According to Bill Pollock, president and principal consulting analyst of Strategies For Growth, "The 2018 survey results reveal that nearly three-quarters (71%) of respondents believe effective warranty chain management to be at least 'very important' to the overall financial performance of the business, with just under a quarter (22%) believing it to be 'extremely important.' The results further reveal that this sense of importance continues to increase substantially, year-over-year, as one-quarter (25%) believe effective warranty chain management to be 'more important than one year ago,' compared to only 3% believing it to be 'less important' -- a ratio of roughly 8:1 citing 'more important' over 'less important'. As such, we know the segment is based on a sound foundation moving forward."

Managing Extended Warranty Programs

Presently, 85% of respondent organizations manage at least some portions of their extended warranty programs in-house, including 78% that do so entirely. As such, it becomes incumbent to ensure that they have the most effective tools and resources available to maximize the impact that sales of extended warranties can bring to the bottom line (Figure 1). Metrics such as warranty accrual and warranty renewal rates become critical in their respective efforts to maximize projected revenue streams and build a stronger customer account portfolio over time.

Source: Strategies For Growth

The survey results also reveal that, presently, more than a third (36%) of respondent organizations expect their annual warranty budgets to increase over the next 12 months, with 20% expecting increases in excess of 10%! During the same period, only 17% expect decreases, with most of those (i.e. 14%) being of less than 10%. All told, the ratio of organizations expecting increases in their annual budgets is more than twice that of those expecting declines (Figure 2).

Source: Strategies For Growth

Warranty Management Organizations Are First and Foremost, Customer-Focused

The respondents to the survey have also once again clearly identified the specific drivers that are pushing them to aspire to the attainment of higher levels of performance. In fact, they have provided responses that solidify that there are three main clusters of factors that drive their respective businesses: customer-focused, product quality-focused and revenue/profit-focused -- and in that order (Figure 3).

Source: Strategies For Growth

For example, among the customer-focused drivers, post-sale customer satisfaction issues (58% -- up from only 42% in 2017!), the desire to improve customer retention (42%) and customer demand for improved warranty services (35%) remain as the top three drivers with respect to optimizing overall service performance. No other drivers are cited by more than just over one-quarter (28%) of respondents.

The next cluster of drivers is product quality-focused, and is represented solely by dealing with inferior/deficient product quality at 28%. The third cluster, revenue/profit-focused, is comprised of two closely-related drivers: internal mandate to drive increased service revenues (26%) and internal mandate to improve service profitability (25%). As such, the warranty chain management community has made it clear that it is squarely focused on, first, satisfying and retaining its customers; second, dedicated to improving product quality-related issues; and third, mandated to drive increased warranty revenues and profitability through improved warranty management services -- again, in that specific order.

These results signify a continuation of the relative normalcy that has characterized the Warranty Chain Management segment over the past several years -- that is, a return to focusing on customers, rather than spending most of their time and resources wrestling with cost reductions and other financial issues. Obviously, while financial considerations are still critically important, the industry focus has shifted back, as it always does, squarely on the customer's needs, requirements, preferences and expectations.

The Benefits Realized by Improving Warranty Management Activities

The number one benefit realized by warranty management organizations through the improvement of their respective activities is improved customer satisfaction (62%). No other single factor is cited by more than 38% of respondent organizations (Figure 4). The next greatest benefits cited by respondents include: reduced service and warranty costs (38%), enhanced product and service performance (35%), improved warranty operational efficiencies (33%) and improved customer retention (33%).

Source: Strategies For Growth

Based on the survey results, Pollock suggests that, "the top benefits realized by improving warranty management activities closely align with the key drivers that influence services organizations; namely, that they need to continue to place their principal focus squarely on the customer, with the end goal being to improve customer satisfaction and retention."

