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Insight: The best route to warranty renewal

By Debbie Kirlew

Need to know
- Contact owners prior to cover’s end to offer extension
- Some customers may choose further extension to cover above buying a newer vehicle

The warranty renewal route is many and varied - should it be administered by the sales or aftersales team, the warranty provider, manufacturer or a customer contact centre? And is there scope for service advisers to both renew and upsell to customers without a warranty product?

In addition to its point-of-sale warranty products, Mapfre Warranty has developed its Black & White Warranty range specifically for use by aftersales to sell to customers who decided not to buy at the point of sale or who did not buy their vehicle from the dealership.

Head of new business Steve Burgess said: “Equipping the aftersales or service team with the right knowledge, tools and products to start conversations about warranty options at this point is vital. Every dealer has a different view on warranty and how it fits into their business, but there is certainly an opportunity to look at the aftersales department as a way to generate warranty sales.”

Burgess, who highlighted the value a robust warranty process can have on a business at AM’s recent Used Car Conference, added: “A major benefit of warranties overall is that they’re probably the only product that can touch every part of the dealership and encourage interaction between departments.”

For dealers though, a warranty renewal scheme is not quite so straightforward. With eight sites in and around the M25 retailing Volkswagen cars and vans and one Skoda franchise, Citygate’s warranty renewal programme operated with vigour up until around 18-months ago when it recognised the group had literally become “a victim of its own success”.

Explained group aftersales manager Simon Poole: “We found customers were all too keen to extend their warranty and service plans, but it also meant their vehicle replacement cycle was extended which affected both our new and used car sales. We were a victim of our own success, so we completely changed our approach. We now contact customers two-and-a-half to three years into their ownership cycle to talk to them about changing their vehicle.

"If at that point the customer is not interested in considering a replacement vehicle, we then talk to them about warranty renewal and service plans. Consequently, our warranty renewal has slowed, but it has created more balance across the business.”

Extended warranty

Paul Greenberg, head of business at Hatfield Audi, agrees: “We were making around £50 per warranty and it wasn’t worth our while given the time invested and the money it was making.”

Audi offers a two-year unlimited mileage/three-year capped at 60,000 miles on all new vehicles and at the point of sale the customer can purchase a fourth or fifth year factory extended warranty product.

Added Greenberg: “We don’t want our customers to keep their cars into the fourth or fifth year; we want them to buy a new car.”

Administered by Allianz (formerly Mondial), the Audi Approved Warranty contacts vehicle owners two months before the end of the third year factory warranty as part of an opt in or out scheme for its dealers ‘to make customers aware of the available top up products’.

An Audi spokesperson said: “We administer the warranty renewals programme to give customers peace of mind and encourage loyalty to the brand.”

Liz Grindell, head of warranty and F&I products at Allianz Global Assistance thinks the aftersales team can be key players in the renewal cycle.

She said: “Ensuring there’s a joined up process between the workshop and the service reception teams is key in spotting potential warranty sales opportunities.

Aftersales staff are ideally placed to discuss its features and benefits with customers due to their technical expertise. Warranty companies can add value by looking at existing dealership processes and suggesting where and how the warranty conversation can integrate.”

Independent warranty company MB&G operates its own warranty renewal programme to help dealers retain their customers and in the past year take-up has been exceptional with a 133% increase in renewals.

However, managing director David McPhee said: “An untapped and under-utilised, yet very obvious point at which an extended warranty can be sold, is when the customer returns for servicing. Service advisers could be tasked with spotting if a customer does not have an extended warranty or if a warranty is about to expire and while the vehicle is in the workshop, the F&I staff should be on the phone pointing out the advantages of an extended warranty.”

By contrast, WMS Group, which administers the Safe and Sound programme, has helped dealerships boost revenue with an extended warranty promotion at the point of sale. Safe and Sound dealerships are required to issue a mandatory six month warranty and recovery package, but WMS offers a range of incentives for buyers such as up to 50% cover free of charge when upgrading to a longer term.

The promotion has seen some businesses achieve around an 80% conversion rate – or in monetary terms, up to a 400% ROI.

Nick Plevey, managing director of the Skurrays Group, which utilises the Safe and Sound product across its Vauxhall dealerships, said: “In only a handful of months, our level of warranty products sold has already risen by 40% at the Swindon branch.

“To aid penetration, we decided to offer our customers a bundle of products when they upgrade to a longer term warranty. This includes a three-year wear and tear warranty, three-year recovery, three-year MoT cover and three-year tyre cover, which we sell for a very competitive price that still leaves room for a good margin.”

Prime time

Eric Stone, business development director at WMS, which also operates a specialist aftersales team that canvasses customers without a warranty, said: “Many dealers are also capitalising on cross-selling or upselling F&I products after the vehicle has been repaired as the customer will have already seen the benefit in having a warranty, especially if the repair costs were substantial.

“A vehicle in the workshop is a prime time to introduce a warranty extension, especially if the policy is due to expire shortly, but it is important to remember that unexpected repairs and vehicle downtime can be stressful, so remove the sales pressure and make the experience as pleasant as possible.

“The customer is at this point likely to be left with a positive image of the dealership and the warranty company, so taking out other protection products should be a natural progression.”

The best way to operate a warranty renewals scheme is very much the preserve of the individual dealer or dealer group although the more supportive the warranty provider and the more open-minded the dealer, the more likely a better result.

Mapfre Warranty’s Burgess said: “It’s the dealer’s choice on whether to sell warranties directly through aftersales or whether they prefer to operate a referral system back to the sales team. Both can work and both processes should be supported by the warranty provider.

“A proactive warranty company should be working with their dealer partners to assist them in finding and implementing the right model for their warranty business including ongoing performance management. In addition, a good supplier will be able to remain flexible to the needs of the dealer and offer added value services such as call centre campaign capability to help dealers utilise their warranty customer database.”

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