Techsafe Aims to Simplify Selling Extended Warranties
Backed by AmTrust, Techsafe tries to eliminate headaches of selling extended warranties for integrators (and help them make money).
Integrator Josh Gorrell of Electronic Life in Topeka and Kansas City, Kan., does not mince words with his frustration when talking about selling and administering extended warranties on the equipment he sells. It is one of the main reasons he created Techsafe Electronic System Protection.
“One of my biggest gripes over the years has been extended warranties. As a dealer, I have always hated these warranty systems. They are such a pain in the ass,” he says.
Every CE pro knows the score: The dealer has to order the warranty card, take picture of the barcode for each item, get online and register each product, buy a warranty for each item, and keep track of the serial number. Even worse, the whole process is handed off to a warranty administration company, but the customer still calls the integrator when something goes wrong. They still expect the dealer to handle it, even if they understand that the integrator is not physically repairing it.
And did we forget to mention that the integrator is not making any money on the repair?
“If I want to make any money on it, I have to charge them for my time and that leaves a bad taste in the client’s mouth because they are paying me even though they purchased an extended warranty,” notes Gorrell. “Even if you go through all the terms in detail with the customer and tell them how the extended warranty coverage works, it is chintzy and Old School. I got the point where I did not even want to sell extended warranties.”
Well, that sentiment pretty much sums up how many integrators feel about selling extended warranties. It just is not worth the hassle.
But Gorrell did not give up. Several years ago, he started offering service plans based on a percentage of the total system.
“I did that successfully for a couple of years. Then one day I mentioned it to my insurance agent that I was warrantying our own systems. He told me that I cannot do that. It violates a whole series of insurance terms and state laws. Technically and most importantly, if you are claiming to warranty a product, you have to have the capital to cover all ‘said items’ in the event of a catastrophic failure,” he recalls.
Gorrell’s insurance agent told him there are strict liability rules about “implying” that you will cover equipment. Some states even prohibit you from even using the word “warranty” unless you are the actual manufacturer of the item. (States like California call them "extended coverage plans" instead of "warranties.")
And while integrators carry traditional errors and omissions (E&O) insurance to cover the liability of their custom installation company, that coverage is not an umbrella that extends to the components themselves owned by a customer.
After that conversation with his insurance agent, Gorrell promptly discontinued his warranty programs. But he still didn’t give up. About a year-and-a-half ago, he made numerous phone calls to warranty administration insurers only to find that none of them had programs to handle “systems” installed by integrators, only individual components.
One of the companies he spoke to was AmTrust Financial, which owns RepairMaster and Warrantech. AmTrust became intrigued and eventually decided to back the creation of Techsafe using Gorrell’s business plan. AmTrust is providing the entire backend of the operation, plus the liability coverage for all the items.
How Techsafe Works
So how does Techsafe simplify such a cumbersome process to make it worth dealers’ efforts, and how is is different?
To clarify, Techsafe is not a warranty, which by definition only covers manufacturing defects. Techsafe protection plans utilize an umbrella of coverage to cover the troubleshooting, shipping, parts and labor for entire system, not just one item.
Among the key elements of the system are:
- The program purposely keeps the local A/V dealer in the loop. It is only sold through A/V dealers. “This is not something a customer can hop on the Internet, click on some boxes and buy,” says Gorrell. Another reason it is important for local dealers to be involved is because it is much easier to take care of the customer when an integrator is involved. Also if CE pros can get into a house a few times per year for preventative maintenance, they are going to upsell more.
- Dealers are not required to cover an entire system. They can pick and choose the items they want covered within a system. For example, they can choose not to cover anything under $500.
- TechSafe can only be sold on systems that are less than one year old. The integrator types in all the data on every piece of equipment. It then calculates the total system value after it is categorized as “residential, commercial or educational.” The website automatically spits out the plan price, which is how much TechSafe will charge the customer to fix an individual item when it fails.
- On top of the Techsafe extended warranty plan, the dealer can add his own optional “White Glove Service” fee. The dealer can design and define his White Glove service in whatever way he wants and charge whatever he wants. At Gorrell’s own Electronic Life company, he charges $10 per month, for example. Gorrell encourages dealers not to make their white glove service fees exorbitant, which will discourage homeowners from buying warranties. Techsafe collects the money from the White Glove Service and remits it to the dealer (minus a 10 percent handling fee). Dealers can also plug in payment options with discounts for multiyear options if they choose.
- The entire quote is saved in the website via a weblink that can then be emailed to a customer. When the customer pays (by credit card only) the program is activated.
“It’s pretty easy. Boom boom boom boom. As a dealer, I don’t want to spend a lot of time creating and managing individual warranty programs. They are such a pain to deal with. With Techsafe, in 60 seconds you are done,” says Gorrell.
The quote link is active for 12 months, so the homeowner can click the link and activate the program any time during the year.
“We are leaving a lot of honesty up to the dealer,” admits Gorrell. “We do not require serial numbers. We do not require invoices. We want dealers to be honest because they have skin in the game as well. On the 15th of every month the dealer is going to receive a commission check based on his or her total volume.”
If dealers try to cheat the system by covering older equipment or trying to cover multiple TVs under the same plan, they will be cut off.
What Happens When a Product Breaks?
When there is a problem, the majority of the time the homeowners ends up calling the dealer. Hopefully the dealer has added some White Glove Service fee so he is getting paid to handle the warranty.
If the customer calls Techsafe, the response team will try to determine which piece of equipment is having a problem and schedule a service technician, or send a shipping label to the client asking them to mail it in.
Techsafe will not call the dealer; it will call the closest one of the 10,000 service centers (that are part of the RepairMaster or Warrantech network) that can actually repair the broken item.
“The missing piece of the puzzle is the reinstallation of a repaired item,” says Gorrell. “That’s where the dealer comes in. He is not required to stay involved, but he should.”
If the customer does not buy White Glove Service, the customer will be responsible for labor costs only if the Techsafe repair crew gets on site and discovers that the problem is not from the under-warranty component but from something else. If the Techsafe person cannot troubleshooting the item over the phone, then the company will advise the homeowner to call his dealer to determine more specifics on what is causing the problem.
Techsafe is not making recommendations for integrators to use any specific remote monitoring systems.
“Most of the dealers already have a remote-monitoring service policy in place,” comments Gorrell. “We are just giving them the platform to make money doing it.”
After the first 90 days, you don’t get that many callbacks on systems, so if you get clients to start paying you monthly it becomes recurring monthly revenue. With TechSafe, the liability of replacing the big-ticket items out of warranty is taken care of, from projectors to TVs to control processors.
There is no minimum criteria to sign up. Dealers need to simply go to techsafe.com and sign up as a dealer. If someone signs up as a customer, then TechSafe captures their info and directs them to a local dealer.
“The money is almost irrelevant compared to the increased client satisfaction,” Gorrell concludes.
Jason has covered low-voltage electronics as an editor since 1990. He joined EH Publishing in 2000, and before that served as publisher and editor of Security Sales, a leading magazine for the security industry. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He is currently a member of the CEDIA Education Action Team for Electronic Systems Business. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at [email protected]
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