Battery warranties: Time to change the terms

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Dale A. Gospodarek  

  By Dale A. Gospodarek
  Vice President of Marketing & Strategy, Johnson Controls

For decades, retailers have used warranty terms to differentiate among battery grades. The higher the starting power, the longer the warranty.

But as new automotive technology demands more of batteries, aligning warranties with starting power is not an effective approach. Now is the perfect time to take a fresh look at battery warranty terms.

Compare and contrast

Consider warranty length for products that cost as much as or more than a battery:

  • Window air conditioners: one-year manufacturer’s warranty (retail price $129 - $199)
  • Flat screen TVs: one-year manufacturer’s warranty (retail price $159 - $199)
  • Refrigerators: one-year manufacturer’s warranty (retail price $350 - $600)
  • Apple iPhones: one-year manufacturer’s warranty (retail price $600+)

See a pattern? Now look at the warranties of common automotive aftermarket parts:

 Warranties of common automotive aftermarket parts.

Clearly, battery warranties are much longer than those for other consumer goods and even other automotive parts. What if those warranty terms were reconfigured?

Major industry savings
Modified warranty terms could start with a three-year free replacement warranty on AGM batteries and step down from 24 months to 12 months to 6 months for best/better/good levels. These terms reflect the realities of advanced battery technology, let retailers differentiate between grades—and, conservatively speaking, could save the industry more than $100M in warranty expenses.

Minor effect on purchase decisions
How would consumers view such a change? To better understand this, we look to a recent Consumer Decision Process study, which found that warranty does not register as one of the top three criteria consumer rely on when selecting an outlet of the actual battery. If we explore further and look at pre-purchase behaviors of battery consumers, we find that 94% are doing some research with more and more consumers turning to the internet (52%) as a source of information. When searching online the consumer is looking for price (78%), vehicle fitment (59%) availability (51%) and finally, warranty (44%). From this research, it would appear that warranty does not weigh heavily in the decision on which battery to buy.

Change terms – and enforce policies
More realistic warranty terms can yield real savings. For maximum benefit, we also need to better enforce warranty policies. When consumers with a legitimate warranty claim return their battery to their local outlet, they get a new battery—and the warranty starts over. Shouldn’t the replacement battery be warrantied for only the remaining original term?

And what about consumers who return the battery near the end of the warranty simply to start the clock over? It’s a real problem. In a recent survey, retailers told the National Retail Federation (NRF) that they expected 3.5 percent of their returns in the 2015 season would be fraudulent, at a cost of $2.2 billion. In the retail battery category, which NPD valued at $3B as of May 2017, a 10 percent return rate puts retailers’ expenses in the $300M range—and based on the NRF survey, $9M would be fraudulent returns.

The time is right
A product warranty is intended to give consumers confidence in the part they purchase. But battery retailers have gone to extremes, hoping to cultivate customer loyalty. In turn, consumers sometimes have unrealistic expectations for warranty terms and policies.

With many large retailers significantly changing return policies, the time is right to reconfigure battery warranty terms and enforce warranty policies. Loyal customers will appreciate the consistency, and customers looking to take advantage of a liberal warranty return policy will likely be discouraged. Either way, the result is reduced waste and increased profitability.

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