I am one of those rare persons who believes in and usually purchases extended warranties or �service contracts�, perhaps because I used to sell them while working in electronics retail and a big part of my time when I became manager was in arguments with customers who didn�t purchase the service contract and had devices fail shortly after warranty (or within warranty - but the manufacturer invariably claimed it was not covered because the problem was not a defect but rather wear and tear). Our warranties at Service Merchandise, as with a few other places (though not the majority) actually covered �normal wear and tear.� I personally had a $500 Aiwa mini system, a $200 Zenith 4-head hi-fi VCR, and $200 6-head Toshiba hi-fi VCR REPLACED (with equivalent gift certificates) no questions asked and I certainly doubt I�ve paid $900 in warranties in that time.
More recently, I purchased the longest possible warranty on my wife�s Dell PC and so far the floppy drive has been replaced once and the hard drive twice - already worth the couple hundred for the warranty. My mother-in-law purchased a warranty on an $8000 month-long trip and sadly had to collect when her husband passed on unexpectedly. Granted this is all anecdotal evidence. Mind you, warranties were indeed high-margin for Service Merchandise and of course that is why the company pushed them. They were 50% margin (true margin � straight to the bottom line) for us and another percent margin to the third party contractor who handled them. However, this doesn�t necessarily make them �bad,� though I agree they ought to be priced lower in general. In fact, our highest margins were in jewelry, then warranties, and then in furniture - and no one alleges jewelry and furniture are immoral to sell. Electronics overall had a break-even margin (the purpose was to get new jewelry customers into the store) and since we had such a liberal returns policy I felt the warranty margins partially compensated us for that. I certainly gave more latitude on customer satisfaction if the receipt or our computer showed the purchase of an extended warranty � a hidden benefit to warranty purchasers. I find generally that extended warranty purchasers are �taken care of� to a degree. This has been my experience at Ritz, for example. Salespeople certainly like you better and help you more when you come back for help or service. Manufacturers were just terrible to deal with on warranty issues, compared to much better dealings with at least our service corporation and Ritz�s. High margins do actually translate into some value in this sense. Part of why warranties are high-margin apart from perceived reliability of consumer goods is that people forget they have the warranty, they lose the paper work and receipt and don�t send in necessary cards, etc. Also, they don�t bother with fixing a product that is performing less than optimally because many have low standards and/or lose interest in the product. My Zenith VCR was playing very slightly slow�this was only noticeable in that music was a fraction of a tone flat�most people wouldn�t have cared but being a musician using the VCR for music tapes I found this unacceptable and so had it replaced. In short, most folks don�t fully utilize the extended warranties. All that said, I probably wouldn�t buy the $15 Radio Shack warranty on a $60 throw-away item. I WOULD buy an extended warranty on a five-liter Mustang whose clutch will reliably fail every few years, usually when one�s cash flow is zero. If you did a life-long survey of the economics of warranty buying you might very well come out ahead by not buying warranties - or possibly not. The same could be said of any other type of insurance. And other concerns, such as short-term cash flow (e.g., I couldn�t have paid for fixing my wife�s Dell very quickly) enter in as well. There is also peace of mind based on, in my case, a longstanding experientially-based distrust of the quality and service of major manufacturer. I like the feeling that no matter what for the next four years because of the warranty that damn Dell will be working regardless of how awful my finances are with my wife in grad school! It�s just too easy to unthinkingly decry warranties for being high-margin. (Myself I am more annoyed by margins in storage media and batteries.) Even Consumer Reports or Digest (I forget which), who is against warranties for this reason, turns around and docks manufactures such as Sony for only providing a 90-day warranty on labor on audio products. Almost every TV sold today has a 90-day warranty on labor (the main cost of repair), while proclaiming �one-year warranty� on the box in large letters (with a little asterisk noting that that only refers to parts). Even during the 90 days, good luck getting them to admit it is a defect, especially if it is something like a power button (notoriously awful on new TVs because it is assumed folks will ONLY use remotes). It would be great if, say, RCA TVs lasted the way they used to. Heck, it would be great if RCA TVs were RCA TVs! One last thing, since this is a camera list. I�ve never had any sort of failure on my Pentax cameras (or certainly lenses) so I�d seriously question my need for purchasing a service contract on one of their film-based products, though I probably would anyway just so as not to tempt cruel Lachesis. ===== Chaso DeChaso "Less is more cheap" - Osvaldo Valdes, Architect __________________________________ Do you Yahoo!? Yahoo! SiteBuilder - Free web site building tool. Try it! http://webhosting.yahoo.com/ps/sb/
