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Under guarantee: Compromises cause issues

There is a disconnect between the key stakeholders in the warranty market, one that has led to the negative comments so often written about warranties.

While the right warranty, provided with the right service levels, is very much worth the paper it is written on, in some cases the quality of product and service levels received are not.

Everybody wants value for money, but value for money changes from person to person. So often, when reviewing warranty products, the dealer’s first concern is cost. This, in part, is because their major focus lies with front-end margin. The less the product costs the bigger the margin.

Unfortunately this can lead to compromise on product coverage with a negotiation of reduced labour rates and parts costs.

Retail customers want easy to understand comprehensive coverage. This instantly creates a disconnect between sales, after sales and the policyholder.

The consequence of this negotiation is that more failures fall into the ‘not covered’ category and repairers are less inclined to take on the work even if it is a legitimate claim, as it is far less financially beneficial.

This behaviour inevitably leads to all stakeholders losing faith in the product and the value being totally destroyed in the eyes of the major key stakeholder, the customer.

To suggest that the more expensive your warranty product is the better it will be is incorrect. There are many products in the marketplace that, when sold correctly, both internally to all departments of a dealership and more importantly to the retail customer, provide excellent value for money.

However, there is something in that well-known saying ‘you get what you pay for’.


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