Product protection programs, while more all-encompassing than warranties, still carry many of the same misconceptions with consumers. We sat down with Nationwide’s director of product protection to talk about how retailers can improve their attachment rates.

Rob Stott: All right. We are back on the Independent Thinking podcast and reading the headline, someone may not be super jet, excited about this, but we’re going to find a way, if there’s a way to get excited about warranties, you’ve got the two right guys here to talk about it, because believe it or not, I’m not lying. You may think that I am Mr. Chad Burris, but I’m actually really excited to talk about warranties with you. And I have been looking forward to getting you on and doing this. I appreciate you taking the time to join us.

Chad Burris: Yeah. Glad to be here. And we can certainly make a topic that a lot of people are scared of into something that sounds fun. And it’s comfortable to talk about.

Rob Stott: Yeah, for sure. And for those who don’t know, Mr. Chad Burris, our director of Product Protection for Nationwide Marketing Group. Chad, what is it that gets you jazzed about the space and warranties and product protection?

Chad Burris: I think you can start by just looking at the title of my job description here. It’s not director of warranties, it’s director of Product Protection. We’ve got a lot of dealers that refer to this as product performance guarantees, and that sound, that word just resonates a little more with customers rather than the bad thing, label of warranty, because everyone’s been pitched warranties before. You’ve probably been bombarded with phone calls, letting you know that your auto warranty is about to expire.

You’ve also been offered a warranty on a Blu-ray disc that you bought for your nephew. There’s all sorts of warranty offerings that are out there that people just become accustomed to saying no to. And so retailers are wise when they look at it and they go, no, this is a Product Protection Program, much more than a warranty. And the truth is we cover more than warranties imply. Even legally we’re covering more than warranty. We’re not a warranty, we’re Product Protection Program.

Rob Stott: I like that spin on it. And certainly a different way of looking at it because yeah, you’re right. A lot of calls come through. A lot of people, like you say, get bombarded by these things. But at the end of the day, it’s about protecting that major appliance, that piece of furniture, that major huge consumer electronic, the TV in your house and that sort of thing. It’s more of a peace of mind type of thing, as opposed to some sort of that negative connotation. And I want to talk about … I think we kind of have to address it because I know it’s something certainly that every retailer deals with when they’re talking about selling a warranty or a product protection plan to a customer.

It kind of has that … I think I mentioned it maybe before we came on, but the car salesman you sort of like, ugh, like back away from it, from a customer’s point of view. I don’t know, it’s not a, maybe a must have in their mind. What can a retailer do to shake that perspective? I mean, it could be as simple as taking the approach that you have to sort of how you look at your job title, but what, from your perspective, can they do to shake that negative outlook that consumers typically have?

Chad Burris: Now we do a lot of different trainings for retailers. And one of the emphasis of every single one of those trainings is that these salespeople can sell warranties by just going, hey, would you like to add a warranty to that? And there will be customers that say yes, and we can talk about some of the statistics behind that. There’s always going to be a customer that buys that, but if you want to get good at it, if you want to truly offer this, then what you do is you start selling this as a recommendation based on the product that they’re buying and the customer story.

There’s always a reason why that customer walks into your door. It’s not because they just want to check out what’s new in refrigeration these days. It’s because they need a new refrigerator for one of two, or maybe even three reasons of an upgrade or breakdown. And so use that story. Why is that customer in your store? And then flip that reason into a personal recommendation as to why that customer should have a protection plan on their product. And that beats the statistics of just offering a warranty at the counter every single time.

Rob Stott: Right. That was kind of … You almost asked my next question, a sort of follow up to that is that, I think the most, the not so good retailers maybe are the ones that aren’t necessarily the best trained at selling these product protection plans. It might be something where the sales associate is, it’s something they think about when you get to the counter when you’re ready to make that purchase. Whereas it sounds like the better approach is to weave it throughout. How does a retailer do that and sort of taking the product protection plan and kind of weaving it throughout the conversation, as opposed to just springing it at the last second?

