Electronics Shopping: Should I Really Buy the Extended Warranty?
Nov 25 '05 (Updated Mar 11 '06)
The Bottom Line Before you decide, make sure you know your options and outcomes.
Where ever you go it's always the same; you go to purchase an electronic that qualifies for the store's extended warranty or protection/replacement plan or what have you, and you get asked if you want to buy it. Maybe you flat-out say no, maybe you hesitate and tell them you'll come back and buy it later, and quite possibly you're one of those who buys them all the time. Either way, you're going to get asked since it has become an integral part of the retail business that, contrary to popular belief, isn't just for profits. Most people don't really know the ins and outs of these additional coverages, so it can be hard to decide whether or not you really need them.
There are basically two types of coverages that you, as a customer, will encounter: replacements, and repairs. The information that follows is generic, since different retails can have different time-frames, costs, and coverages, so treat it as a guide instead of gospel.
For those who wonder how much I really know what I am talking about, I worked at Staples in the computer department for 2 years (promoted to the department lead after my first 4 months of working there), and Circuit City for over 2 years. I got to experience 5 holiday seasons and black fridays, and was assigned higher responsibilities by management from time to time. I handled customers well and tactfully enough that when the few times came where a customer had complaints against me, management scoffed it off. While gaining respect OF management, I never participated IN management, so I am much more sympathetic to the regular customer and associate (I am a lot less rah-rah for the company, and treated each work day with more of a realistic attitude). Aside from working in big box retail, I've been a consumer for long enough and remember how it feels to be on the other side of the transaction.
REPLACEMENT PLANS
Replacement plans are generally found on smaller electronics such as radios, MP3 players, handheld gaming consoles, etc. The cost of these are relatively cheap in comparison to the item they cover, and they offer a 1-time replacement of the product for a specified duration (usually 1 or 2 years). Depending on where you purchase your toys, the coverage either starts from the day of purchase, or one year after the manufacturer's basic warranty is over. Most retail stores offer store credit for the value of the product, instead of trying to replace it with a like item. Few stores will actually try and fix the product or replace it with the same item. Generally, the turnaround time for sending in this type of item to get your credit is typically 2-3 weeks.
REPAIR PLANS
Repair plans typically cover the larger and/or expensive electronics. The cost of these plans are much greater than the replacement ones, though they cover more, longer (1 to 5 years). Depending on where you go, the retail place will instruct you to ship defective items out accordingly, or you may be able to bring them into the stores themselves to have sent out to service. Some products (like TVs and appliances) have in-home service so you don't have to ship it out. This type of coverage will attempt to repair the item over the duration of the plan, and will only go about replacing items as a last-resort. Aside from repairs, these plans will cover additional things such as free tech support, no-lemon guarantees, surge protection, maintenance, etc.
Most retail chains offer similar coverage (especially for the replacement plans), but the repair ones can vary greatly. Associates don't always know the true details of these plans so it is highly advised that you read through the brochures fully and ask questions afterwards. Plans are non-taxable, and you always have the option to get a full refund of them within 30 days (generally, some may quote 14 days).
PURPOSE OF THE PLAN
These retail-based extended coverages have two basic purposes: better customer service, and making money. Most people assume that the latter is the only purpose, though it's not true at all. Anyone who has had a near nightmare dealing with support through a manufacturer over the phone will understand how there is customer service involved with what the retail has to offer. You can't just walk through the front door of say, Hewlett Packard, and complain about your item breaking. You can do that with a retail store.. provided that you purchased the coverage, since the customer is provided another option.
Do the plans make money? Yes. These plans are all profit for the store that sells it, since corporate covers the cost of the actual service. They costs extra, and not all covered products will malfunction to where the plan needs to be used. Though the initial, monetary amount is not the main way that retail store intends to generate it's sales flow. These coverages keep the customer tied to that particular chain, therefore maintaining a line of repeat business, provided that the service was superb enough to keep the customer. Statistics will show that the longer you stay in a store, the more likely you are to buy something (unless you're in a return/complaint line). If that something is an electronic, that turns into another chance to include an extended warranty.
