Yet another article exposes the painful experience consumers must endure to decide on and purchase the comfort of an extended product warranty. Under the tagline Is paying for extra coverage a dumb move or a smart move, Dale Buss writes in the New York Times (Extending the Debate on Extended Warranties, NYT, 1/28/06) that “we’ve done the math … if you look at the cost of your typical warranty, the price isn’t that much cheaper than what it costs for your typical repair”.
When a customer looks across retail formats and sees virtually no distinction in their total experience, they smartly make their purchase decisions solely on price. Evidence is clear that a typical consumer’s experience at almost every online and in-person technology retail format will promise little more than unreliable selection and availability, inadequate decision information, poor comparison opportunities, haunting fears of obsolescence, and anxiety about the cost and efficacy of warranty services.
Hence, in a sign that the warranty business has sunk to the same commoditized positioning that it’s targeted products has, Warranty Week indicates that Wal-Mart is entering the market with warranty offerings at prices up to 64% lower than Consumer Electronics superstores.
Rather than lament the fact that they are going to lose windfall category profits from confusing and anxiety-provoking warranty services, existing retailers should be soul-searching how it all came to this.
An industry retreat to Wal-Mart commoditization should be a wake up call to upstream manufacturers as well. What does all this retail turmoil suggest about the likely success of new “convergence” offerings coming from telecommunications, cable, equipment, and application makers? Adoption and distribution are hopelessly linked in the drive for significant market share and revenue gains.
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