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The last year has proven to be an interesting market for warranties at retail point of sale, particularly as it has fared very well in the otherwise turbulent retail environment. In fact, one could say it has fared well because of the turbulent markets.

On the negative side, reducing sales volumes of TVs and major domestic appliances meant less potential warranty customers coming through the door. Thankfully this decline was balanced out, and in many retailer stores actually overcome and improved upon, by increased conversion rates. While fewer people are buying major electrical purchases, those that do are more likely to purchase a repair plan at point of sale. So why is this?

Firstly, many of today’s TV and domestic appliance customers are making distress purchases rather than considered upgrades or the wanton spending sprees of previous years. In a distress purchase scenario the customer probably has a pile of dirty washing at home or ruined food from the freezer in the bin or a family irate that they have no TV. In this case they will be far more responsive to the peace of mind, both emotional and financial, that a warranty can offer them into the future.

The second major reason for increased conversion rates is the economic climate itself. Whether customers are making new, distress or upgrade purchases the uncertain outlook means that they will have a weather-eye on the future and the longevity of their purchase. Again this makes the customer much more responsive to the benefits of a three or five year repair plan, particularly if it doesn’t add cost to the purchase price today. D&G’s 10-month payment terms and ongoing pay-monthly plans have seen exponential growth in the last twelve months as customers want the benefits of a warranty without adding more to their credit card bill on the day.

The third and perhaps most pertinent reason for the increase in warranty sales conversions is the actions of the retailers themselves. With reduced turnover, incremental sales are a vital ingredient to keep retail shops on the High Street alive, and the reduced footfall means retail staff have longer to work on their sales pitch to the customer. D&G’s warranty sales training program has seen unprecedented demand in the last twelve months from retailers really looking to make profitable warranty sales a major part of their business.

The take home message from 2009 and the continued tough market dynamics is that warranties will play an ever more important role in the High Street marketing mix throughout 2010.

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