Stagnant or declining Extended Service Plan (ESP) sales represent a missed revenue opportunity and can harm product and brand perception. However, ESPs can also enhance customer satisfaction and loyalty, transforming the overall ownership experience. As more consumers seek protection beyond standard warranties, companies across industries should consider offering ESPs to complement their product lines.
This blog will address challenges that can be overcome as well as outcomes that can be transformative to brands beyond just home appliance and consumer electronics - companies that have traditionally offered ESPs.
To begin, let’s start with the challenge of overcoming any negative perceptions the consumer may have about the value of extended warranties in general. These sentiments are often based on previous experiences with warranties that either “weren’t used” (low value benefits) or a claims process that didn’t meet the buyer’s expectations.
Fortunately, this perception is changing as more buyers come to view ESPs as confirmation that they are purchasing a high-quality product (i.e., the perception that inexpensive, replaceable products don’t typically offer warranties). Another factor is the increasing complexity of products, especially electronics and appliances that are often more expensive than older models. Buyers may purchase an ESP to offset the risk of having to replace the product and ultimately added peace of mind.
“The [consumer electronics extended warranty] sector has become increasingly relevant as consumer electronics,
from smartphones and tablets to home appliances and entertainment systems, have become central to everyday life.
These products not only represent a substantial financial investment for consumers but also play a crucial role in their daily routines, making the extended warranty market more critical than ever.” (Credence Research)
Additionally, some studies have posted that consumers may not purchase an extended warranty or service plan simply because they didn’t know it was an option or didn’t understand the specifics or benefits of the plan being offered. This presents an opportunity to increase ESP conversions by ensuring new product owners receive timely, clear and compelling offers.
Service contract buyers are more likely to be loyal to the brand of the product they purchased and/or
to the retailer where they purchased the product, and more likely to be familiar with
how service contracts work. (The Warranty Group)
For customers that do purchase an extended warranty or service plan, issues such as confusion over plan details and terms, long wait times, lack of communication, and unsatisfactory claims resolution can result in negative brand feedback and a high customer churn rate. Not only do these customers not renew their current ESP, but some may also become ESP skeptics and decline future offers even from another brand.
Typically, an underperforming ESP offering, in terms of sales or customer satisfaction, can be attributed to one or more of the following factors:
- Lack of clear communication regarding ESP availability, plan specifics, claims process and outcomes
- A generic ESP offering that does not align benefits with specific product or customer needs
- Third-party ESP providers that lack an understanding of the brand and its customers
- Limited brand control over ESP features, pricing, and level of support
- Cumbersome customer support and limited brand touchpoints
In addition to these broad considerations, when reviewing ESP performance, it’s also important to identify and understand consumer behavior related to your specific offering. Some key questions for brands to ask are:
- Who purchases our ESPs? Customer data relative to product purchased can provide insight into customers who are most likely to purchase an extended warranty or service plan so brands can tailor their offerings to these individuals.
- Who doesn’t purchase our ESPs? Do you know why owners opt out of your ESPs? Price? Perceived value? Not enough information? No offer received?
- What do we offer? In addition to traditional extended warranty plans, would your owners find value in other types of benefits such as scheduled maintenance, accidental damage protection, shipping protection or subscription-based models?
- How do we communicate about our ESPs? Are your offers clearly communicated at the opportune moment? Are ESP touchpoints an extension of your brand or do they feel like third-party interactions?
- How do owners feel about plan service? Understanding how your customers feel about making a claim, receiving updates, and getting service is imperative to not only keeping those customers happy, but also improving ESP conversion for both existing and new owners.
- How many owners renew their ESP? Related to ESP satisfaction, if you offer a renewable service plan, retention rates are a KPI you should have on your radar.
- What is our investment and can it be optimized? If you manage your ESP, look at the resources it requires to support operations and sales. If you use a third-party provider, what is the ROI? In either case, can you identify areas of friction, inefficiency, or waste that could be eliminated?
Accidental protection plans are the fastest-growing segment of the extended warranty market
due to more people accidentally damaging their devices. (Allied Market Research)
And most importantly: How does offering an ESP contribute to a better ownership experience and do we as a brand, want to be the one who delivers the value and the experience to the customer, not another provider?
Whether your brand manages its own ESP or a third-party does, if you are seeking higher ESP performance, switching to a branded care solution may be the answer. By providing a branded, customized, and scalable ESP program, you can realize additional revenue, increase customer satisfaction, and further enhance your customer loyalty strategy.
The Managed Care Advantage
When it comes to extended warranties and service plans, today’s product owners expect fast response times, comprehensive support, and personalized solutions direct from the brands they own. With Registria’s Managed Care Program that is tailored to your brand and your customers, you can give your product owners exactly what they want when they need it. Additionally, your brand can tap into new revenue streams by offering product protection programs purchased directly from your brand instead of retailers.
Consumers tend to trust and prefer extended warranties offered
directly by manufacturers over third-party providers.
(Credence Research)
Registria’s customizable and scalable Managed Care Program delivers several key benefits for durable goods brands, including:
- Increased sales and renewal rates for ESPs
- Improved customer satisfaction and brand perception
- Enhanced customer support aligned with the brand’s voice
- Data and analytics to optimize ESP offerings
Consider these outcomes that some of our partner brands have realized:
- A global provider of audio/video electronics for consumers and professionals increased point of purchase ESP sales by 300% in less than two years and aftermarket campaign sales by nearly 200%. Point of registration ESP sales grew 350% in a two-year period.
- A legacy home appliance brand leveraged the increase in product registrations to realize a 7x increase in ESP revenue.
- A leader in connected fitness equipment and software developed a data-driven model to better target and engage likely ESP purchasers. The result was 80% growth in ESP sales during registration and owner onboarding, and 361% ROI from enhanced service plan upgrades.
These significant outcomes, and many more, can be attributed to the advantages of a branded care plan over a more traditional approach to ESP management.
Take the Guesswork out of Your ESP Performance
Registria can help you take control of your ESP performance. On your behalf, we facilitate your Branded Care Program, from underwriting and plan pricing, to analytics, customer support, and optimization – giving your customers, and your brand, peace of mind.
With our turnkey Managed Care Program, you can take care of every product owner by delivering:
- Strategic ESP offerings that offer value, tailored plan benefits and increase conversions
- Easy for consumer to buy (or renew) at retail, eCommerce sites, during registration and throughout the ownership experience
- Consistent, branded touchpoints that instill trust and reinforce brand loyalty
- Easy, digital access to plan and coverage details and additional product resources
- Streamlined claims management that delivers on customer expectations