Thursday 17 September 2020

The Thing About Extended Warranties


A few years back, when I switched to retailing of home electronics and appliances after moving on from my weekend Howard Storage World sales gig (company went bankrupt), the retailer I was posted to by my brand organised a meeting for all promoters not under their payroll.

For those not familiar with the retailing of home electronics/appliances scene, the majority of the sales staff are not on the payroll of the retailer, even though we wear the same uniform. Wink.

That's why you walked into the store interested in brand X, but walked out with brand Y... You've been "washed". LOL!

This retailer has a partnership with a insurance company to bundle and sell extended warranties. So they want us to promote these extended warranties to our customers.

Of course non of the promoters were interested. We were more interested in promoting our own brands - the carrot is sales commissions and incentives like bonuses if we hit our sales targets; the stick is no sales survive on basic very the sad one...

A few months passed and the extended warranty scheme was a dismal failure... 

So the retailer used the stick and threatened us. If we don't sell X number of extended warranties per week, they will kick those non-performing promoters out.

Never make threats you can't follow through... 

Most of us ignored their bluff. (Except those weak or newbie promoters who got worried)

Remember I said most of the sales promoters are not on their payroll?

The retailers depend on us "free" resources. So the threat is like cutting off your nose to spite your face.

Furthermore, most of the brands belong to international worldwide MNCs. You think they care about a local local or regional retailer? Really?

So after a few awkward months of empty threats, the retailer finally capitulated. 

Now switch to carrot approach.

Going forward, every extended warranty a promoter sells, we'll get a sales commission. 

Now the extended warranty scheme finally took off!

Not too bad. Its not really any extra work. After closing a sale, we just ask customers whether they want to add an extended warranty to their purchase.

The extra commissions for those who can "push" these extended warranties can amount to a few extra hundreds a month. 

See how extended warranties become "good" for customers once promoters get incentivised?

Of course this story is not really about extended warranties. 

Its about human psychology and motivations.

And you probably never thought about it. (Unless you're landowner or shepherd.) 

Its pervasive. 

From politics, to business, to religion. 

Yes, even religion. 

The cell leader for that Taiwanese Buddhist monastery (very big in Taiwan) was very frank with me when she confided with me one of reasons they offered "free" meditation sessions was to not only create more awareness and publicity for the monastery (relatively unknown in Singapore), but its also to raise funds for further expansion in Singapore. (Got market share KPI?)

I'll leave it to you to figure out how to raise funds when its "free" meditation sessions?

If you confused, you're probably the target for all those "free" course previews, "free" spa treatments, "free" drinks, "free" food promotions!





  1. Hi Smol,

    These days, my wife is the guru of retail. We were thinking of getting a touchscreen notebook so taht it is easier for my wife to do online marking and as for my son to video zoom, our pc is going to die anytime.

    I convinced her after some research that the price difference from online platform and harvey normah seem really insignificant. i say even if there is 10% difference, having feel and touch it, and going back to a shop is still worth it.

    So we went.

    After the purchase was made, she "scolded" me for approaching a newbie. Says that guy damn blur. When he wants to sell Exetended Waranty, i looked at my wife, she has really become quite shrew and just shake her mind. Exactly, i ask just for "respect" hahahah, so i said no no matter how the guy make the sales pitch.

    Carrot and stick? actually both worked well. Please use carrot, and I will eat. Is not that stick dont work, in your case, bluff dun work.

    Ya, recently i was invited to write a advertisement for a product, ask me for my rate. With menu and guidelines of how the advertisement should be, and rate negotiable. SO REAL

    then they invite me for a complementary service so that i can write the product properly. They told me to bring my wife, since its a hair saloon.

    Thats where the conversation ends

    1. Sillyinvestor,

      Ah! I think I know which sponsor you talking about. I've worked with them before ;)

      And I think B got write the advertorial we both turned down.

      Although I don't mind making some kopi money, I told the nice lady I'm a guy, and more importantly, look at my hairstyle...


      I mean although I'm a manwhore, there's still a line I won't cross - no kissing on the lips. Wink.

      I'm glad we still have people like you who don't mind to pay a bit more to enjoy a bit of service.

      I don't fly budget airlines for the same reason. I rather take up discounted airfares from full service airlines.

      TIP: To Insure Performance.

      I don't mind tipping for good service ;)

    2. Oh THAT advertorial. That makes 3 rejections from us haha. But can always go for scalp massage and treatment? Err.. never mind :D

    3. Kevin,

      I guess she approached anyone and everyone?

      Scalp massage?

      Reminds of the time in Shanghai where the salons over there do give full body and scalp massages besides haircuts.

      One side is girls with cute pink uniforms doing the massages, the other side the hairstylists.

      Good times :)

  2. "For those not familiar with the retailing of home electronics/appliances scene, the majority of the sales staff are not on the payroll of the retailer, even though we wear the same uniform. Wink."

    any way to tell the salesman is representing which brand?

    1. foolish chameleon,

      It would defeat the purpose if anyone and everyone can tell us apart, wouldn't it?

      Only during those limited sale events, like those held at Singapore Expo, then every promoter will wear their own brands on their polo t-shirts.

