The Warranty Informer

What Happened to Selling the Value of an Extended Warranty?

If you have to trick someone into buying something, maybe they don't want it.

Posted by Tony Russell

July 16, 2020

Warranty Informer - Opinion

I'm going to start this off by saying that I'm no angel.

Back when I was on the phones, I could sell. I sold extended warranties to people who didn't want them or didn't need them for way too much money.

I could rebut anything.

Need to ask your wife? "I thought you were the man of the house? Why do you need to ask her?"

Can't afford it? "You can't afford not to have it. How are you getting to work if your car is broken down and you can't afford to fix it?"

You'll do it later? "You have to do it right now. This is your last chance. If you don't buy now, we are going to delete your record and you will never, ever be able to buy an extended warranty again. Forever."

What happened to selling vehicle service contracts for a sensible price? $4,000? For an extended warranty? We all know these things wholesale for $1000 or less unless it's for a German luxury barge.

I may look like a doofus, but I could sell, and when I was in my prime, I could outsell anybody who bothers to read this.

But that was then.

I realized there's an ethical component to selling. I realized that the best way to sell things is to sell people things they want for a fair price.

Customers are not ATMs

There is a column this morning on Ward's Auto by Justin Gasman titled Odd Thing to Do at a Car Dealership in which the author explains how he tricks customers into buying a vehicle service contract for a higher price.

In the column, Gasman explains that he "plays into the customer's pysche" by using descending odd numbers at the end of a service contract's price, because the "perceived value is higher, and that encourages buying."

The example Gasman uses is a VSC with a targeted sales price of $4000. He suggests that instead of pricing at $3999, pricing it at $3987 makes it "seem like more of a bargain," and "deters customers from seeking a lower price."

"The perception of the deal is that the dealership has got it down to the last penny," Gasman says, "The perceived value is higher, and that encourages buying."

Look, I get it. Dealerships aren't charities. Neither are warranty telemarketers. The F&I department isn't a non-profit. You have to sell and sell at a profit to stay in business.

I'm not stupid, no matter what my friends and family say.

But what happened to selling actual value? What happened to selling extended warranties because they are a good thing for consumers; and if priced right, the customer will keep it and return to the dealership to get their car fixed?

What happened to selling vehicle service contracts for a sensible price?

$4,000? For an extended warranty?

We all know these things wholesale for $1000 or less unless it's for a German luxury barge.

Why not mark it up enough so that you make a bit of a profit and the customer can actually afford it?

If a customer thinks they are getting ripped off, they're not keeping the warranty, and guess what? They're definitely not buying another one from you, and possibly never buying one again because of the experience.

Why do we keep coming up with new ways — or recycling old ways — to trick customers into buying an extended warranty?

Customers are not ATMs, and if you treat them like one, you're going to wake up one day and realize the PIN has changed and the machine is empty.

Going Off Script

If we sold "actual value" instead of "perceived value," maybe extended warranties wouldn't be view as such a scam by customers?

Look, if I were on the phones today, I would want to tell customers why they should buy an extended warranty.

About the value.

About how, if they are priced right, a VSC can help them out of a jam.

About how they can still get to work if their car breaks down.

About how it's only marked up a few-hundred bucks so it's affordable for the customer, my boss is paying the bills, and I'm making a little bit so that I can still feed my family.

And so can they.

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