An urgent call to action for the service industry
By Paul MacDonald, ServiceSource
In today’s fast-paced world, the appliance after-sales warranty process remains a significant challenge.
Inefficiencies, high costs and slow resolutions have plagued this process for decades. Compounding these issues, manufacturers often reject claims, requesting proof of purchase or citing non-existent serial numbers, further frustrating service providers and customers.
The recent enactment of Right-to-Repair (RTR) legislation, which allows consumers to have their products repaired by whomever they want — not just the OEM — has and will significantly alter the landscape for manufacturers, service providers and end users. It is also sure to intensify the pressure to reform the warranty claims process. (Visit www.repair.org for more information on the RTR movement.)
But service providers also face additional hurdles, as they can no longer purchase repair parts directly from manufacturers like GE Appliances. Instead, they must go through parts distributors, which involves a cumbersome warranty parts credit process. This situation forces service companies to navigate a complex system to recover costs on transactions that already offer zero margins. The impact of this challenge is akin to dealers retailing appliances at zero or fixed margins, exacerbated by UMRP pricing and luxury manufacturers attempting to control pricing and logistics post-sale.
Standardize and Simplify!
Is it time to standardize, simplify and add margins to the warranty claims process for service providers? The results of ServiceSource’s 2024 Manufacturer’s Warranty Scorecard survey strongly suggest that it is. It’s no longer just a suggestion, it’s a necessity.
The Scorecard, comprised of nine questions evaluating satisfaction with various stages of the warranty process, was distributed to over 800 self-servicing dealers last spring. While not all members responded, the feedback was sufficient to highlight critical industry issues.
On a scale of 1 to 5, the industry satisfaction score average across all questions and 28 manufacturers was a mere 3, indicating a neutral satisfaction level. Not a single manufacturer scored a 5, which would signify “very satisfied.” These results underscore the urgent need for reform in the current warranty claims process.
Financial and Operational Impact on Service Providers
The 2024 Scorecard results also reveal that over half of BrandSource’s self-servicing dealers have a warranty-to-COD call mix exceeding 40% warranty. A 30:70 mix of warranty to COD is the optimal ratio to achieve profits in service. As the percentage of warranty calls increases, so do operational claims and administration costs, eroding profits from COD calls.
For instance, a dealer in the Northeast with 30 technicians reported a warranty-to-COD mix of 38% warranty. They completed 15,200 warranty calls, employing four full-time clerks to handle these claims at an annual cost of $200,000. This translates to a staggering back-shop cost of $13.15 per call, excluding the truck and technician expenses.
Parts distributors (PDs) like Marcone and Reliable Parts similarly struggle with the high cost of handling warranty parts credits. The manufacturers’ reaction to the RTR law shifts the onus on PDs to stock more inventory and process more parts warranties, increasing operational costs by over 20%. It boggles the mind that parts distributors receive parts handling compensation from the manufacturers (rumored to be more than 20%), yet the service provider receives nothing, zero margins, zilch! Why? Because servicers have accepted this practice for the more than 43 years I’ve been in this business.
The appliance repair industry lets the manufacturer bully servicers into a losing business model while the parts distributors remain profitable.
The Path Forward: Embracing Digital Transformation
To address these issues, the appliance industry must embrace a simple, standardized digital transformation. Here’s how a modern, efficient warranty claims process could look:
1. Automated Claim System: Implementing a single (not several) standardized digital platform for warranty claims can drastically reduce manual errors and processing times. Service providers can submit claims online, and an automated system (one platform) can validate and process them quickly.
2. Centralized Data Management: A unified digital platform can centralize all customer and warranty data, making it easily accessible for manufacturers (ownership registration), service providers (warranty validation and claims) and customers (appliance repair history). This improves transparency and speeds up the resolution process.
3. Enhanced Communication Channels: Modern omnichannel communication tools, such as chatbots, emails and SMS notifications (think Zendesk), can keep servicers up-to-date on their claim status in real time. This reduces frustration and builds trust.
4. Simplified Claim Submission: Streamlining the claim submission process through a single intuitive online form and easy-to-follow instructions can make it less daunting for end users. Features like photo uploads, pre-filled information and repair history can further simplify the process.
5. Faster Resolutions: With automated workflows and real-time data access, service companies can resolve claims more quickly, reducing processing downtime, increasing cash flow and reducing accounts receivables. This would also provide a one-pay for parts, with margin, and labor reimbursement.
Conclusion
Today’s outdated and cumbersome warranty claims process is untenable in the digital era. Manufacturers and service companies must modernize their systems to remain competitive and profitable and meet evolving customer expectations. By leveraging digital solutions, they can streamline operations, enhance customer satisfaction and ensure long-term success. Modernizing the appliance warranty claims process is not merely a technological upgrade but a strategic imperative for the industry’s future.
Warranty practices in the automotive industry demonstrate a commitment to efficiency, transparency and customer satisfaction, which can serve as valuable benchmarks for other industries, including the appliance sector. Implementing similar systems could help modernize the appliance warranty claims process and address many current challenges.
Scorecard Participants Rewarded
Many thanks to Service Company Solutions, producers of “The Blue Book Appliance Flat Rate Repair Guide,” and SCS Communications’ Unified Communications for sponsoring the ServiceSource 2024 Manufacturers Warranty Scorecard — and providing prizes to the following BrandSource members in a random drawing of survey respondents:
- Herman Windham, principal, Windham’s Best Brands: a one-year subscription to the online “BlueBook Flatrate Pricing Guide”
- Jeff Tharpe, president, Korvin Appliance: a one-year subscription to “My Parts Help Diagnostics”
- Edmond Jacobs, service manager of Keith’s Appliance: a $500 credit towards an SCS Unified Communications telephone system.
Many thanks to all who contributed to the 2024 Scorecard. We hope you and additional self-servicing dealers will participate in next year’s survey — and will have better experiences to share.
Paul MacDonald, AVB’s senior ServiceSource lead, ran his own 38-tech service business and is a past president of the UASA. He currently operates The Expert Service Program, which helps servicers run their operations more efficiently and profitably. You can reach Paul at (647) 500-7785 or at Paul.M.MacDonald@brandsource.com.