Chad Burris: It takes some practice. And I think you’ve made a good point there, Rob. There’s always going to be that last chance, hey, do you want to add it? And here’s where we run into a lot of no’s where we could have received yeses if we’ve talked about it throughout the process. And think of it this way, Rob, let’s say you and your wife go buy a new dishwasher next week. And you say, I want to spend $450. That’s my budget on a dishwasher. And you go in there and you find the $450 unit, but your wife’s looking at the one that’s $550, which has the nice new features, the beautiful little chimes, the excellent cycles that she really wants. So you stretch your budget a little bit and you get the $550. Right, $550 plus tax, plus delivery. Sales person does his job and says, hey, we need installation.

And this type of a hose versus this type of a hose, all of a sudden Rob, you’re up to $650. And this is before you’ve ever even been mentioned a warranty. And if you’re at the counter at that $650 price tag, when you only intended to spend $450 all in, and then they go, would you like to add the $130 protection? They could say it with as much empathy as possible, but you’ve already gone and busted your budget on everything else. You’re going to say, no. Even if it’s something that you would be naturally inclined to add. And so you made a great point, you kind of weave it into the conversation. And I think that plays an impact into the budgeting of it. And we can even turn this into a big, positive talking point, if you want. You can say, hey, Robert, I know you came in here on a $450 budget, but you’re getting your wife, the nicer unit with $550 worth of features and benefits.

And this protection plan is going to help cover those features and benefits. Not only will it cover any major breakdown, but if any of these features failed to perform, we’re going to make sure that it gets back up to operating standards because you’re buying those features and you’re buying a unit. Let’s make sure that a protection plan covers both of those facets of it. And that to me, would sell my wife, it would sell me and it would make me move my budget number to include a warranty versus excluded. Makes sense?

Rob Stott: Yeah, absolutely. And if the wife, first of all, if the wife sold on it, then you know, you’re sold on it. You have no choice at that point. If you’re the really good retail sales person, you know who to go after to get that set and make sure that gets included in the final price there at the counter. But no, I guess timing wise, it feels like it’s not a one size fits all as far as product protection plans go and maybe that answers my next question. But a right and wrong way to, or timing. A right and wrong timing of when to pitch it. Is it really figuring out what that customer is in there for and why they’re in there? Or is it something that … As we’ve been talking about it, you got to get it into the conversation at a certain point to increase your chances of success with trying to pitch this.

Chad Burris: Yeah. I think there’s an art to it and timing does matter. And it probably will change based on your level of rapport with the customer. And it’ll change based on product too. I mean, the refrigerator that goes out has a little bit more of a fear, urgency factor that you can definitely use to your advantage when offering a protection plan. But if we flip the script, when we start talking about furniture, now Rob, it’s a whole different thing. You buy a refrigerator, you buy to keep food cold and you expect it to work 100% of the time. But when you buy a sofa, let’s just stop and think about the sofa purchase by itself. A sofa is where life happens. It’s where, I know you recently had a baby. Congratulations.

Rob Stott: Thank you.

Chad Burris: But it’s where you will sit and hold that baby in the middle of the night, watch a TV show and try and sleep.

Rob Stott: Have you been over at our house?

Chad Burris: I know right. It’s where you will have that baby sit on the floor and you’ll sit there and watch him open his first one-year-old birthday presents and his five-year-old birthday presents and lay on the couch under a blanket when he’s sick and misses school and watches movies all day with you and things like that. Buying a sofa is so much more of an emotional decision, and we would be remiss if we didn’t use that and not to take advantage of customers. I don’t want to say that, but to use that, to sell the value of a protection plan, like we’re not covering a piece of furniture we’re covering where life is going to happen. And you’re spending this money. You took a long time to decide on a sofa. As most people do the buying process is a lot longer for furniture. It’s much more emotional and heartfelt. And if you use those reasons why that customer should use or buy a protection plan on their sofa, I think you do start with timing and weaving those things in all along.

