BrainTrust Query: Dick's No Sweat Protection Plan - A Classic Loyalty Asterisk
Commentary by Bill Hanifin
Through a special arrangement, presented here for discussion is a summary of a current article from the Hanifin Loyalty blog.
These days, it seems that consumers can't buy a major appliance, personal computer, or big screen television without being offered an extended warranty.
The irony in the sales pitch is that talking points from store personnel leading up to the purchase decision are centered on the high quality of the item being considered for purchase. Once that decision is made -- whoosh -- the chatter morphs to emphasize the need for a consumer protection plan to shield you from any number of consequences -- especially manufacturer defects.
If there was ever a better example of fear-based selling, I can't think of one.
Long ago, I added extended warranty plans to the list of "loyalty asterisks" in the market today.
As a brand, you should be careful to monitor the presence of the loyalty asterisk in your marketing mix as they throw up barriers, making long-term customer loyalty tougher to achieve by creating mistrust and diluting value.
I'll leave the full analysis of when it makes sense to buy extended warranties to Consumer Reports and others who have more time on their hands. I do instinctively know that the lower the price and more disposable the item, the less it makes sense to buy a protection plan.
Always shopping with a cautious eye towards these plans, I was gripped by signage in Dick's Sporting Goods offering Footwear Coverage. As the copy read, I was being offered "Added protection from failures due to defects in materials and workmanship, including those experienced during normal wear and tear."
Dick's launched its "No Sweat Product Protection" program back in February 2009 across a number of items, including footwear.
A call to a Dick's store in Pennsylvania indicated that the program is still in place. Under the program, customers receive a gift card worth the original value of the shoe if it shows any defects under typical use over a 13-month period, according to a store associate. For shoes costing under $40, warranty coverage costs $4.00; for those between $40 and $80, it costs $9; and for shoes priced between $80 and $120, $12.
I've been running since I was 15 and am convinced that it is wise to replace running shoes every 400-500 miles to improve performance and avoid injury. Depending on your running volume, that equates to two pairs of new running shoes per year for anyone training for more than a dog walk.
That said, the idea of a consumer protection plan for running or any other athletic shoes is just plain mad. While it makes more sense for high-priced treadmills, its value is questionable for expendables such as shoes. Readers of Runner's World seem to agree.
Dick's offers ScoreCard Rewards, a basic rewards program that delivers about a three percent deferred discount (spend $300 get $10). With consumers seeking transparency and value in the retail shopping experience these days, the offer of a clearly suspect extended warranty product undermines the "loyalty" that Dick's is seeking.
Discussion Questions: Do extended warranty programs at retail undermine loyalty efforts? Is there a right and wrong way to present them to customers during the selling process?