Why customers can’t afford to pass on a protection plan
By J.R. Zirkelbach, New Leaf Service Contracts
Merriam-Webster defines price as “the amount of money given or set as consideration for the sale of a specified thing.”
It further defines cost as “the outlay or expenditure (as of effort or sacrifice) made to achieve an object.”
These two words have similar definitions, but let’s take a closer look at how different their meanings can be.
- The price of an ink pen may be as little as 29 cents, but if it leaks in the pocket of your best shirt, the cost of that pen may be $60!
- The price of a tire for your car can be as little as $29 on sale, but if that tire goes flat on your way to a job interview, making you late, its cost could be thousands of dollars.
- The price of health insurance may be several hundred dollars a month, but if you develop a serious medical disorder the cost of the insurance is close to nothing.
- The price of a frontload washer may be $999, but given the energy and water efficiencies that front loaders offer, the cost of that washer is far less.
Have you ever considered the difference between the price and the cost of a service policy? The price of a service plan on a major appliance is typically around $159. But if that product fails, what is the cost of that policy to your customer? Little if anything! Your customer has saved money because she avoided a costly repair of possibly $300 or more with a $159 investment.
What is the cost to that same customer for not having a service policy? It’s much higher, likely that same $300 or more, in addition to the hassle and lost time. For you, the dealer, the cost may be the loss of a valuable customer in addition to a lost margin opportunity. Therefore, the cost of not having a service policy to both the retailer and the customer is exponentially higher than the price your customer would have paid for the coverage.
The takeaway? When presenting a service policy to your customer, don’t focus on the price of the policy. Instead, focus on the cost of not having it. Do this, and the price will become much less important to the customer, and your service policy sales will surge.
J.R. Zirkelbach is a business development executive at New Leaf Service Contracts with a 30-year record in retail. Zirkelbach implements New Leaf-administered extended service programs for BrandSource members, which helps them provide exceptional service to customers, create earnings opportunities for salespeople, and increase their overall profitability. Contact J.R. at firstname.lastname@example.org.