And a good salesperson is figuring out how that person’s going to use the sofa, why they’re replacing their old one, all these different reasons, you use those reasons and it starts early. But I think the final close here, Rob, and I’ll answer your question very long windedly. The final close is a Salesforce wraps it up in a bow and says, hey, Mr. Customer, because you told me that you’re going to use your sofa, refrigerator this way, and you’re replacing it here. And this is the kind of experience that you’ve had in the past. This is the kind of experience you’re looking for. These are the features you’re buying today. That’s why I think a protection plan makes sense. And then you ask them if they agree with you. And it turns a whole lot, the auto dial, auto warranty call into something a lot more personal.

Rob Stott: Right. Absolutely. And you talked about differences has me thinking about something I want to ask, but I want to get one more question before we kind of transition to that. And that’s, is there ever a time where a warranty doesn’t make sense, especially in our space?

Chad Burris: Sure. I mean, being completely honest I don’t buy warranties on every single thing. If I go buy a Blu-Ray player, I’m not going to buy a warranty on it. Buy my kid a video game system for Christmas. I’m not going to buy a warranty on it. But I know I have some insider information as to how products perform. And so I definitely say everyone should be buying a protection plan on a refrigerator, everyone. The dishwasher, you should buy it on a dishwasher, you should buy it on a washing machine, because you’re combining three elements, heat, movement, and water, you can add in electricity. And those things just don’t always mix. And they’re meant to mix and work 24-7 in a refrigerator. Buy a protection plan on it, make sure you’re going to cover yourself for that. So where it doesn’t make sense.

I think some of the smaller ticket items, I don’t know what I would buy a warranty on a KitchenAid standing mixer. I know we have a lot of retailers that do it, but here’s what’s great about our product, is just because I wouldn’t buy it that doesn’t mean another customer agrees with me on that. And so it’s critical to offer it on every single point. I use this example in furniture stores, Rob. A lot of furniture retailers right now have a red sofa on their show floor right now. But I would wager that most people wouldn’t pick that red sofa to go in their living room. But somebody bebop’s in the front door, ding a ling and said, hey, I’m looking for a red sofa. Guess what that sales person’s going to do. They’re going to sell them that red sofa. You got to remove your own personal persuasions from it and follow that customer journey. What’s their story? Why did they want that red sofa?

Rob Stott: That’s an interesting way of thinking about it too, is that, I feel like a lot of the spaces, the retailer having to push and talk and weave it in. But there are times where the customer comes in, maybe it’s because of a bad experience that they had with an appliance or piece of furniture. And that warranty is actually going to in turn sell itself because of that experience and the customer not wanting to have to go through the distress purchase that they’re in the process of making or something along those lines.

Chad Burris: It’s a perfect point and another spot along those lines is when a consumer comes in and uses our Wells Fargo or Synchrony Financing, some use their money to be smarter that way take advantage of the 0%, other people need payment plans. They’re in a more emergency situation where they weren’t expecting to replace whatever appliance. And if you’re paying for 18 months or 24 months, or even 12 months on a machine, it makes a whole lot of sense to add a protection plan in there that can be financed in that payment. And then if something terrible happens and you’ve got an 18 months financing on a refrigerator and month 14, it goes out, my goodness, you’re paying for a refrigerator that’s broken. It makes a whole lot of sense to add into any sort of a financing purchase too.

Rob Stott: Certainly does. And now to go back to, a little bit ago you talked about the differences between why someone would, for a refrigerator versus a sofa and how you position it. How about the specifics of warranties and protection plans when it comes to those products? Is there a lot of difference between the way protection plans are set up for a piece of furniture as opposed to a home appliance or a refrigerator or washing machine, that type of thing?