DO I REALLY NEED IT?
It all depends on: what the item is, who is using it, luck factor, coverage & cost comparison. Here are some common examples to follow:
Item: 30GB Apple Ipod Color, $299.99
User: Teenager
Luck: History for the occasional broken item
Retail Coverage: Will pay for shipping to service, and provided that it is malfunctioning the consumer will receive store credit (including taxes and prorated amount of the remaining cost of the plan) within 2-3 weeks
Retail Cost: $59.99 for a 2 year coverage
Manufacturer Coverage: Single incident telephone support for 90 days, 1 year limited warranty
Manufacturer Cost: Included with product but consumer pays shipping, minimum $30.00 for service per incident, additional $60.00 for battery replacement
It can be a tossup, though product knowledge and history play a big part as well. Ipods are known to be used so much that batteries will go out with no question. When you compare such cost, the store's coverage is rather appealing. Not just that, but if the item is going to need a replacement during the warranty coverage, better to spend $60 to have the $300 value go towards the newest and latest gear. Lets say that instead of a careless teenager, we substitute a minimal user who has had no needs for extra coverages whatsoever and has kept electronics well for over 4 years each. By the time the item breaks, it turns into a good reason to buy something new. This type of person would see much less need for these extra coverages. Lets try a different scenario:
Item: HP A1250n Desktop PC, $899.99
User: Knows to work a PC, but has no clue what to do under the hood
Luck: Never any problems yet, careful
Retail Coverage: In-home service on the product, scheduled 2-5 days after calling in coverage, free 24-7 tech support, no-lemon guarantee, power surge protection
Retail Cost: $159.99 for a 2 year coverage
Manufacturer Coverage: 1 year limited warranty, first 90 days is parts and labor, after that is parts only, free tech support for a year
Manufacturer Cost: Included with product but consumer pays shipping per incident, and also pays for labor after 90 days
This scenario would require more thought involved. Most PCs should be completely fine, though there are always exceptions to the rule. Neither coverages will assist with software-related problems (like from viruses or incompatibilities), though many retail chains have PC tech/repair departments in-store who will assist covered products discounted or free of charge. The manufacturer won't. These types of retail coverages generally start the bulk of the service after the manufacturer's warranty has expired, but many retail places will assist consumers from day 1 in the name of customer service. The turnaround time for the manufacturer is 2-3 weeks, while you can get service through the retail chain in 2-3 days. These types of plans are easier decided upon when you know the full extent of what a retail chain will do for you in the event that something goes wrong. For the most part, if your computer has software protection then you can eliminate that as a potential issue. All you are left with is a hardware problem. Consider the cost of coverage plans versus what it would cost to have a particular piece of hardware replaced (most common pieces would be disk drives, rom drives, networking, and possibly even graphics) and decide if you can save your money by doing it yourself. Here's another scenario (added 3-11-06)
Item: JVC GR-D370US MiniDV Digital Camcorder, $399.99
User: A couple familiar with camcorders and are seeking a replacement for their old 8mm unit of 6 years
Luck: Has had a few minor issues with electronics, but nothing to hinder performance
Retail Coverage: Carry in to retail locations for free-shipping to service, 7-10 business day turnaround, no lemon guarantee, free annual cleaning
Retail Cost: $69.99 for a 2 year coverage
Manufacturer Coverage: 1 year limited warranty, first 90 days is parts and labor, after that is parts only, free tech support for a year
Manufacturer Cost: Included with product but consumer pays shipping per incident, and also pays for labor after 90 days
