Dell charges extra for their warrantee service, and you can
also purchase a free service warrantee. These are not inexpensive,
yet most people do purchase them.
I spent years doing service cost estimating for large computer and
telecommunications equipment, as well as software to support them.
One thing was common with the failure characteristics of this
equipment. The electronic parts had their highest failure rates in
the first 30 days of use. By the 90 day mark, the electronics were
almost bullet proof, until the parts reached an age of around 10
years or so, and then the failure rate started slowly climbing up
almost to the 30 day rate. A 90 day or 1 year warrantee was a good
bet for the manufacture. In fact we considered offering a lifetime
warrantee on some of the smaller components because we knew that it
was offering the sleeves out of our vest to the customer.
In my opinion, these “extended warranties” are little more than
snake oil on paper. With todays electronics, if it doesn’t fail in
the first 90 days, you will trash it for something bigger and better
long before it starts causing you problems. If there was a real
possibility that you would use the extended warrantee, they wouldn’t
be available, because the people issuing them couldn’t make money on
them. They are sucker bets.
If you were to purchase an extended warrantee, you would find pages
and pages of what I call weasel clauses. Reasons why they won’t pay
for the failure. IE Abuse.
Now for a jeweler, what does that mean. There are two things that
cause jewelry to fail in the near term. Poor construction, and
abuse by the customer. What kind of message is put out by saying
that your product might fail in the next five years due to bad
construction, and you should pay more to have it repaired if it
does? When you compare this short term approach to making money to
the approach that companies like Art Carved and Jostens, as well as
others, offer on their class rings, Life time warranty. Period. No
extra charges. No weasel clauses. Life Time Warrantee.
These companies are not doing this for free. The cost of providing
this warrantee is built into the cost of their product. But, the
message they conveying is that their products will last a lifetime.
You are comfortable in buying their product.
Now if you offer a product and you want to charge the customer for
an “Extended Warrantee”, the message you are providing is this.
First, "my product is OK, it should hang together for at least “X"
months”. And second, “if you want to make sure you can still wear
it for the next “Y” years, you need to pay me “Z” dollars more”. If
I were your customer in this case, I would clasp my credit card
tight to my vest and walk out the door.
Which message do you want to give to your customers? Are you in
this for the short term profit, or are you one that wants to have a
25th anniversary sale in your store? Do you think Dell will be in
business in 25 years. IBM is no longer selling PC’s in stores, and
they started this line. They have been around for 75 years or more.
Hey, I worked for them for 30 years, and I was a new kid on the
block when I started.
The point is that extended warranties are short term money makers,
not something to help establish a long term relationship with your
customer. If you only plan on being around for a year or two, go
for it. If you can look at yourself in the mirror in the morning.