Complacency with Their Current Warranty Management Solution

However, building upon the survey findings from previous years, a majority of warranty management solution users are not as duly impressed with the vendors that are currently providing these solutions. For example, Pollock claims that "only 40% of respondents are presently 'satisfied' with the services and solutions provided by their primary warranty management solution vendors – including a stunningly low 2%, or only one-out-of-50, who are 'extremely satisfied'. These percentages reflect a further downtick from just one year earlier."

Pollock believes that there are probably a number of reasons for why users are not particularly happy with their current WCM solution vendors: "In talking to a number of warranty chain managers over the past several months as part of our benchmarking program," Pollock claims, "many have said they are unhappy with their current provider because their needs for this year and beyond are simply no longer being met by their existing warranty management solutions that may have been implemented a number of years earlier. Basically, their needs have raised the bar regarding what they now expect out of their solutions; but, in many cases, their vendors have not raised their own bars in terms of performance delivery."

Madhu Kunam, director of software development at PTC for the iWarranty product, concurs with Pollock, but adds that, "Even with an implemented warranty management system, the "still manual" processes may make the overall system inefficient or unproductive." He goes on to say, "Other reasons may include that the features and functions of the existing vendor-supplied solution do not work as advertised, due to a poorly implemented system, or one that has been constantly plagued with bugs. It may also be that the vendor-supplied solution simply doesn't deliver the expected value, that the vendor is either unable or unwilling to help with consulting or professional services support, or is not able to provide other types of customer-specific support. Then again, it might all just be about cost, although a solution structured for small and medium businesses and sold on a subscription pricing basis can certainly mitigate any problems in this area!"

However, these are only some of the potential problems that he believes PTC's iWarranty solution can help its customers avoid. For example, Kunam explains that, "PTC's warranty management approach defines, manages and analyzes all of the organization's warranty processes from initial product registration through to the end of the standard or extended warranty period. This unique approach to warranty analytics and service lifecycle management focuses on a product-centric data model that allows users to manage warranty information and capture service history in the context of the product itself, thereby allowing this important data to provide feedback to the enterprise for continuous product and service improvement. In this way, no matter how high the customer raises the bar, or how customer-specific the solution needs to be, PTC stands ready to support its customers in all facets of their warranty operations. PTC believes that this is one of the key areas that can make a difference between a satisfied customer, and a dissatisfied one."

On May 24, PTC will be hosting a complimentary hour-long webinar featuring the executive-level results of this survey, to be presented by Bill Pollock. It will also be making available the companion Analysts Take paper that provides further insights relating to the findings. To register for the "State of Warranty Chain Management for 2018 and Beyond" webcast, or to obtain a copy of the companion Analysts Take paper, simply click here.

About the Authors

Bill Pollock is President and Principal Consulting Analyst at Strategies For Growth, the independent research analyst and services consulting firm he founded in 1992. Previously, Bill served as President & Chief Research Officer (CRO) at The Service Council; Vice President, Principal Analyst, heading up Aberdeen Group's Service Management Practice; and Managing Analyst, Services Industry at Gartner.

In 2015-17, Pollock was named "One of the Twenty Most Influential People in Field Service" by Field Service News (UK); One of the "Top 10 People Every Field Service Pro Should Follow" by Field Service Digital; one of Capterra's "20 Excellent Field Service Twitter Accounts"; and one of Coresystems' "Top 10 Field Service Influencers to Follow". He writes monthly features for Field Service Digital, Field Service News and Field Technologies; and is a regular contributor to Warranty Week. Bill may be reached at +1 (610) 399-9717, or via email at wkp@s4growth.com. Bill's blog is accessible @PollockOnService and via Twitter @SFGOnService.

Madhu Kunam is the Director of Software Development for the iWarranty product line at PTC. Madhu has an extensive knowledge and wealth of experience within the Warranty and Service domain and has driven PTC's iWarranty Solution forward as one of the leaders within the Warranty and Service segment. Previously, Madhu served as the key Business Solutions lead for R&D and Senior Product Manager for PTC's iWarranty solution. Madhu can be reached via email at mkunam@ptc.com.