People are really unsure about getting additional coverage on a camcorder, especially the more expensive ones since you're already spending a lot of money in the first place. When people are unsure about something they generally decline the offer. Camcorders are a different type of electronic, being that you can have a week of flawless performance or a month of not being used, only to turn it on the next day and find some error preventing the use of the device. Read enough reviews or talk to enough people and you find that camcorders don't really give you any warning when they go out, and particular models have a habit of experiencing the same issues. For a $400.00 camcorder a $69.99 retail coverage is only $35.00 a year, which is about the cost of taking a camcorder in to get it cleaned. It's a fair value, considering that the turnaround time and no-lemon guarantee are retail bonuses that surpass what the manufacturer will provide to you. Keep in mind that a camcorder is a computer, camera, and VCR all rolled into a small package that fits in your hand. Before buying a camcorder, be sure to investigate (on the internet) all the common problems that people are screaming about and use that to help decide whether or not to purchase any additional coverage. If a particular model has problems few and far between, you can get away with saving your money. Coverage plans aside, camcorders are used outdoors and they do get exposed to elements which collect in the gear mechanisms. Using a camcorder only once in awhile won't spare it from dust unless you have a dust-free home or have it sealed in an air-tight container. Not only do you record with the camcorder, you also play back tapes or transfer video to a PC. Yearly maintenance is definitely recommended for this type of product since it's getting more wear and tear than you think
Like any type of insurance coverage, be it a car or house as well, it always costs a lot more if you are not covered and have a problem. Granted, that home electronics don't cost as much as cars or homes, it's all relative to how much you want to spend or risk. It's always best to evaluate everything and see how well it pertains to your situation. There are things that are always guaranteed to break (ESPECIALLY if there are small parts that move, like digital cameras and camcorders), and the smart consumer will keep this in mind. Be mindful of the brand which you are purchasing too, and especially the price. Inexpensive products do NOT use expensive-quality materials. The greatest benefit of retail warranties is the ability to walk in and complain, as opposed to spending hours on the phone with the manufacturer. Squeaky wheels get the grease, and no district manager wants to hear of a customer complaint that should have been handled appropriately in-store by the general manager. You get faster service than when you have to deal with the manufacturer, even if you purchase their extended coverages (which are mirrored by retail coverages for much of the same cost, or sometimes lower). Though, you can (hopefully) guarantee better work done when you go with the manufacturer. There is always a tradeoff.
I WANT TO REFUSE, BUT THEY'RE SO PERSISTENT!
Well-trained associates will ask questions and determine the best parts of the coverage to highlight for each customer, based on what they've found out. Every person is different and requires a different pitch to have the best chance of success. The best (like yours truly) will mesh this information into the natural flow of conversation about the product so that customers understand the value which pertains to them, without having the topic be so prominent. After all, we can't sell an extended plan if the customer doesn't purchase the product. Expect to say no at least twice, because it is expected of us to ask for the sale of it at least twice.
Personally, I could care less if you bought a guarantee from me or not. I've worked in retail enough to understand everything that goes on, and I prefer to let customers know their options and decide for themselves, while I smile on the inside knowing that the customer will be back. There is a power in saying, "I told you so", when you do it in a polite way that is aligned as a solution for a problem. I don't ever beg and rarely do I crack out "deals".
Unfortunately, there are those associates who bring up the service plan more than the product, or ones who beg, or entice with deals/discounts, or offer free items to you if you will buy it. Why? Because it's part of our job requirement, and our management tracks our sales data very carefully. Associates who don't sell the minimum required amount are subject to less-desireable schedules, less hours, or even job termination. All of a sudden, it becomes important to us grunts if we have bills that need to be paid to survive, and sometimes desperation can set in for those who are hitting bricks. This is an unfortunate truth of why you can encounter very aggressive sales associates. A lesser percentage of sales people will have tact with their customers (like yours truly), and would rather be informative, let the customer and fate decide the outcome, and keep high spirits so that customer won't feel uncomfortable to the point where they would not ever come back to buy anything again.
CLEAN TECHNIQUES FOR REFUSAL
So you want to say no, but you're guilt-ridden and on the verge of caving in. Here are some methods to skirt the issue a bit easier with less chances of the associate overcoming your objection.