      It wouldn't help even if you knew how to tell us apart.

      NO ONE is neutral.

      Even if ALL the sales staff belong to the retailer, we would "push" certain brands over other brands.

      For eg, if brand X offers $50 while brand Y only offers $10 sales commission for the same sized TV at the similar price point, even if customer comes in interested to buy brand Y, what do you think would happen?

      Its "washing" time!

      Even if its buying online, there's a lot of "washing".

      One easy low level skill way is to put "fake" online feedbacks and comments when giving product/service reviews.

      Don't laugh, but there are people who believe in what strangers say online!!!

    2. there is this other sales tactic which i observed at one of the major retailers.

      -customer can place a booking for a product for an indefinite time.
      - there is a "guaranteed" price match if customer can find the same product of a lower price being sold anywhere.
      - can also refund 100% back deposit.

      what is the rationale for this tactic?

    3. foolish chameleon,

      1. They are relying on inertia from customers.

      Most customers won't compare prices after a purchase. The few who came back for a price match also meant customers still buy from them, not their competitor.

      Earn less is better than no earn at all ;)

      2. The deposit you've paid (even though refundable) is interest free cash flow to the retailer. Its like those stored value MRT cards or food court cards. Its so "profitable" that they are willing to give us a "discount" to entice more of us to be their captive market ;)

      Although refundable, NO retailer refunds in CASH (where possible). Its always a gift voucher.

      So even if you cancel the order, they'll still have your business for the "deposit" when you return to redeem the voucher ;)

      I see similar tricks and tactics being employed online. It is cheaper buying online, provided we are super disciplined.

      If we intend to spend $200, but ended spending $500 online because of super bargains, discounts, bonus points, free this free that; we've been "washed"!

      Although membership is "free", guess what they'll do with your personal data?


  3. Some men have a weakness for fast cars. Luckily, my weakness is in something cheaper. I like fast computers. What?! You want me to buy extended warranty? Take away my excuse to upgrade to latest, faster computer if it spoils early? No way! Need to indulge ourselves sometimes.

    1. hyom,

      A man of culture!

      My weakness is wine, women, and song...

      No extended warranty for me too ;)

    2. SMOL,

      I don't know about wine and song. But women ... I dare make a sweeping statement that it is a universal weakness for ALL men.

      There are 2 weaknesses that I'm acutely self-aware and constantly on guard against. Women and Money. One wrong move will negate a thousand right moves in life. 一失足成千古恨.

      When it comes to weakness for women, my role model is Lee Kuan Yew. He is a one-woman man throughout his life despite being a man of power, charm and wealth. Fortunately, compared to LKY, I am neither a man of power, nor charm, nor wealth. Hee Hee. Easier to be one woman man because temptations don't come my way.

    3. hyom,

      Not all men ;)

      Some men prefer other men.

      Some men prefer boys.

      You think why most in our community use FIRE as cover for wanting to get rich?

      Why most men have fascination with fast cars?


  4. Path of least resistance is always a win-win strategy. Everybody happy! ;)


    1. Kevin,

      I myself don't buy into that win-win thingy...

      But I can see the benefits of letting the other guy "thinks" he has won too ;)

      If not, how to have repeat business?


    2. Oh yes, that too haha! I suppose the "think" part is very important, depending on which perspective we're coming from.

      If retailer win (revenue) and promotor win (sales commission), then life's good. You don't need to do much work for that extra $. Coming from customer POV, well ..

    3. Kevin,

      That's why we experienced promoters "no hue" the retailer when they wanted us to promote the extended warranties for "free".

      You smart; others not stupid.

      The retailer is well known for being miserly. Extended warranties are so profitable (as with most good-to-have insurance policies), yet they tried to keep all the spoils of war to themselves...

      Not cool.

  5. Smol,

    Extended warranties definitely not my cup of tea.


  6. HI SMOL,

    The psychology of the people who buy extended warranty - they either have the buy and hold 'long term' mentality or their kiasu-ness is premised on ignorance. The latter mistake 1 year warranty as the product ONLY having a useful life of 1 year. So when they amortise the cost over 12 months, suddenly they get an acute heart pain which is unbearable! When the salesman offered extended warranty, of course they grab cos it is Nitroglycerin for them. The next time they buy another product, you don't even need to ask if they want extended warranty, they will request for it. That's when you know they have done self 'washing'. LOL!

  7. Endrene,

    Yes, I have customers who ask for extended warranties themselves!? Yup, they have been "washed" by my colleagues in other depts, and when these customers bought from me, I became a free-rider ;)

    For customers that are super nice and have a great rapport with me, I would shake my head from left to right, "I strongly recommend you to add this extended warranty to your purchase."

    Of course must make sure no manager or supervisor around!

    The customer will laugh and thank me for my honesty.

    We snake oils are not so evil lah. I often play the Robinhood role.

    Fleece and rob rude, obnoxious, "hao lian" don't know act smart know it all customers...

    The bounties I'll return to those high EQ customers who treat salespersons proper ;)

    It pays to be nice to people in general. Not just salespeople OK?


Related Posts Plugin for WordPress, Blogger...