Feedback For The Week: 05/13/2002
A Necessary Evil
I would be happy to respond to John R. Hall’s March 11 column [“Who Is The Winner Of The Extended Warranty Sweepstakes?”] on standard and extended warranties — from a distributor’s point of view.Warranties are an unfortunate necessary evil. Standard warranties have gotten way out of hand. Now, just about every manufacturer has gone to a standard five-year parts, 10-year compressor, and 20-year heat exchanger warranty, with some even having 10-year parts warranties on higher-efficiency models.
This is really changing the landscape of the distribution parts business. Parts houses have to ask more for their commodities because they are losing their higher-margin oem parts to warranties. At the same time, the contractors are demanding lower pricing on commodities because every other parts house is slashing their prices on common parts just to move some boxes.
So with ever-shrinking margins on commodities and little to no margin on oem products, it may make sense for distribution to revert back to the old days when you just had manufacturer warranty stations instead of a one-stop shop parts and supplies house. Higher standard warranties are also increasing the workload of the warranty administrators within the distribution companies and, as any distributor would attest to, those positions are unrecoverable expenses.
On the other hand, you have extended warranties. Extended warranties put the same increased pressures on the warranty administrators with an extra little kick to the head, because now they have to register these optional contracts with the manufacturers. These extended warranties are also sold with very little markup, if any.
So once again, distribution is seeing additional workload with nothing to cover the additional expense.
But (and this is a big but) you have to have both the better standard warranty and the optional contract, at a reasonable price, to compete for the contractors’ and the consumers’ business.
If you step back and look at the hvac industry, you will see we are one of the few industries that have actually increased our standard warranties. If you buy a stereo component or TV, it has a 90-day (or if you’re lucky, a one-year) manufacturer’s warranty.
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Look at the new housing markets. The builders are offering a one-year warranty on workmanship of the home. Some people are spending hundreds of thousands of dollars on a new home and it is being backed by a one-year warranty? And yet the homeowner is demanding a multiyear warranty on their air conditioning-heating system. What is the world coming to?
So to answer one of the questions posed by The News: Yes, manufacturers should go back to the one-year parts, five-year compressor warranty. It would be better for the manufacturer, the distributor, the contractor, and yes, even the consumer.
Name and location withheld upon request
Grab Sales Opportunities
I have read the response of Chris Hammond [“The Great Coil Debate”] published in the April 8, 2002 edition of Feedback. It never ceases to amaze me how technicians view equipment. Anything that isn’t easy is bad. Never mind the greater surface areas of spine fin coils and what it means to the customer.I would suggest that as an American Standard Customer Care Dealer, we do not have these problems because we include preventive maintenance agreements on every new installation. This means that several seasons of cottonwood never accrue on our spine fin coils. In the event we service a unit that has not been serviced for several seasons, we use up-front pricing that reflects the service we provide, and sell this customer an agreement to avoid future costly cleanings.
In short, don’t be mad at the equipment, be mad at your sales force and technicians who complain and don’t sell. Dirty coils are a sales opportunity. The question is, do you want to grab the opportunity or complain? Slandering equipment only makes the technician look disgruntled about doing his job. And what kind of service does that disgruntled technician provide?
Eddie Knapp, Managing Partner, A C Doctors, LLC, Mechanicsville, VA