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:
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:
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.
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:
Consider these outcomes that some of our partner brands have realized:
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.
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: