Most people may not get excited about Service Contracts, but Warranty Week estimates that Service Contract industry generates at least $42 Billion revenue annually. The Service Contracts Industry Council (SCIC) estimates that over 250 Million contracts are sold annually.
Service Contracts represent a significant source of revenues and profits for Manufacturers, Third Party Administrators (TPAs), and Retailers. That excites hundreds of executives responsible for extended warranty and service programs gathering this week for the 8th annual Extended Warranty and Service Contracts Innovations conference in Nashville, TN from Sept 13th-15th.
The event agenda covers all aspects of extended warranty and service contracts including technologies, marketing and sales strategies, and regulations. This year, the conference also added an extra day of sessions to cover the topics about the support and service delivery to improve customer experience.
Eric Arnum also has done a great job of detailing some of the sessions in a recent two-part article in Warranty Week.
Today, we want to look at how the conference addresses:
- Changing nature of Service Contracts,
- Technologies impacting the industry,
- Marketing and Sales strategies to grow revenues,
- Improving Customer Support, Service, and Experience, and
- The future of the Service Contracts industry.
The Changing nature of Service Contracts
Service Contract is considered a cost-effective way for customers to protect the products beyond the terms provided by the manufacturer’s standard warranty. Service contracts have been evolving to offer flexible benefits and other value added services such accidental damage & handling (ADH), multiple product coverage, maintenance, product upgrades, proactive monitoring, and predictive services.
Over the last decade, Service Contracts have also adopted subscription model as Telecom carriers, Utility companies, and TV Service providers include charges for device protection as part of the monthly bill they already send to the customer.
The expensive smart phones have been sold as a lease spread over the contract period. Manufacturers such as Apple, Retailers like Best Buy, and Carriers like AT&T have included the trade-in of the old products to upgrade to new products even before the end of contract period. Microsoft recently introduced a Surface membership or lease program that also includes in-store services, and upgrades.
It will also very be interesting to learn from Erik Hickly, Senior Offerings Manager at Microsoft, as he presents on the topic of “Surface Studio and In-Home Service, What We Didn’t Expect To Learn.”
All these different offerings are of course are underwritten by the insurance companies. Most of the major insurance companies including AIG, Assurant, AmTrust, SquareTrade, Ally, and others are represented at the conference.
The marketing and sales strategies to grow revenues
Even though $42 Billion annual revenue is a very large number, it only represents a small portion of the potential considering that Service Contracts Attach Rates are less than 15% in most industries. Everyone is interested in improving the key metrics of Attach Rates and Renewal Rates which drive the revenue and profitability for the companies.
Amazon’s presence is being felt at this event too as David Gregory, from Amazon is kicking off the conference with the key note on “Best Practices for Merchandising Extended Warranties Online and Driving Customer-focused Innovation.” David is also joining the session on channel strategies to Drive Service Contract Sales on Digital and Direct Channels moderated by Ashok Kartham, CEO of Mize.
Major Appliance and Electronics Retailers (Lowes, Best Buy, and Sears), Appliance Manufacturers (GE, Electrolux), Automotive (GM, Ford, Ally) are presenting about their experiences and strategies.
Focusing on Service Marketing and sales is critical even though service contract marketing does not get as much attention as compared to new customer acquisition.
The Technologies impacting Service Contracts industry
Many technologies have the potential to transform the Service Contracts industry, and the conference has plenty of sessions to inform about these developments. Here is a quick list of technologies and what they could mean for Service Contracts.
|Technology||Impact on Service Contracts|
|Omni Channel||As consumers now connect spend time on many channels, Service Contracts can leverage these channels including Web, Mobile, Social, Messaging apps, and IoT for marketing as well as for service delivery. These digital channels are augmenting the physical retail and dealer channels.|
|Big Data Analytics||Applying big data analytics to contracts, warranty data, claims, and product usage patterns can lead to better pricing of service contracts, management of risk, and customer insights useful for marketing and sales.|
|IoT/Connected Products||Connected devices represent the fastest growing segment as billions of products are being connected with IoT. Connected homes and work sites provide opportunities to provide new services or include IoT subscription as part of a service contract to proactively maintain the equipment.|
|AI and Machine Learning||AI has emerged as one of the most disruptive technologies as we use Digital Personal assistants (e.g., Amazon Echo/Alexa, Google Assistant, Apple HomePod/Siri, Microsoft Cortana), Autonomous driving, Chatbots, and intelligent recommendations. Service Contracts can apply AI to identify the right target customers, recommend personalized service plans, and deliver automated customer support.|
|Block Chain||Block Chain is gaining prominence as the use of crypto currencies (Bitcoin) grows to decentralized information, maintain a shared ledger of transactions, and handle authentication and auditing. Service Contracts can use Block Chain to implement Smart Contracts that have built-in code to trigger service events, track repairs, and even handle payments.|
Software and technology solution providers such as Mize, PCMI, and Over The Edge, Accentf(x) are sponsoring and presenting at the event. Mize announced the launch of their next generation Service Contracts solution at the conference.
Improving Customer Support, Service, and Experience
Customer Experience is the important factor to improve customer retention, increase renewal rates, and repeat sales. Cost of service delivery is, of course, another critical factor in driving profitability on Service Contracts.
Angie Tuglus, Executive Vice President, Ally Financial – Insurance Operations, is chairing the newly introduced Service Support & Operations Add-on Forum this year.
The presentations by Pivotal home solutions, Encompass Supply Chain solutions, and Valspar emphasize the need to focus on customer service and experience.
The Future of Service Contracts Industry
As numbers collated by Warranty Week show, the Service Contracts is growing in numbers as well as significance for companies across various industries.
Coming together of a broad cross-section of companies, people, and ideas will help identify the key drivers and influencing factors to improve the Key Performance Indicators (KPI) for Revenues, Attach Rates, Renewal Rates, and profitability.
Whether you are attending in Nashville or following it from afar, the Innovations in Service Contracts are going to transform the service offerings, channel strategies, technology applications, and customer experience.
We welcome you to share your thoughts in the comments section below.