E-commerce has its moment. In 2020, it rose to $ 861 billion, according to Digital Commerce 360. Every year, e-commerce accounts for more of total retail sales, reaching 21.3% of retail sales in 2020. This corresponds to an increase of 15.8% in 2019 and 14.3% in 2018.
The trend is clear. People are buying online now more than ever. With lower barriers to entry and a steady influx of new entrants, competition is fierce. Retailers bend backwards to attract and retain customers.
“You can’t wait for customers to come to you. You need to find out where they are, go there, and pull them back into your business. “- Paul Graham, Y COMBINATOR
Every retailer vies for the attention and purchasing power of consumers. In a constantly evolving industry, the rules of the game have changed. New channels emerge while others become insignificant. According to Hubspot, 71% of customers no longer trust sponsored ads on social networks. So if you don’t do anything new, you may be wasting your money.
The challenges don’t stop after the acquisition. Once consumers walk through your “digital door”, getting them to buy something is a given. Online stores include flexible user interfaces, detailed reviews, dynamic pricing, and customized offers. Even with these levers, only ~ 2.75% of customers make a purchase on average.
Once you finish the rat race, move on to the next one: repeat purchases. According to Clever Tap, the retention rate at week 12 is 7.1% for existing users and only 1.4% for new users. Single-digit conversion rates across the board. Because of this, companies are fighting tooth and nail over gradual elevators.
Retailers need to provide customer-centric platforms that are differentiated, drive purchases, and improve customer lifetime value (CLV). Today more than ever, e-commerce companies need to innovate and adapt or become irrelevant.
“Ecommerce executives must keep pace with these changes (and others) to survive and stay ahead.” – Linda Bustos, Get Elastic ecommerce expert
Get ahead with value-added services
For example, Amazon, Walmart, Best Buy, and the major retailers offer their customers numerous options and value-added services such as payment plans, shipping insurance, and product protection. In the past, these services were difficult to provide so only large retailers could offer them.
Now companies like Clyde, Route and Extend can unlock value-added services for every retailer and their end customers. These technology-first platforms offer white-gloved service immediately. They’ve democratized payment options (BNPL, funding, etc.), shipping insurance, and product protection plans.
In particular, product protection plans can help build customer loyalty and increase a consumer’s purchase intent. For example, Assurant found that extended warranties increase a consumer’s purchase intent by about 25% on average. According to After, a positive claims experience can also lead to a higher lifetime value and a higher propensity to purchase additional products and services.
What is product protection?
Products can be covered in different ways. Many products come with manufacturer warranties that usually cover manufacturing defects from 6 months to a year. However, product protection plans go beyond that.
Product protection, also known as a service contract, guarantees the operating condition of a product over a longer period of time. Product protection can come in many different forms:
1. Extended Warranties.
These service contacts extend the duration of the manufacturer’s guarantee. They start when the manufacturer’s warranty expires and then extend the cover for mechanical or electrical faults for a certain period of time.
2. Protection plans.
These service contacts protect products from certain damage or accidents. Each protection plan has different conditions. A common plan is Accidental Handling Damage (ADH), which covers damage caused by accidents such as falls, breaks, and spills.
With product protection, merchants can offer their customers more extensive coverage that can alleviate a customer’s fears at the checkout. It’s important to note that plans are not mutually exclusive.
A good example is an iPhone; It can be protected in a number of ways. If your iPhone battery fails due to a manufacturing defect within one year of purchase, it is covered by the manufacturer’s warranty.
However, this warranty does not cover accidental damage. So if you’re prone to dropping your phone, you can buy AppleCare, Apple’s protection plan. AppleCare provides accident protection so you don’t have to pay out of pocket if you drop your phone and crack your screen.
Why is product protection important?
Customers want product protection. This is reflected in the global extended warranty market size of $ 120.79 billion in 2019. This market is expected to reach $ 169.82 billion by 2027, according to Allied Market Research. There is a clear market demand. That makes it a crucial element of your ecommerce experience.
