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‘A LONGER WARRANTY IS NOT ALWAYS A DEAL CLINCHER’
Dorian Davies who runs Doric Marketing as a hot tub marketing and promotions service and who works as a consultant with BISHTA looks at the conflicting issues facing the industry in the bid to increase warranties
T
he current warranty debate is a contentious and divisive one for sure, especially during the times we live through presently, where every new hot tub sale is hard fought and squeezing the very last penny of margin out of every transaction and opportunity can mean the knife-edge difference between a profit, mere survival or potential disaster. So why the contention and divisiveness?
It’s true that a warranty has little to do with the perceived or reliability of the actual product and are used as weapons in the armoury of salespeople looking to seek as much differentiation between their hot tub offering and that of the bloke down the road.
Warranty coverage periods, especially those produced by the ‘big brand’ North American manufacturers, increased steadily throughout the late 1990s and early 2000s in a series of tit-for-tat increases whereby when one brand claimed a competitive advantage by being a nose in front of the rest of the field, and then incorporated this aggressively into sales pitches, along the lines of “if you buy a spa from him, you’ll be covered for X fewer years than you will with us, and repairs can be expensive, don’t you know!” Invariably, as is the way markets work, the rest of the field increased theirs to the same level to cancel out the competitive advantage until such time as the next brand stuck their head above the parapet and launched into the next round of increases.
Typical hot tub parts and labour warranty coverage periods by the highest profile brands, mostly manufactured in North America, now average at 10 to 12 years on shell structures, five to seven years on shell surfaces, and three to five years on electrics and plumbing.
Some even quote lifetime warranties on shells, which in itself is a contentious issue as to the definition of “lifetime” (most warranties only extend to the original spa owner and are not transferable if the original owner moves and leaves their spa behind, or sells it on; and in the US the term “lifetime” is limited by statute in many states). These levels of warranty coverage now represent some of the longest warranty periods offered by any manufactured consumer goods in the world. If you buy a Bose stereo you get a maximum of two years if you’re lucky (and you have to take the thing back to the shop yourself), and even the mighty marque Bentley, a name synonymous with the highest quality and impeccable levels of bullet-proof reliability will only give you a maximum of three years. It appears that levels of coverage have now levelled out to a point where there’s not much to choose between the major brands and no significant competitive advantage to be gained these days. It’s likely that we have the post 2008 economic conditions to thank for that – the cost of providing manufacturer’s warranty coverage is underwritten by insurance companies, and this premium is costed into the production price of every spa, so it’s no surprise that while difficult trading conditions persist, moves to raise production costs unnecessarily and, therefore, selling prices to importers, distributors and consumers are strongly resisted; and it would appear that there is, understandably, no appetite in the foreseeable future for manufacturers to increase them further. And many retailers in the UK see this as a good thing, and brings us to the principal reason why the issue of warranty coverage levels are so devisive.
Many dealers view long warranty coverage periods as a vital tool in helping
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them win sales, particularly against the low end of the market, particularly Far Eastern imports sold over the internet who typically only offer the bare statutory minimum of a one year parts only warranty (though it should be noted that under the Sale Of Goods Act, a consumer could still claim for an item for up to six years after purchase if a product and/or component could be “reasonably” – yes, that woolly word again that means everything and nothing in equal measure – expected to have lasted longer than the statutory 12 months). Against this perceived deluge of low-end products from China, long warranty periods which include parts as well as labour are felt to offer a clear and compelling competitive advantage to the established brands sold through bricks and mortar retailers.
However, there are those in the industry who feel that warranty coverage periods are much too long. Many dealers, for whom warranty coverage is seldom an issue raised in consumer objections during the sales process, object to having to honour coverage periods on hot tubs that are significantly longer than the world’s most prestigious auto brands. Why? Well, as noted by Rachel Grinnall of Complete Spas in Evesham, voted the country’s most-loved hot tub retailer by the ‘Best Of...’ online local business to consumer network website, it’s more often the job done by the sales person in building a relationship of trust, the longevity of both retailer and manufacturer, extolling the quality of the brand and the benefits offered by particular features of a spa model which are more important factors than the length of the warranty.
She says, “Shorter but more comprehensive warranties seem not to bother consumers if you have done the job of building a relationship of trust with the customer at the time of spa purchase and an open and honest approach with future possibilities and approximate costs of parts replacements seem to put people at ease; so a longer warranty is not always a deal clincher. It seems to be more about quality, features and the company relationship and profile in the area.”
There’s also another big factor to consider here.
In the vast majority of cases, it is the dealers’ service technicians who are expected and required to diagnose and carry out warranty repairs post- installation for the duration of the warranty coverage period. Whilst many manufacturers cover the cost of the parts used and many also make a token payment in acknowledgement of the time required to carry out the repair, mileage to and from site is not generally covered, and these payments are designed to mitigate the dealers’ costs, and not as profit streams for them. This means that many dealers, particularly those for whom service and repair are a growing, significant and lucrative part of their offering and has made the difference between survival and catastrophe in times of weaker new spa sales, are sometimes looking at up to five years before they can start making any profit from service calls to customers for what are viewed as routine service issues such as pump repairs, or sensor, panel or circuit board replacements; a situation not having to be endured by service companies working on Bose or Bentley products. spn
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