Extended warranties
Someone must have told me years ago that extended warranties on equipment are a bad idea. So I never get them. Nor do I ever get frequent buyer cards. Life is too short for me to remember the details about the warranty. And I know myself well enough to be able to predict that I'll never have the buyer card with me at just the right moment.
I was told tonight that businesses like Best Buy make high profit percentages on extended warranty sales. Consumer electronics are becoming a commodity, so the real money is in service contracts that (with any luck) won't get used. (Consumer Reports story here.)
Extended warranties are a mysterious business. There's no requirement that the manufacturer actually service its own material, so there may be one giant warranty-servicing company out there (right? one Beatrice Foods of warranty services) doing all the work. And making, one hopes for their sake, a lot of money.
Things with moving parts break, and the long tail must have a warranty equivalent. Thinking about this has led me to Warranty Week, an online magazine for “warranty management professionals.” The extended warranty guys are apparently irritated at their bad reputation, noting that no one says negative things about basic manufacturers' warranties.
This seems like a market that, like the travel industry and the bookselling industry, is ripe for creative disruption online. If consumers really understood what warranties they were getting, and were able to manage them in aggregated places, we'd be better off. Right now, it's hard to compare extended warranties, there's a huge variety of consumer electronics being bought and sold, and manufacturers' warranties are getting shorter and shorter. Time for a big, detailed, extended warranty marketplace to emerge.
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