Chad Burris: Yeah. They’re very different and so different in fact that, if we’ve got a member or retailer who sells only appliances and then hears about our furniture warranty plan, they think it’s an alien concept. Or if we have an appliance salesperson that comes into a store, as a new hire, and this store sells appliances and furniture and bedding. Now they’ve got to learn two sides of it. The biggest call-outs Rob, is going to be accidental damage. Our appliance protection plans are functional, mechanical, electrical, but they’re not going to cover the cosmetic scratches and dings, but a sofa recliner or a loveseat. Those are all heavily centered on stains and accidental rips and tears and pet damage and things like that. A big, big, big difference in coverages. And then appliances you’ve got the safety of the manufacturer’s warranty in there that covers most of the breakdowns.

We do step in and cover some things like power surge and food loss in the first year that a manufacturer wouldn’t cover for an appliance. But for furniture, they still have a craftsmanship work in a warranty, but they don’t cover accidents through the manufacturer warranty. You buy that brand new sofa, bring it home, and your brand new baby spits up on it in the first week that’s going to be covered under a protection plan. We’re going to get that stain clean for you. But if it spits up on your new range, we’re not going to cover.

Rob Stott: You’d be surprised. I think we may have already experienced that. Good to know that it won’t be covered by those protection plans. And I know too, something that we had recently, I know this is something down the line potentially for Nationwide, but there’s also the way of approaching these warranties where they’re geared, I know they’re sold in timeframes. I want to ask you about the idea of re-upping. When a warranty is set to expire. Is it on the retailer to consider that, or how does that work as far as … And I guess even too, what’s the success rate of a retailer getting, or the warranty company, getting someone to re up on those warranties as they are set to expire?

Chad Burris: Well, you raise a great talking point and a good question. It’s not always up to a retailer to re up. There’s a lot of workings behind the scenes of a warranty that I don’t think a lot of people know about or even want to know about maybe, but a big part of that is an insurance company willing to take on the risk of insuring a used product.

Rob Stott: Which, I’m thinking these products have made it through the life of a warranty. You’re talking about wear and tear that’s been on the product. So risk certainly goes higher as you look into these situations.

Chad Burris: And these insurance companies, these warranty companies that are out there today. They’re not dumb they do have some data behind when a product breaks and how likely it is to break if it’s already broken before and metrics like that, they look at. We are always looking to develop a renewal program that we can offer for our retailers to use. Currently today, there is none. We had some insurance companies pull out and say, they’re not willing to take on that risk.

The group is actively looking to re-establish that, I can tell you it’s a 2021 initiative for us, but with furniture it’s pretty much a lost cause because what you’re doing with, if you’re reinsuring a five-year-old piece of furniture as you’re buying a claim about every piece of furniture after five years has some sort of a stain on it. And so sure I’ll take that extra year of coverage. And then five days later call in all the claims. Probably not going to happen with furniture, but definitely something we’re working towards in the appliance and electronics side.

Rob Stott: That’s a nice segue too, you mentioned initiatives and things like that. I know there’s a lot that you’re doing from the product protection side, and working with a lot of great partners and pulling together a lot of great programs. As you’re building those, what is it that you look for, on behalf of the retailer to make sure that they’re getting the best access to some of the best programs as you’re looking at, not necessarily who or what you’re working with. But what’s important to you as you’re building out these programs for Nationwide dealers?

Chad Burris: Well, you’re going to make me brag a little bit on my providers.

Rob Stott: That’s the point.

Chad Burris: Right now, we’ve got a provider with the Epic Protect program, company that backs it is called Centricity. And three years ago, our team did an RFP and we put out a big request to the whole warranty industry. And we had some big, big, big players. We had the guys who do, Walmart and Best Buy and, Lowe’s and, Home Depot. And they were all in our little Nationwide Memphis office, desperately pitching to create a program with us. And it was neat. It was a great learning experience. We got to meet a whole lot of interesting people, but the biggest part of that is it helped us learn exactly what we want. And what we want is the best, easiest, most seamless process for a retailer, because warranties are unhappy things when they go bad, they really are, because a retailer right now, today is selling a promise that they can’t even fully uphold by themselves.

