The Death of Extended Warranties: Why this is Good News for Consumers and Businesses

17th March 2020Change Management

Extended Warranties Replaced by Product Support

You will be hard pressed these days to find the words “extended warranties” writ large in store or online or uttered by your friendly sales assistant. But wait, there is more to this than meets the eye.

If you are making any major purchase, whether it be a car, a washing machine, a boiler, a television or a laptop, you will more than likely be asked to consider purchasing additional “product support” or “service support”.

And if you already have any of these products and suffer the misfortune of a malfunction or a breakdown, you will no doubt be offered the option of “repair protection” or a “care plan” when you phone for assistance.

Cynics might suggest that these new names are simply a clever rebranding exercise by manufacturers, retailers and service companies to revive and repackage a somewhat maligned business model.

But they’d be wrong. Old style extended warranties really are dead. This means that consumers should no longer:

  • Feel pressurised into buying an extended warranty from the retailer
  • Find it necessary to pay upfront for a lengthy period of cover
  • Have to worry about unfair exclusions lurking in the small print terms and conditions
  • Wonder whether a service company will still be in business at the moment that they need to call for support

The death of extended warranties is therefore a good thing for consumers and businesses alike. Not just because of the above issues which led to investigations by the Office of Fair Trading in 2002 and 2012 but also because the after sales support packages that replaced old-style extended warranties have evolved.

Like consumer expectations, they’ve moved on.

So what do these new products and service packages actually do?

The clue is in the name.

Product Support

The concept of product support replaces both in warranty and out of warranty services. It grew out of consumers’ needs to learn more about their high tech electronic products pre-purchase. Then to have them correctly set up and installed. Finally, they wanted updates in use as well as upgrades and replacements as opposed to just repairs.

The technology itself facilitated on device help. Online support with downloads from official sites as well as advice from affiliated, community forums provided further help. In addition, geeks” “gurus” or “geniuses” were recruited in store to quite literally give hands on assistance.

Today, this kind of product support is everywhere from televisions to tumble dryers and available both free of charge and paid for on demand.

Care Plans

Care plans or service plans combine the key attributes of product support packages with additional services which very often are delivered in the consumers’ home.

Service plans for cars and boilers take care not only of routine maintenance but also include safety inspections, system upgrades, cleaning and care advice.

Care plans for white goods, sometimes include services such as oven cleaning, seasonal servicing and even discounts off new appliances.

Repair Protection

Long gone are the days when consumers had to commit on the day of product purchase to a lengthy term agreement payable upfront to cover themselves against potentially costly repair bills in the future.

Repair protection can be taken out at any time, including after a product breakdown. What’s more, it is payable in monthly instalments. Often, it even includes additional benefits such as accidental damage and product replacement.

How can the end of extended warranties benefit businesses?

Consumers have always valued the peace of mind that extended warranties bring. Now, they are enjoying the addition of apps and online support to help them get the most out of the features built into today’s products.

Also, this ongoing  product support helps create a closer relationship to the company providing this service. Especially when it comes directly from the retailer that sold the product or the brand that actually manufactured it.

For businesses who evolve after sales support to meet today’s consumers’ expectations the rewards are clear:

  • Deeper engagement with customers from pre-purchase through to re-purchase
  • Targeted development of consumer led services
  • Higher product repurchase rates and increased brand loyalty

The long-term commercial benefit of upgrading from traditional extended warranties into consumer-centric product support and custom care packages far outweighs the set-up costs of doing so.

Not sure how to build a product support business?

We’ve written a separate blog article on the practical steps you can take to build a product support business. You can also download the guide here.

Finally, we hope this article has reassured you that old style extended warranties really are dead. Few consumers or businesses will shed a tear at their passing.

Isn’t it time your business found the right after sales support package to replace them?

*This article was originally written in 2014 and has been updated on 16th March 2020