How to Sell Extended Service Warranties:
The Profit Center You May Be Missing
Part 1 of 3


by Tom Egelhoff

Author Tom EgelhoffIn February of this year I had the privilege of presenting my "25 Ways To Bring In The Business" seminar at Knowledgefest 2002 in Nashville.

My talk was sponsored by VAC Service Corp of Middletown, NY; which provides MERA members with Extended Service Warranties on the products they sell.

In talking with the VAC reps I was amazed to find that many dealers are not taking full advantage of this valuable profit center.

When I sold consumer electronics I made a pretty good bonus income from sales of extended service.

So I thought I might be able to pass on some tips on how to present and sell Extended Service Warranties.


Three Kinds of Customers

The first point I want to make is that there are three kinds of customers when it comes to selling extended service contracts.

There are people who always buy them, people who never buy them and those who sometimes buy them. It's this last group where the real profit is made.

Baseball teams play a 162 game season. Good managers know that they are going to win 50 and lose 50.

It's what happens in the other 62 games that decide pennant winners from those that go home and wait till next year.

But no matter what kind of team you have all teams must play all 162 games. Which means you must present extended service to each and every customer to win your profit pennant.

I guarantee that if you simply ask every single customer to buy extended service that you are going to sell some.

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The Store's Benefit of Extended Warranties

But what would it mean to your shop if every salesperson's gross monthly sales volume carried an additional 6-8% in extended service dollars? What would that do to your bottom line?

Six percent of a $50,000 sales month is $3,000 in additional gross sales per salesperson. It means additional profit with no additional inventory expense, floor space, labor and only a small amount of additional time on the salespersons part.

The salesperson benefits and so do you ESP can make a mediocre month a good month and a good month a great month.

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Creating Value And Planting Seeds

What are your customers really looking for when they come in your shop? They're looking for a product that will fill a need they have. A NEED.

Keep that word in mind. Not a desire, or a wish, but a genuine need in their mind. Good sound, protection from car theft, whatever the need, they're there for you to fill that need for them.

Doesn't it make sense that they want to protect that need? So as you present a product to your customer you are not only presenting features but you are also explaining benefits to your customer, which will fill that need.

The more benefits a product has for your customer the more of a bargain it becomes. As you're pointing out the benefits of the product you also want to demonstrate or explain quality and complexity.

You might want to include how fast a CD deck spins, the kind of motor that makes that happen, the electronic components that make up a car alarm and relate these items in the total cost of the equipment.

How much of the cost of the unit does the motor account for? The computer board? These are the elements that may require service or replacement down the line because they are eventually going to wear out.

Show the complexity of what the customer is really buying during your demo. This creates value in the product and will make the ESP explanation later seem more natural.

The customer's car is going to travel over all types of road surfaces. Some smooth - some not so smooth. Is that product going to get some rough treatment? You bet it is. Point these things out to your customer.

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It's Not A Separate Sale

I know most of you think that ESP is an additional sale. It really isn't. It's an option just like the type of speakers the customer might like. It's an enhancement to the product.

The biggest mistake salespeople make is trying to introduce it at the end of the sale for the first time without laying a proper foundation for it during the product demonstration.

The last point I want to make is faith in the product. I don't believe that many salespeople are very successful unless they truly believe in the product they are selling.

This is no different for ESP's. You must believe in the integrity of your ESP provider and feel confident that if your customer has a problem you won't have any problem taking care of it for them.

in Part Two I will outline a plan on how to improve your closing ratio of ESP and I will deal with some common objections that I know you all are hearing.

"If it breaks I'll just buy another one." "So what you're telling me is this isn't a good unit if I need this insurance?"

" The cost of the ESP is almost half the cost of the unit, that's just too much money."

"I think I'll take my chances with the manufacturers warranty."

Part Two - Click Here
Part Three - Click Here



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