Loyalty Truth

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 manufacturers defects.

Most major appliances and consumer electronics are sold with a one year manufacturers warranty, hence the evolution of sales pitch from quality to protection communicates a (wink-wink) message that, despite the advertised quality of the product, you are rolling the dice that it will function as intended beyond one year. If there was ever a better example of fear-based selling, I can’t think of one.

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. It’s interesting to observe how some products like computer printers have devolved into this category as prices have come down, repair costs have skyrocketed and new technology is plentiful. Rather than buying a printer warranty, your money would be better spent buying discounted print cartridges!

Long ago, I added 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.

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 experience during normal wear and tear.”

If you are asked to make a list of popular multi-line sporting goods stores, only a few come to mind. My list would include Sports Authority, Dicks, and Modell’s. Though they have similar inventory, store layouts, and staff knowledge on the floor, each chain has its own personality and Dicks has been my favorite of the three. I’ve also 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 2 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. Dick’s announced the warranty coverage in February 2009 and while it makes more sense for high priced treadmills, it’s 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 3% 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 to achieve with ScoreCard Rewards.

Consumers keep score on the sum total of offers made by retailers and ultimately evaluate brand worth on a holistic level. Now that’s something to mark down in your retail playbook!