1) Be honest. Let them know that you understand everything, and that you've decided to take your chances with the high/low risk item. Then thank them for not being high-pressure and keeping the department a nice place to shop. You can throw in a trash-talk of some other retail place and how they had horrible service if you wish. Remember that we're bottom rung and have everything against us, so it's nice when a customer appreciates what we do and how.
2) Buy it anyway. Seriously. If you have the means to, just purchase it, go home, and get a refund over the phone. Most places have an 800 number that you can call to refund these additional costs, and it makes it a lot easier when you do it over the phone as opposed to staring a person in the face and refusing. You can return these at anytime, and after the 30 day amount they are prorated so you can actually keep a certain amount of coverage as much as you like. Phone refunds aren't done at the store level, so as far as I know the sales associate doesn't take the hit to his numbers.
3) Ask for a brochure to take home. This won't work if you frequent the store enough where people might find you familiar. Tell associates that you're interested, but you want to read the full brochure before you buy (since everyone's is different), and that you don't have time to read it right now.
HONEST TO GOODNESS TRUTH
Working retail for as long as I have, one would see the volume and types of products that get sent to service or back to the manufacturer, so there is indeed a value that comes with these service guarantees. The items that I see the most are DVD players, camcorders, MP3 players, and laptops. I see brand-name items, but I see more of off-name items. Remember, there is cheap, inexpensive, and both. I never investigate the reason it's being sent back, or the type of person who sent it back, or the percentages; I just keep in mind that these items are coming back to the store malfunctioning and getting sent to service. These, of course, are either returns within 30 days or products covered by the retail store. People who choose to save their money deal with the manufacturer on their own terms, and I have no idea what that comes out to.
I've talked to thousands of customers, and have heard stories of horrible service by both the manufacturer and retail. I have also heard picture-perfect stories as well. Upon all this discussion and listening, I've decided that what these service guarantees boils down to is how much you really want to hassle with a broken item, and it's up to individual consumers to decide based on that. There is a possible consequence either way. I am much more sympathetic to those who are covered through retail and have a problem, and will actually go out of my way to ensure they receive the proper treatment. There are services that the brochures says get dealt with outside the store, though oftentimes we associates will take care of our customers in-store to fulfill the value of what we promised and sold. There have been many customers who would have been out of a LOT of money had they decided to save a little bit up front.
Quite honestly, I feel that many products are quality enough where a service plan would never be needed. I also feel there are products where the retail plan is just a ridiculous way to suck money from the consumer. My personal sales performance barely keeps a minimum due to the attitude which I have about these service plans, though my sales volume is always at the top. I prefer to have repeat customers come and shop with me, instead of trying to coerce a customer one time into buying something they don't really need. Management doesn't really like it, but the customer is the true boss, right? I like to educate my customers, and sometimes it takes a few times before they learn. If you come to me with something you bought over 30 days ago, didn't buy the retail coverage, and want a solution.. I'm going to hand you a scrap of paper with the manufacturer's toll free support number and say "I told you so" in the smile of my eyes.
Read my poem about retail customer service.
Q & A
Got questions? Email me and I'll post up my answer in the review here.
1) Have you ever purchased a retail warranty and needed to use it?
Yes I have purchased some retail warranties. No, I have not ever needed to use one yet, within the duration of the coverage. I have a CD/MP3 player I purchased from CompUSA 6 years ago, and it is still in pristine working condition (with the exception of the outside that has suffered scuff marks due to constant use). I take care of my stuff.
2) What do you do if none of your customers want to buy it, but your bosses are pressuring you to "do better". I don't want to lose my job!!
This can be a tough one here, and it really depends on the management you're working under. If you do your job well on every count, with the exception of selling these warranties, they should be hard-pressed to affect your job so bad, especially if you do everything as they train. You can't force people to buy and you can't let yourself get down if they don't; that attitude carries on, people can sense it, and then not want to do anything but remove themselves from the bad vibe. If your management can't accept it.. screw it, it's only retail.
3) How would you compare or rate service plans for digital camcorders? (03-11-06)
It's now been included in the body of the review.
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