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Longer Warranties Something To Consider

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Old 12-31-2017, 04:00 PM   #1
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Longer Warranties Something To Consider

Here is a link to an article I wrote about offering your customers a longer part and labor repair warranty.


Username: extendwarr

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Old 12-31-2017, 08:04 PM   #2
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Re: Longer Warranties Something To Consider

Went ahead and just pasted it here. Thought it might be of interest to some of the contractors on this site.

Most HVAC and plumbing contractors usually give a parts and labor repair warranty of 30 to 60 days. They often have a fear that extending it for a greater period could cost them valuable revenue should they need to provide their customers with a covered warranty repair. Unfortunately, due to their apprehension they miss out on what could be the most profitable part of providing repair services. They essentially miss the forest for the trees. Hereís why.

The chances of a repair failing are greater in the first 30 to 60 days then after that time. Studies have shown that if a failure is going to occur it will usually happen within a relatively short period. Once that initial time has passed the odds of the repair failing diminishes greatly. The fact is that only about 1 in every 20 or less the 5 % would fail within a 2 year time period. If then you were able to increase the repair invoice by 10% by offering a 2 year part and labor warranty to your customers it would more then cover any valid warranty repairs.

Letís Do the Math:

20 repairs at an average of $220.00 = $4,400
10% of these repairs = $440
1 warranty repair required (here actual cost to business and not profit is considered) 1.5 hour for technician and wholesale part cost = $120.00 the actual cost to provide the warranty service

$440.00 - $120.00 = $320.00 Additional Revenue

Now letís look at the some of the other benefits of providing a longer warranty.

The increased revenue in the repair by providing the additional warranty actually cost your company very little. No parts were consumed which would then require ordering and stocking and no additional time was required by your technician. There is a reason why when you purchase a product from the store they offer an extended warranty. Often times it is the highest profit margin product they sell.

When the customer has purchased an additional warranty they feel more comfortable and satisfied with the repair and your company. They believe they have received a quality repair because your company is willing to stand behind it for 2 years.

If the customer has another issue with their system within the warranty time period they will call your company first as they may feel it will be covered under the warranty. Often they may even wait for you to come. The chances that the problem is the same is extremely rare so your company then has another opportunity to repair or even replace their system. Because you provided them with the warranty they will remain close and most likely will not call your competitor. This relationship is vital in helping ensure a long term stream of revenue from every customer.

Your technicians are a very valuable part of your business and keeping them from going elsewhere is always a concern. They are hard to find and having to replace them with new ones is costly. By offering extended warranties you can increase your technician wages by giving them a portion of the warranty sale. This additional spiff should help in retaining quality techs.

Certainly, there are some businesses that are not a good fit for extended warranties. Some states have rules that prohibit contractors from issuing long warranties as they consider them insurance and would require a different license but other states do allow it. Therefore, it is not for every business but perhaps we have cleared a few trees away so now we can see the forest.
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Old 01-04-2018, 08:36 AM   #3
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Re: Longer Warranties Something To Consider

Thanks for the information guys!

CraigFalls44- Idaho Carpet
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