Offering a warranty can also help increase sales, according to Assurant’s Connected Decade survey. For video game consoles and set-top streaming boxes, an extended warranty increases the likelihood of purchase by 22%. That probability increases by 21% for smart TVs and DVRs.
The value of product protection is obvious. The trend is clear. Consumers appreciate expanded coverage that also opens up new revenue streams and new value for businesses.
1. Products are protected.
The extended warranty coverage gives consumers security. Additional coverage ensures customers always have products that they love and that work. The cover can be adapted to the needs of the customers for a particular product, e.g. B. the coverage of animal biohazards for devices.
2. Fix problems quickly.
Product protection improves the customer experience by turning a potentially negative product experience into a positive one. With Extend, for example, customers can chat with a virtual claims assistant around the clock to get a quick response and get replacement products out the door quickly. This is how an unhappy customer becomes an enthusiastic customer. This high quality service can enable stronger ties between customers and retailers.
3. Retailers can make a profit.
Product protection expands business by increasing net profit, increasing conversion, and improving the customer experience.
For example, SoClean has partnered with Extend to improve its reputation for excellent customer service. They wanted to make sure that their customers could find an easy way to resolve it if something went wrong with their devices. SoClean was able to test its guarantee offer with Extend. One experiment resulted in a 167% increase in sales.
4. Increase the purchase conversion rate.
Consumer confidence in a purchase increases when they see that someone is behind the product they want to buy. Intuitively, it makes sense that customers would like the additional validation.
In fact, product protection increases purchase conversion. For BlendJet, overall product purchase conversion rates increased 11% when the company offered Extend product protection plans.
5. Improve the customer experience.
Excellent product protection improves customer loyalty by turning a negative experience into a positive one. In today’s environment, retailers need to give options to their customers. E-commerce first saw this explosion with payments (BNPL, funding, etc.) and now product protection is on the rise.
Product protection also provides merchants with a channel to bring customers back. For example, when a claim is met at Extend, customers are returned to the dealer for a replacement. Customers can purchase a replacement product which is considered a net new sale by the dealer.
This multi-touch engagement strategy adds another important touch point to the customer journey. Positive customer loyalty and the conversion of potentially negative experiences into positive ones can lead to stronger customer loyalty.
Different types of product protection
Product protection has been around for a century. As early as 1919, AIG was the first company to offer these plans to dealers. Until recently, product protection suffered from archaic damage processes and a distribution problem.
In addition, claims processes can take months to resolve and often result in frustrated customers. New user-friendly technologies like Extend improve access to product protection so that any retailer, regardless of size, location or product catalog, can offer product protection.
Product protection can also come in many forms:
- Replace – These service contracts are good for everyday items that may be reasonably priced. Think Skullcandy earbuds, it’s easier to replace a damaged earbud than to try to fix it.
- Repair – These service contracts are for items that are worth more than the labor cost. It makes more sense to fix a Peloton bike than to replace it.
- Planning duration – These service contracts only extend the manufacturer’s warranty so that consumers are covered beyond the manufacturer’s warranty period.
- Simple Product Protection – These service contracts allow a little more customization. They often extend the length of the manufacturer’s warranty and can even expand the coverage options. These plans come into effect after the manufacturer’s warranty expires.
- Accidental Handling Damage Protection (ADH) – These service contracts protect against more damage, such as falls and spills, than a manufacturer’s warranty. Since they cover different topics, these plans start at the time of purchase.
With so many options, retailers can choose the coverage that suits not only their product but also their customers.
Enhance your BigCommerce store with Extend
When it comes to retail, the future is written online. Online sellers are facing an increasingly crowded, rapidly evolving field. Their success requires the ability to customize their offerings to provide the best possible service to their customers. Retailers need the resources to meet customer needs and generate new revenue streams. Product protection plans enable retailers to differentiate themselves from the competition, encourage purchases, and improve customer longevity value.
BigCommerce’s flexible, open SaaS platform makes offering product protection a breeze. BigCommerce offers easy pre-built integration with Extend’s API solution. Through this collaboration, every retailer can improve their online offerings and benefit from a protection plan program in the shortest possible time.