Benchmarking warranty performance can be a very valuable exercise to gain an independent perspective on how well you are doing compared to other companies. Bill Pollock, President & Principal Consulting Analyst, Strategies for Growth (SFG), has been doing a Warranty benchmark survey for few years and currently conducting a Benchmark Update Survey for 2019. Mize Warranty Insights caught up with Bill to learn more about the Benchmarking survey and process.
Connected Customer Experience
Replacement Parts cost represents 60% or more of the warranty claim expense. Studies indicate that up to 15% of the parts cost is excessive resulting from:
- replacing good parts leading to NTF (No Trouble Found) issues
- replacing parts when they can be repaired at a lower cost
WSJ article on annual logistics report finds:
- Costs for freight have risen steeply since the middle of last year because of rising interest rates, higher price of fuel, and driver capacity constraints
- Average freight rate per mile have risen between 20% and 30% so far this year
In a recent benchmark survey results from Strategies for Growth published by Warranty Week, 58% of Warranty professionals identified improving post-sales customer satisfaction as the main driver for higher levels of warranty performance.
Although technology - connectivity, analytics, sensors - has changed a lot and enabled OEMs to implement much tighter controls and detect fraudulent behavior, the general picture looks quite unchanged and warranty fraud continues to be a challenge.
The strategic importance of warranty management has increased and the general maturity of the warranty profession in the industry has improved during the past 15 years. However, the battle against warranty fraud continues to be a challenge for many warranty professionals.
Is warranty fraud an issue for us or not?
In our earlier blogs (“The Dark Side of Warranty Management”, “What is needed to control warranty costs and prevent fraud?”) we have referred to multiple client cases and several research studies, estimating fraudulent warranty claims to occupy up to 15 percent of the average company's warranty costs. However, averages are averages. Do you know the real situation in your company? In many cases we hear, that “warranty fraud is a major issue, but not for our company” or with slightly more awareness “we have a feeling there may be something wrong, but we don’t know the scale of the problem”. In any company with a large number (tens, hundreds or even thousands) of customers or service agents, a certain proportion of them will try fraud and some of them will do it in an excessive manner. Analytics, if done right, can be very impactful in getting the picture of the situation, either by uncovering anomalies, suspicious behavior and direct malpractice or giving confidence, that the situation is under control.