They’re relying on a third party to help them uphold that. Who’s also relying on a third party servicer to uphold that too. There’s a lot of things that we wanted to wrap up and tie up into a bow and make this a dealer friendly program. And Rob, I will never sit here and tell you that everything’s going to be perfect. It won’t be. And we’re going to have times where we got to jump in and mediate between a customer and a dealer and a warranty company and the insurance company. And that’s our job, that’s what we do. But if I’m getting the chance to brag on our programs on the appliance side, I’ll do it by saying that, hey, we’ve got a full value limit of liability. That may mean nothing to most people, but what it means to a customer who has, say a refrigerator, that’s had two claims prior, and now they’re on their third breakdown, and you’re already frustrated.

You’re mad at the world for selling you that refrigerator and the servicer deems it unrepairable. What we offer now that the industry outside of Nation Group, when Nationwide Group does not, is the full value limited liability coverage, which means that we are going to pay full replacement value for that customer, regardless of previous claims paid. I’m getting into the weeds here, but Rob, if your mom has a $2,000 refrigerator and she’s had $700 of work done on it, now she’s only got $1,300 left of coverage and she has to get a new one and she gets a $1,300 check instead of a $2,000 check to go buy that refrigerator. Is she happy? Are you happy? Are our vendors happy? The answer’s no. We’ve decided to eliminate that.

Rob Stott: Right. And ultimately you mentioned it sort of at the top there describing that unfortunately, in the case of a situation gone bad, that comes back on the retailer, which then that’s a customer then who is in a situation where they may be looking not to spend that $2,000 back with that retailer. I know there’s a lot of a reputation at stake too with some of these things. That’s, I know, important as you’re going out and looking for these partners and the programs you’re pulling together, for sure.

Chad Burris: Yep. And on the furniture side, not to be excluded, we led the way, the buying groups led the way in including pet damage coverage on the furniture protection plan. We’ve been copied a lot and there’s been a lot of copycats imitators of that coverage since then, but the fact that we’ve been doing it longer, we know the cost of that. We know the increase and attachment rate in that. Benefits to selling a group program do exist, believe it or not.

Rob Stott: That is awesome. And I know I’d be remiss if I didn’t ask, we’re sitting here December, it’s been about 10 months of sitting at home and working under some unique circumstances. I feel like every part of this industry has been touched. Every part of life has been touched by COVID and this, what we’ve been living through with this pandemic. And I imagine the product protection and warranty space is not limited in sort of how it’s been impacted as well. I’m curious to know what those impacts have been and how you’re approaching them and tackling them?

Chad Burris: It’s been an interesting saga to watch for sure, because we all feared the worst, I think. And back in April and May, we all wondered what was going to happen, but then to see our retailers pull through and sell more than ever has been such a boost to confidence. What we’ve noticed, we went back and compared studies of how consumers view risk and looked down kind of prior to COVID and there’s basically three ways. There’s the people that take on the risk. Sure. If it breaks, I’ve got the money to fix it or I’ll try and fix it myself. I don’t need a warranty.

Rob Stott: I hate to admit to be that guy, but that’s that’s me most of the time.

Chad Burris: That’s a large part of the population.

Rob Stott: It’s not the money, that’s for sure. I’ll tell you that much, but it’s certainly the guy, I like to get the hands dirty. I don’t know what it is. I’m like a little bit of a grease monkey in that way, I like to try to fix things.

Chad Burris: There’s nothing in the world wrong with that. I wonder what your wife would say about that.

Rob Stott: Yeah. Right? That’s when the arguments happen in the house, I’ll tell you that.

Chad Burris: There’s another subset of customers that are risk averse. Oh my gosh, please. I don’t want to take on any extra risk. Yes. I will buy that warranty so that I’m covered. I have that peace of mind and protection over me. And then probably the largest swath of customers is going to be what we call evaluators. And that’s the ones that probably where you and I truly lie and that’s does it make sense for this purchase? And so there was a distribution of those customers and what we’ve noticed has maybe changed, and we’re still waiting for some hard data to come back. But anecdotally, and we’ve heard this a lot from our retailers, is those risks seeking customers who now have had to go through COVID and maybe worried about their job, worried about their house payment, worried about their health and all of a sudden, there’s more of a reason to draw to add coverage and protect yourself from risk in areas that you can.

