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Friday, 10 August 2012

Extended Service Plans: How to Sell ESPs

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How to Sell Extended Service PlansHow to Double Sales of Extended Service Plans While Creating Loyal Customer Relationships

Extended Service Plans (ESPs) are an important part of a retailer’s success, profitability, and a customer loyalty builder. A successful extended service plan ultimately depends on strategy, program offering, reporting, execution, and processes. These core components dictate whether a retailer achieves optimal financial results and increased customer loyalty -- or -- marginal performance and disappointed customers. If you want to identify the missed opportunities for your organization in maximizing profit and increasing customer loyalty through extended service plans … then read on! Doubling or tripling your current sales of extended service plans is a realistic expectation, when you challenge your organization to think differently.



Learning how to sell extended service plans with the goal of doubling revenue begins with crafting the right strategy from both an operations and training perspective. The key question that should be asked when initiating the process is “who should be responsible for developing the strategy”? Retailers who approach strategy development as a partnership between their executives, functional departments or the third party administrator and insurer are more likely to excel. A single person having responsibility for the extended service plan program who works in concert with this team of experts is necessary to help you and your team probe for answers to the following questions and then make the best data-driven decisions possible:

  • How do we identify, negotiate with, and select the right third party administrator for our retail organization when we are considering a change or initiating a new program?  If we have our own service department how are we monitoring their performance as it relates to: customer satisfaction, pricing, repeat repair levels, cost per repair trends, etc.
  • How do we hold our third party administrator or our internal service department accountable?
  • What data are we collecting and how do we make our data analytics more meaningful so we can make better operational, marketing, and customer-oriented decisions? Also WHO owns the data? It never should be the third party administrator -- but in many cases it is!
  • How will we streamline the layout of our reports and decide the availability of each by level of the organization and determine the frequency of the reporting?
  • How do we properly assign our extended service plan to the right people internally so buyers are involved but our store operations personnel are in-charge and accountable for results?
  • What is our plan to identify and follow up performance issues or successes?
  • How will we keep our in-store personnel energized and positively motivated with the program and not make it another chore for them to complete?
  • How are we going to challenge ourselves to constantly identify new ways to improve the program? Monthly product sub-line reviews attachment reviews? ESP price to product price ratio reviews? etc.
  • Finally, how do we properly train our leadership, sales and customer service teams, and create a better informed organization? 

To begin the process, ask yourself and your colleagues to quantify how important the selling of extended service plans is to your strategy to increase customer loyalty while accelerating store profits over the next several years. How does your organization from CEO to the newest  part-time salesperson view your extended service plan program, is it seen as a value for the customer or strictly looked at as a "profit machine"? 

Some retailers are reluctant to put an ambitious strategy in place to more proactively offer extended service plans to customers because they think their sales teams on the floor (or customers) will resent the decision. Some leaders believe the only way to increase sales of extended service plans is to badger customers until they say “no” multiple times. 

That is a "high pressure" assault that neither salespeople or customers appreciate. It is also a prime example of not putting the customer first, which quickly erodes sales and customer loyalty. This also destroys one of the newest benchmarks in evaluating customer service, i.e. customer intimacy, which builds upon the daily interactions with the customer to create true and lasting relationships.

The reality is that a well-informed and managed sales team wants the opportunity to offer customers more choices. But many times leaders make the mistake of prejudging what choices to offer. If you don’t offer the ESP then WHO has just made the decision? You or the customer? You did, is that right? How about your team? What decisions are they making right now? When the sales team is properly trained and managed they become enthusiastic about offering ESPs to customers, which often leads to other cross-selling options like accessories, services, credit cards, etc. In addition, customers want to know about all of their options so they can make their own informed decisions. ESPs, accessories, etc. are all options that may be attractive to them, especially when offered without high pressure tactics.

Results with extended service plans can be immediate and long-lasting when retailers approach selling ESPs from a strategic and collaborative mindset. For example, a major retailer was experiencing a 15 percent conversion rate with its extended service plans. The retailer recognized the need for a change in their thought process and strategy. The situation was addressed by first completing an analysis of the thoughts, views, and expectations of the ESP program by all levels of the organization (CEO to part-time salesperson) then delivering training that was expertly designed and entertaining (EnterTRAINING) for its associates and leadership. The retailer’s conversion rate of selling extended service plans increased dramatically to 25 percent percent in just 60-days. 

John Quattrucci, president of Stuart & Associates said “savvy retailers recognize that extended service plans represent a significant financial opportunity as well as a strategy to improve customer relationships. However, it has been our experience, that even a major retailer can under perform in these critical areas. In fact, one major retailer had decided that its only option was to begin giving away ESPs to customers because they did not know what else to do. Our team of experts immediately addressed the situation. Within 12-months, we tripled our client’s performance against their stated goal and for the past 15 years we have continued working with this retailer to constantly refine the program and improve profits with the end result of happier customers and shareholders!

The truth is -- not all retailers know how to sell extended service plans optimally or how to take performance to a whole new level. When this happens, a retailer essentially allows their own service department or third party administrator and its insurance company to dictate how the program will be run. The result is average financial performance and marginal customer loyalty because no one is challenging the value the program provides for customers -- it has to be more than just a numbers game!

You are not after marginal results … are you? Optimal results requires strategy, collaboration, and the right experts. Take charge. Be proactive. Double or triple your ESP sales and improve customer loyalty and long-term relationships! Learn how to increase your revenue from extended service plans by 100 percent or more during the next 12 month


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John Quattrucci

John Quattrucci is President of Stuart & Associates, a retail consulting firm specializing in Sales and Margin Growth Programs and Returns Reduction Programs.

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