In today’s highly competitive retail marketplace, providing valuable add-on services is essential to increasing profitability and enhancing customer satisfaction. But, determining the value of an extended service plan (ESP) is often in the eye of the beholder. For some consumers, it’s seen as a security blanket, knowing their investment is protected long after the manufacturer's warranty runs out. Others, however, see warranty plans as another line item on their receipt that they can’t justify during challenging economic times. As retailers look to bolster profit margins in times of flat sales, it’s important to drive home the benefits ESPs offer consumers above and beyond the warranty terms and conditions.
One Size Doesn’t Fit All
In light of slumping retail sales, extended warranty programs have become an essential and profitable value-add for retailers. Extended warranty plans such as product replacement programs, extended service plans, on-site service and comprehensive service programs offer distinctly different options to help customize a plan that best suits the consumer. By knowing the specifics, your staff will be better equipped to capitalize on the value these plans offer.
The only way to have valuable dialogue with the consumer is to have a well-represented team selling products and the services associated with them. Generally, there are four factors that go through the consumer’s mind when considering an ESP:
1. Value of item being purchased
2. Price of extended warranty
3. Length of manufacturer's warranty
4. Length of extended warranty and date coverage begins
Through various sales tactics and techniques, your sales team can re-engage the consumer beyond the normal talking points by highlighting the services your warranty provider offers that often get overlooked:
1. Save time and money — If a product fails during the extended term, the consumer will not have to deal with repair hassles or bills because either a replacement (delivered same day or next day) or repair of the product will be handled by the provider. Locating an approved service center by the consumer’s ZIP Code is also a valuable time savings.
2. Ongoing support — For ongoing product support or questions about a plan, consumers can call a dedicated toll-free ESP hotline for inquiries or other details during the term of their extended warranty.
3. Trusted partner — The extended warranty plan is attached to the consumer, not the store. Since the rate of foreclosures and bankruptcies are up in today’s economy, it never hurts to point out the ownership aspect of the ESP.
The Bottom Line
The world of consumer electronics is cut throat — profit margins are slim, and prices have to remain competitive or stores lose business. For retailers, finding new ways to increase profits are not easy to come by. But, ESPs cost virtually nothing to market, take up little to no inventory space and are easy to promote. Retail personnel, especially, are in a unique position to sell extended plans to consumers because the transaction takes place live, in-person and at the point of purchase. Timing is definitely part of the sales equation, but selling value to an informed consumer provides better customer service and sought-after profit margins.
Filed Under: consumer, customer, extended, margins, plan, profit, retail, service
AmTrust Financial Services (AFSI), the parent company of Warrantech, issued strong earnings today for the first quarter ended March 31, 2015.
Operating earnings were $121.4 million, or $1.45 per diluted share, an increase of 24.6%, compared to $97.4 million, or $1.24 per diluted share, in the first quarter of 2014. First quarter 2015 net income attributable to common stockholders grew to $154.7 million, or $1.85 per diluted share, an increase of 54.9% from $99.9 million, or $1.27 per diluted share, in the first quarter 2014. First quarter 2015 annualized operating return on common equity was 26.1% compared to 27.8% in the first quarter 2014. Annualized return on common equity was 33.3% for the first quarter of 2015 compared to 28.5% for the first quarter of 2014.
First Quarter 2015 Results
Total revenue was $1.11 billion, an increase of $0.16 billion, or 16.6%, from $0.95 billion in the first quarter 2014. Gross written premium was $1.73 billion, an increase of $0.24 billion, or 16.0%, from $1.49 billion in the same period a year ago after excluding from the first quarter 2014 $174 million in non-recurring gross written premium from the Cut Through Reinsurance Agreement with Tower Group International, Ltd. in first quarter 2014.
A summary of Q1 results is listed below, and the earnings release is linked below as well. Thanks to all of our employees and agents who contributed to these results. We look forward to having another strong year and appreciate everyone’s hard work in making it happen.
First Quarter 2015
• Gross written premium of $1.73 billion, up 16.0% after excluding from first quarter 2014 the impact of $174 million of non-recurring gross written premium related to the Cut Through Reinsurance Agreement with Tower Group International, Ltd.
• Net earned premium of $949.4 million, up 14.5% from first quarter 2014
• Operating diluted EPS of $1.45 ($0.07 attributable to gain on life settlements) compared to $1.24 ($0.02 attributable to gain on life settlements) in the first quarter 2014
• Diluted EPS of $1.85 compared with $1.27 in the first quarter 2014
• Annualized operating return on common equity of 26.1% and annualized return on common equity of 33.3%
• Service and fee income of $112.9 million, up 24.1% from the first quarter 2014
• Operating earnings of $121.4 million compared to $97.4 million from the first quarter 2014
• Net income attributable to common stockholders of $154.7 million compared to $99.9 million in the first quarter 2014
• Combined ratio of 89.0% compared to 89.9% in the first quarter 2014
• Book value per common share of $24.00, up from $22.34 at December 31, 2014
• AmTrust's stockholders' equity was $2.46 billion as of March 31, 2015
Filed Under: 2015, AmTrust, first, highlights, Q1, quarter, revenue, Warrantech