Last week, Mize hosted a webinar titled “Benchmarks to Optimize & Maximize Service Contract Sales”. The webinar presented the results of study conducted among service executives and warranty professionals who are involved in marketing and selling service contracts and extended warranty (SC/EW) programs. Representatives of 96 companies participated, providing an elusive look into how they’re configuring their contracts, sales and marketing approaches, results realized and planning for future expansion of this customer-connecting, revenue-generating profit center.
It’s comprehensive. Webinar Presenters included Eric Arnum, Editor of Warranty Week. Arnum addressed trends in the SC/EW sales among U.S. based manufactures, including consumer extended warranty expenditures among eight categories (totaling $46.8 billion in 2019) showing areas of opportunity for manufacturers to engage business and consumer category customers.
Michael Blumberg, CMO of Mize provided manufacturers a guide for optimizing service contract programs. He identified results of a recent industry survey indicating best practices involved in marketing and selling SC/EW, valuated the impact of these practices on key performance indicators (KPIs), and validated which strategies and tactics offer the best results.
The survey’s Customer Buying Journey is telling. The majority (60%) of respondents indicated they cross-sell or up-sell SC/EW during the entitlement process if the customer doesn’t have a program in place. This tactic helps increase attach rate. In fact, half of the respondents surveyed indicated that customers purchase programs in 26% - 50% of the times they are asked. This indicates opportunity; do companies ask enough? Are these asks optimized by automation, ensuring a cadence that removes the onus from the sales team?
Opportunities appeared in the respondent’s company’s Go to Market Approach:
- Most respondents sell service contracts and extended warranty programs (SC/EW) through authorized channels partner (76%) and/or their own product sales organization (80%)
- Approximately one third sell these programs through their Service & Support organization (36%) and/or Independent Retailers/Distributors (32%).
The further a manufacturer is from their point of sale, the more difficult it is to effectively maximize SC/EW revenue. It goes back to asks: is sales and program management process automation being utilized to assure the asks are being extended the way customers are most likely to buy?
The need to engage buyers appropriately is reflected in respondent’s Attach & Renewal Rates:
- A majority report attach rates of 50% or less
- 45% of experience attach rates in the range of 26% -50%
- 15% report attach rates in the range of 51% to 70% (slightly higher rates in the B2B Segment)
- Over one-quarter (28.6%) state renewal rates over 76%
- 14% report renewal rates of 90% or higher (slightly higher among B2B).
Revealed was Best in Class companies are achieving attach rates in excess of 50%, with renewals greater than 75%. Key drivers of both are level of customization, coverage and configuration, flexibility of terms, frequency of communication, use of front-line service personnel in sales process, and use of automation. It’s about the asks.
Mike Stroffolino, Senior Product Manager of Mize, demonstrated how manufacturers are enabled through automation to maximize service contract sales. He highlighted the ability of Mize’s Service Contract Management solution to configure flexible programs to suit each manufacturer’s operations and processes. These enable channel partners to access data within a single system for sales and service enablement, simplifying the buying process for customers. These abilities ultimately connect customers, channels and brands, through notifications and engagements.
Attachment and renewal rates analytics are provided to gain actionable insights, to further grow both customer connectedness and a robust secondary revenue channel.
Access the presentation recording for on-demand viewing here.
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