Consumer Warranty 101

Today’s consumers demand and deserve professional treatment from every retailer in all businesses. But surprisingly, we marine retailers treat our consumers differently. Surveys have shown that the “boating experience” we deliver is poor, especially to buyers of new products carrying a factory warranty.
The NMMA did some pretty extensive market research in the late 90s and found that consumers were leaving our sport because of poor service, especially on warranty. This unsatisfactory mark stems from the anemic warranty philosophies found throughout the industry.
The number of inboard/outboard boats sold in 2003, were less than half of the number sold in 1988. The NMMA study points out that boaters simply had had enough of our “shoddy treatment.” They went elsewhere to spend their recreational dollars. Giving the new boat buyer fair value for money spent seems pretty elementary. Yet the industry continues with warranty philosophies from the 1970s. We seem to ask: “what can we get away with,” not “what can I do for you.”
Looking To The Auto Industry
Industry leaders wince when we are compared to the auto industry, but consumers see the comparison as fair. And, the consumer is king. Assume, I “invest” $40,000 in a new boat, and my neighbor spends $40,000 for a new auto. We know his expenditure got a product that will require less warranty service than mine. We also know that when he needs warranty service, it will be delivered more quickly and in a more professional manner. The $40,000 amount is the same, so what gives us the right to deliver second-(or third-) class treatment? Well, here lies the issue, and the time to clear it up is now.
First, we get retailers ready to provide professional warranty service on a 12/7, seasonal basis, for all the new products they deliver. That means: having factory trained techs on duty, all day, 12 hours a day, every day, during the boating season. Certainly those retailers stuck in 1970s thinking will protest. But, we have to get there. We have work in front of us.
What retailer can afford such professionalism, you ask. Well, to regain the lost sales, they simply have to do it. Since 1988, many consumers have told us they don’t need us. They went elsewhere to spend their recreational dollars. The question is, how do we get them back? We start by giving today’s new customers a good “boating experience.” That will require a new warranty philosophy at the builder level. And, a new professionalism at the dealer level, backed up by the builders.
Profitability Cures All Ills
People crave to own our products, but not at the sacrifices we cause them to make. Profitability does cure all ills, and the solution is as easy as adopting a new warranty philosophy. It will include a 100-percent, bow-to-stern warranty on every new boat built. It will require builders to properly reimburse their retailers, at a profitable level, for correcting all the imperfections found in the products that we deliver. It requires giving the retailer full margin on replacement parts, full labor rate compensation on the repair, on testing time, on haul out, and on re-launching. It requires compensation for travel lift and fork lift use in warranty repair. This reimbursement will not be tied to CSI scores.
We must stop squeezing the retailer out of a profit, on the work they are obligated to do. At that point, the retailer can afford to properly compensate their professional technicians. Then, we will see a greater number of more highly qualified young people, gravitate to the marine technician status. Who can blame students for choosing another career path when the marine industry pay is sub-standard? It is sub-standard because, as was pointed out in the NMMA study, the retailer is not properly compensated for warranty repair. It is a pretty simple, but vicious cycle.
In a phone survey of the CEOs of boat builders, I learned that the industry average for warranty accrual is about 1.5 percent of total sales. That’s the amount they set aside for future warranty liabilities. The high was 2 percent, and the low was .8 percent. Managers concentrate heavily on more important budgetary items like manufacturing costs, marketing expenses, R&D and the like. Small budgetary items, such as 1.5 percent for warranty accrual, get scant attention. As a result we have remained stuck with poor warranty philosophies.
An equitable warranty philosophy is just that, equitable for all parties. Initially, builders will need to invest about three to four times what they are now budgeting. It will deliver a “boating experience” that consumers deserve. It brings professionalism to the industry. It will quickly cause better built products to appear in showrooms, at which time warranty claims will diminish significantly.
The economic equation in the auto industry for this reality was very clear. In the late 80s, they simply added what people asked for—customer service. Next, they properly reimbursed their retailers for correcting imperfections. Then, they raised the prices accordingly. The average price of an auto today is nearing $30,000, and the industry is growing nicely. Boaters left our industry because we didn’t take care of them, not because we charged too much. All we have to do is ask. They’ll pay the bill, if we provide “hassle free” recreation. That is Consumer Warranty 101.