used to enjoy."
For instance, Stapleton said, his father always bought Kenmore appliances.
"He loved his Kenmore appliances because, in his mind, they earned his
trust and loyalty year after year" he said. "He wouldn't dare shop
for another brand. Sadly, we don't have that kind of an environment anymore."
"As warranty and service contract professionals, we have a unique
opportunity to affect customer loyalty," he said. "We have the
ability to turn a negative experience into a powerful trust building moment
with customers. Customers recognize and accept that product breakdowns can
happen to even the most reliable products. The customer's perception of the
product issues is more often driven by our responses."
Stapleton further noted that one of the greatest challenges with service
contract programs arises when a customer's claim isn't covered under the
contract, whether as a result of an expired contract or other reasons. "In
such situations, there is still an opportunity to turn a negative into a
positive."
He suggested that there are plenty of instances when no coverage exists, but
accommodation can still be made to assist the customer and provide them value.
Accommodations may take the shape of providing a product replacement or repair
outside the service contract. However, there are other solutions that are less
frequently utilized that can have a major positive effect with minimal
financial impact.
For instance, Stapleton noted that broken products not covered under a plan can
be purchased back from customers based on the products core value.
Additionally, discounts on replacement products can be provided or even gift
cards with token values which can be applied to future purchases can be offered
to customers. The actual cash value is less important than the act of going the
extra mile for a customer.
Discount
Repair Services
Stapleton proposed another low-cost marketing idea: leveraging a claims
administrator's repair network by making it available to customers who have a
non-covered product issue. Why not offer loyal customers discounts on repairs
for their customer-pay jobs related to these types of product issues, or even
for other products they own?
"Here's how I see it: Warranty and service contract programs are developed
by operations groups. However, the marketing departments of the retailers or
manufacturers are rarely involved in the development of these programs. And I
think that creates a level of disconnect. I see service contracts and warranty
programs as one of the most powerful loyalty solutions out there. It actually
is a game changer," he said.
Manufacturers and retailers might not know the name and address of every single
customer, but they certainly have that data for those who needed warranty work
or who made claims under their service contracts. With this information, a
critical segment of their customer base can be identified and hopefully saved.
Stapleton suggests that marketing departments utilize claims data to establish
a loyalty campaign tailored toward these affected customers. "The fact is
that some of these customers may have been your best customers in the past. The
data currently residing in a company's system can provide them the ability to
know how and when a customer's perception of them soured. Moreover, that data
combined with a strong retention plan can help return the customer to their
former loyalist status. Further, this type of strategy can prevent the impacted
customers from becoming one of your net detractors." He noted that with
the power of social media, disenfranchised have the ability to shape an
enormous population of existing and potential customers' views of your product
or company.
Ultimately, he said, when structured and executed appropriately, warranty
programs build trust and loyalty. Stapleton said it is inexcusable to allow one
claim to impact a lifetime relationship with an existing customer.
"Instead of spending the majority of available marketing resources to
bring in new customers, let's keep the ones you have. Let's prevent them from
getting out into social media and destroying your reputation based on one poor
claim event."
The first step, Stapleton suggests, is to change the whole image of warranty
within the retail industry. "If you want to change the perception of
warranties and service contracts for customers, you have to change it
internally first. We can't allow warranties and service contracts claims to be
viewed as an unfortunate expense. We need to view them as a marketing
opportunity that can potentially save a customer thereby leading to countless
future purchases and maybe even a means to evoke positive customer emotions
that go beyond 'like.'"
To
read this article in its entirety, go to Warranty Week.
And be sure to visit Warranty
Conference for more information regarding the WCM Conference.
Filed Under: claims, Conference, customers, economy, retail, Sean, service, Stapleton, Warranty
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