And a warranty is a pretty good guarantee that, hey, if anything happens in the next five years, it’s going to get fixed and it’s going to cost me nothing to do it. And so we’ve seen customers and retailers that have sold to these customers who normally said, no, now they’re starting to say yes a little bit more. And it would be really wise of me to have all this data that we have collected to back it up. But it’s still, it’s pretty early in the process. We think this mentality may last a while, and that only serves to reinforce what we’ve been saying all along. And that’s, you’ve got to offer this protection plan to every customer. You just don’t know where they stand when they walk in your door.

Rob Stott: I’d be interested to, there may not be necessarily some hard data that you have on this, but I’m curious to know if you’ve heard just in being in touch with the space. I think one of the things that comes to mind over this time, as people have been staying home and especially in the home appliance space, we know that we anticipate if it hasn’t happened already, the replacement cycle picking up because people are cooking three meals a day and appliances are certainly having a lot more stress on them.

Is there any impact on the cost of warranties or product protection plans as a result of all this increased use. And in turn, I mean, the risk for the companies backing these programs certainly has to be going up during this time. Is there any impacted from that perspective on, I guess it’s specifically to the appliance side? But it could be, I mean, people are sleeping, sitting on their couches, more working from their beds more so furniture I’m sure is impacted as well.

Chad Burris: I would almost argue that furniture is probably more so, because that sofa that was not being used for eight hours during the day is all of a sudden used, eating on, drank coffee on in the morning where it normally that was done on your ride to work. So yes, on the furniture side, we have seen more claims come in and we help our vendors monitor that. The insurance companies monitor that. And there is probably going to be a service labor rate increase that we’ve noticed over the past few months where a servicer can say, hey, look, customers don’t want me in their home. I don’t want to be in a customer’s home, but if you pay me a little bit more, I will be. And that is direct to customer, that’s in manufacturer warranty. And it’s in third-party warranty period as well.

There hasn’t been a cost increase to doing business. And one of the things that we want to be proactive with as a group and influence what we can influence is be proactive with those rate increases. Because the last thing we want to do Rob, is to announce to our retailers that, hey, we’ve got a 20% rate increase coming.

Rob Stott: Right, right.

Chad Burris: And so we may make it more of a bite size. Hey, here’s a 2% because service has gone up X amount, 2% increase the cost this year. We may do it again in 18 months, we made it again in three years, who knows, but more bite-sized palatable rate increases that adjust to the market. The cost of appliances is going up, raw materials is going up. As those costs thrives, so does the cost to replace and repair a lot of those items. We’re going to follow the industry in that, but we’re going to make it as easy to handle as possible for our programs.

Rob Stott: And that’s, I think, certainly understandable and certainly something I’m sure it’s no big secret, these things, this is COVID right. This is what we’re living through and the impact it’s having. Like I said, it’s touching every part of this industry and every part of our daily life. But I think we’ve succeeded in making product protection fun to talk about. I’ve had a lot of fun.

Chad Burris: Yeah, I haven’t been bored.

Rob Stott: Say a half hour flew by pretty quick, I’m looking at the clock and I’m like, it hasn’t really been a half hour and we managed to do it.

Chad Burris: I tell you what, Rob, if people have listened to it this long, I would also argue that they probably thought it was worthwhile too.

Rob Stott: I hope so. I hope so. But Mr. Burris, I appreciate, I know we’re both crunched too, we’re talking during December, the final month of the year here, where we got the holidays and everything else happening and a lot of stuff going on. I appreciate you taking a few minutes and chatting with us about a space that I know is certainly near and dear to your heart and obviously your title, your job title. I thank you for spending some time with us.

Chad Burris: Thanks a bunch, Rob. It’s been a pleasure.

Rob Stott: You got it.