Who Is The Winner Of The Extended Warranty Sweepstakes?
The intention of my column this week is to open a dialogue about extended warranties in order to encourage your feedback.
My curiosity was piqued during some discussions I had at the recent ACCA Annual Conference in Kissimmee, FL. I talked with a group of contractors who expressed concern that extended warranties may benefit one group more than another. However, they weren’t prepared to offer any concrete solutions until they heard from other member contractors.
Last year, the Market Research Division of Business News Publishing conducted a unitary market study (a very valuable tool, I might add). The News’ “2001 Unitary Heating/Cooling Study” included opinions from residential and light commercial contractors. Respondents were asked if they agreed, disagreed, or didn’t know when presented with the statement, “I prefer the traditional warranty: 1 year on parts, 5 years on compressor.”
Fifty-one percent of the residential contractors agreed (an 11% drop from the 1999 survey); 42% disagreed; 7% didn’t know. Forty-nine percent of light commercial contractors agreed; 44% disagreed; 7% didn’t know.
When asked if extended warranties hurt their service business, 64% of residential contractors said no and 72% of light commercial contractors said no. Total respondents to these two questions in the survey averaged 325 contractors.
Although I don’t pretend to be a market analyst (just a wannabe), it appears that contractors in this survey were divided about traditional warranties, and that there was no clear majority that preferred traditional warranties over extended warranties.
REFLECTIVE FEEDBACK
Last fall, a Florida contractor sent his comments on the topic to The News, which were published in our Feedback section on Sept. 3, 2001. Here is what he wrote:“Like it or not, longer standard and extended warranties are apparently here to stay. With them come two major problems for a/c contractors.
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“First, only those a/c contractors appointed, authorized, approved, etc., can make repairs and be reimbursed by the manufacturer. Labor rates may be too low for the contractor to make a profit and there may be insufficient or zero markup on parts. Those contractors approved, etc., effectively have the consumers holding warranties as captive customers, preventing competition or choice by the consumer.
“The second problem is that it’s almost impossible to keep up to date on what brands, models, etc., have what warranty ‘out of the box,’ much less if there is an extended warranty in effect. Manufacturers say it is the consumer’s responsibility to inform the contractor of their warranty. The problem is, many consumers’ a/c systems came with their new home and they didn’t receive the warranty or misplaced it. Others can be second owners, or they just don’t remember the warranty that came with or was purchased when they got the system.”
During one of the livelier seminars of the ACCA Conference, “Problem Solving 101,” the question of extended warranties and whether they benefited contractors was put to a panel of hvacr contractors. The replies varied, showing that there may be no clear-cut winner in the extended warranty sweepstakes.
Consumers win because they can choose from a variety of warranty options and have the work performed by a qualified, competent service contractor. But what about contractors, distributors, and manufacturers?
I’ll leave that up to the experienced businesspeople to answer. Let me know if you’d like to see a change in traditional warranties or if you’d like to discuss the pros and cons of extended warranties.
I’ll look forward to your feedback.
Hall is business management editor. He can be reached at 734-542-6214; 734-542-6215 (fax); johnhall@achrnews.com (e-mail).
Publication date: 03/11/2002