Why Your Shop Needs to Offer Premium Warranties
When I was still in the auto repair business, I learned an invaluable secret from a remarkable man named Sol Price. For those of you not familiar with the name, he was the founder of Price Club; the company known today as Costco. Sol was able to take himself out of the price comparison game, and the way he did it was by making sure that every appliance he sold was unique to Price Club. Every refrigerator, TV, etc., all carried model numbers that were unavailable through any other retailer. So, I found myself wondering what I might be able to do to provide added value to our customers and take our shop out of the price comparison game at the same time. I ended up creating a program that I called Fast Track 2000, and it dramatically increased my auto repair profits. Here’s how it worked….
I took a look at all of our warranty claims and discovered that although we had a low comeback ratio, 92% of those failures occurred within ninety days, 6% failed within a year, and only 2% failed after a year. So, I saw a great opportunity to offer our customers a longer guarantee (at a premium price), which gave them the option to invest in the “peace of mind” that so many auto repair customers are looking for. Not only did this provide many of our customers with peace of mind, but the uniqueness of this service took us out of the price comparison game.
Did we pick and choose the types of repairs that we offered the premium warranties on? Of course, and we priced the premium service based on our calculated risk. Think about it: If you were to charge an additional $35.00 for a premium water pump service, those added dollars would not only add up quickly, but since the customer now knows that the water pump is covered for a full five years, they’ll call you when they have any cooling service concerns. Not only did these premium warranties put more money on our bottom line, but they led to more satisfied customers, and increased customer retention since customers under warranty had a greater incentive to come back to our shop.
Let’s say that you sell 100 premium warranties on water pumps. Even if you have to replace 2% of your pumps three years down the road (using my numbers above), you now have two thrilled customers, and you have $3,430.00 (98 X $35) in added profits from the other 98 pumps you sold. So if you’re looking to generate more satisfied customers, boost customer retention, and significantly increase your bottom line, I would strongly recommend that you implement premium warranties in your shop today!
If you’d like some additional help building a more successful shop, while having a positive impact on your employees, your customers and your community, learn more about how you can team up with one of the top shop owners in America through the Elite Coaching Program.