<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=1014450&amp;fmt=gif">
Recognition

IDC Analyst logo

 

    Follow us

    Sign Up for Updates

     
      3 min read

      Service Contract Configuration: The Key to Higher Attach Rates

      Featured Image

      Mize is currently conducting a study among service executives and warranty professionals who are involved in marketing and selling service contracts and extended warranty (SC/EW) programs. Our objective is to identify best practices involved in marketing and selling SC/EW and extended service programs and evaluate the impact of these practices on key performance indicators (KPIs). 

      The findings will validate which strategies and tactics offer the best results which in turn will help managers and executives become more effective in marketing and selling extended warranty/service programs. In this blog post, we present a snapshot of selected findings from the survey.   As of this post, 90 service contract and warranty professionals have participated in our survey.

      In this post, we will examine how companies handle SC/EW configuration. Configuration refers to:

      • the length of coverage,
      • level of customization,
      • processes/services engaged
      • resources deployed in delivering the services
      • entitlement levels offered.

      With respect to length of coverage, most respondents (82%) surveyed to date indicate the typical length of SC/EW programs is equal to or less than three (3) years.  Among these respondents, slightly more than half (48.0%) offer programs that range in length between 1-2 years, while 52% have programs of 3-4 years in length.  The survey results suggest SC/EW programs have a shorter coverage period within B2B than B2C.   Slightly more than half of the B2B respondents offer programs that are 1-2 years compared to only 18% of B2C respondents. 

      In terms the level of customization provided, over three quarters of the respondents offer SC/EW with some level of configuration.  While approximately one-half (54%) offer mostly Standard Configuration, they also indicate that some of the programs have some level of customization.  However, only 18% offer mostly Customized programs or entirely customized programs.  The remaining respondents offer only a standard configuration.  Customized programs are more prevalent within the B2B sector than B2C.  Nearly 82% of B2B respondents offer programs with some level of configuration while only 44% in B2C.

      When it comes to processes covered, most (86%) respondents will correct failures that customers experience during the coverage period. Other types of processes engaged as reported by 20% to 30% of respondents include preventive maintenance, calibration, planned inspections, consumable replacement, recalls, and remote product monitoring.  

      In delivering these services, most respondents provide the following resources as part of the SC/EW program:

      • Spare Parts (64%)
      • Advanced exchange/parts swap (54%)
      • Onsite Field Service (82%)
      • Depot Repair (50%)
      • Remote Support (57%)

      A smaller percentage of respondents also offer Diagnostic tools (14%) and loaners (7%) as part of the SC/EW configuration.

      Entitlements are another aspect of SC/EW configuration that customers will consider in their purchase. Entitlements can be viewed as the level of service they can expect to receive once a problem or claim is reported.   Almost one-half of the respondents (43%) provide a field service response time guarantee. Another 39% include guaranteed parts delivery time.  Other types of entitlements that maybe found with an SC/EW configuration include resolution time guarantee (21%) and telephone response time (36%) and loaner if problem can’t be resolved within 24 hours (18%)

       In summary, the more distinctions a company can make about its SC/EW program, the more likely customers will be to purchase it. In other words, customers consider the value of a service contract before they purchase it.  This maybe an “eye-opener” for manufacturers and their channel partners who take the view that a warranty is a warranty. Just because customers purchase their product doesn’t mean that they’ll purchase the SC/EW.

      It is not too late for your company to participate in our Benchmark Survey.   The deadline is midnight eastern time May 1, 2020.   To participate, click here.  Also, don’t miss our webinar on May 19th where we will present our findings in more detail. 

      benchmark_service_contracts_webinar_apr2020_SM_v2

       

      BLOG AUTHOR

      Mize Inc.

      Our company blog authors are among the best in the industry. By using our product and customer experts as sources we are able to share the latest trends and tips.