Hoping to profit from extended warranties in 2015

Hoping to profit from extended warranties in 2015?

It’s the time of year when retailers are hoping to sell lots of extended warranties and planning for new products in 2015.  Not only do extended warranties add profit to the bottom line, but they can assist in giving your customers piece of mind.  However, they can be a ticking time bomb if they are not drafted and marketed appropriately.

Recently ACCC fined Fisher and Paykel $200,000 for advising its customers that they had to purchase an extended warranty in order to avoid repair costs.  Although the fine print of their product did state the truth, the messages were inconsistent and considered insufficient by the ACCC.  Note that the ‘big message’ should be consistent with ‘fine print’.

The warranty provider, Domestic & General also received a fine of $200,000.

If your customer has a minor problem with a product or service, you can choose to give your customer a free repair instead of a replacement or refund.   However, if your customer has a major problem with a product, they can request for their choice of a replacement or refund.  These are rights that your customers are entitled to under the Australian Consumer Law.

When selling an extended warranty you need to ensure that you are not misleading customers into thinking that they will be left high and dry without recourse in the event of an issue with their product.

In developing your extended warranty product and associated marketing the selling points should be what rights the extended warranty offer your customers which are in addition to their rights under the Australian Consumer Law.