[After conducting our fifth annual Warranty Chain Management (WCM) Benchmark Survey in Q3/Q4, 2018, Strategies For Growth℠ has put together a new results package consisting of an Analysts Take paper, a Webinar and a 2019 WCM Conference workshop and presentation on “The State of Warranty Chain Management (WCM) for 2019 – and Beyond!”. The Webinar was hosted by Mize, Inc. on January 17, 2019 at 1 PM EST. However, you can download a copy of the webinar at https://info.m-ize.com/webinar-on-benchmark-and-optimize-warranty-management. Mize is also distributing copies of the Analysts Take paper at the 2019 WCM Conference in Orlando, FL, March 12 – 14, 2019.
The following is an excerpt from the January 10, 2019 issue of Warranty Week. Read the entire article, including illustrative charts and additional commentary, at Warranty Week.]
The 2019 survey results reflect all of the signals for an expanding market growth over at least the next 12 months, and probably beyond. Nearly two-thirds of respondent organizations are already running their services operations as profit centers with their own P&Ls, and annual warranty-related budgets are expected to increase-over-decline by a ratio of more than three-to-one. This has all of the makings for a fast-growing market.
Further, we are seeing an uptick in the percent of warranty services organizations taking steps to improve their respective planning and forecasting activities, and restructuring, as necessary, for improved warranty management oversight and accountability.
As such, all of the key aspects that can be used to signify both operational and financial improvements seem to be there, leading to an optimistic expectation for accelerated growth in the industry over the next 12 months.
Presently, 63% of respondent organizations manage service as a profit center, keeping pretty much in line with the findings for other related components of the global services industry (e.g., the field services segment, etc.). For many organizations, running services as a profit center allows them to focus more on the processes that may be used to generate higher levels of profitability, which represents one of the three main “clusters” of key factors currently driving the global market.
Warranty Management Organizations Are, Once Again, First and Foremost, Customer-Focused
The respondents to the survey have also once again clearly identified the specific drivers that are pushing them to aspire to the attainment of higher levels of performance. In fact, they have provided responses that solidify that there are still three main “clusters” of factors that drive their respective businesses: Customer-focused, Product Quality-focused and Profit-focused – and in that order.
For example, among the Customer-focused drivers, post-sale customer satisfaction issues (60%, up from 58% in 2018, and only 42% in 2017), the desire to improve customer retention (43%), and customer demand for improved warranty services (40%) remain as the top three drivers with respect to optimizing overall service performance. No other drivers are cited by more than just over one-quarter (28%) of respondents.
The next “cluster” of drivers is Product Quality-focused, and is represented by product defect-related costs (28%) and dealing with inferior/deficient product quality (23%). The third “cluster”, Profit-focused, is represented solely by an internal mandate to drive increased service profitability (23%). As such, the warranty chain management community has made it clear that it is squarely focused on, first, satisfying – and retaining – its customers; second, dedicated to improving product quality-related issues; and third, mandated to drive increased services profitability – again, in that specific order.
These results suggest a continuation of the relative “normalcy” that has characterized the Warranty Chain Management segment over the past several years – that is, a return to focusing on customers, rather than spending most of their time and resources wrestling with cost reductions and other financial issues. Obviously, while financial considerations are still critically important, the industry focus has shifted back, as it always does, squarely on the customer’s needs, requirements, preferences and expectations.
The Greatest Challenges Facing Today’s Warranty Management Initiatives
Aside from the top clusters of customer-, product quality- and profit-focused drivers, warranty services managers are also faced with myriad additional challenges that come from many different areas. The top challenge, as cited by nearly two-thirds (63%) of the survey respondents, is the ability to identify the root cause of product failures. However, nearly half (45%) also cite cost recovery from suppliers as one of their top three challenges. Further, between 28% and 30% of respondents also cite repair management (30%), claims processing time and accuracy (30%), and sale of extended warranties (28%) as significant challenges as well.
Based on the 2019 survey results, the greatest challenges facing warranty services managers today align closely with the key market drivers, as well as with the current and planned strategic actions to be taken. As a result, these data continue to reflect an environment where overall improvements are likely to transpire in the next 12 months, thereby leading to higher levels of customer satisfaction and the further stimulation of financial growth for the segment.
Analysts Take on the Global WCM Community
However, building upon the survey findings from previous years, only a small majority of warranty managers (57%) report that they are satisfied with their company’s warranty claims processing time – and only 22% are “extremely satisfied”. Although these percents represent a significant increase over previous years’ surveys, there are still more than one-in-five (22%) that are currently “somewhat dissatisfied” with their company’s warranty claims processing time performance.
Ashok Kartham, founder & CEO of Mize, concurs adding that “the companies can achieve the key goals of improving customer satisfaction and profitability of service business by connecting all stakeholders and processes in warranty and service contracts. Companies need to connect with customers directly to improve self-service and grow service contract sales. Service technicians need to be enabled to make better diagnostic and repair decisions upfront. Supplier collaboration needs to be improved to drive product quality. Companies can move beyond claims processing to drive customer satisfaction and grow additional revenues from innovative service offerings.”
Kartham further explains that “the warranty industry is facing significant challenges and opportunities with increased customer expectations for product uptime and predictive maintenance. The Mize Connected Customer Experience platform, and Warranty Management solution, enable companies to transform warranty to be a profit center. We are excited to bring the industry benchmarking and best practices to help companies optimize the entire warranty lifecycle and maximize the customer lifetime value.”
[Again, to download a copy of the Webinar, or to obtain a copy of the companion Analysts Take paper, simply click here: https://info.m-ize.com/webinar-on-benchmark-and-optimize-warranty-management.]