hot topic
Managing Warranties
By Karlen McLean, ABOC, NCLC,
Illustrations by David Merrell
patient leaves his glasses on the top of his car and then speeds away, losing them. Another patient returns lenses her dog used as a chew toy, while another brings in his son for the fifth time in a year with mangled eyewear. Then there's the patient who just can't get used to his prescription. For the third time in a month.
They're all aware of the warranty on their eyewear because they were told about it at the sale, and they're here to collect on their benefit. Again. Warranty work hurts ECPs in wasted product, money, and time. It can be handled more profitably. To begin, look at the combination of past patient patronage, office policy, individual cases, and the doctor or dispenser, as well as labs' and lens manufacturer's policies.
WARRANTY WAR
Warranty redos have many causes. There are legitimate redos, but there are some that are borderline abusive to the system.
The reasons? Every segment of optical points a finger at reasons for warranty abuse, including:
Doctors: Lack of time to conduct thorough eye examinations or working with difficult patients.
Dispensers: Lack of training in dispensing and new lens technologies.
Labs: ECP errors.
Manufacturers: Lenient lab policies.
According to lab and ECP respondents across the country, warranty work comprises an average of around 10 percent of their total goods and labor. One large independent lab group notes that warranties make up 12 to 15 percent of its overall work, and those numbers are increasing.
Redos damage patient loyalty and retention. Due to perceived product failure and the impression of inefficiencies, some patients are likely to walk away from the practice and never come back...and tell others about the problem. Excess redo and warranty work also hurts lab-ECP relations when turnaround time suffers.
"Each warranty job affects production time for three jobs: The original job, the warranty redo job, and a potential third job that gets displaced because the lab has to process the warranty job," a lab executive comments. "Some spoilage and rework is to be expected. But there are abuses to the system and carelessness, which account for a good portion of redo/warranty work."
| What ECPs Can Do |
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Some ECPs have developed strong practice policies on warranties that have helped them turn warranty work into sales. Here's how you can, too. 1. Don't use warranties as a selling tool. Mentioning that eyewear is warranted for two years devaluates the eyewear. Instruct patients on what their eyewear provides and how to care for their eyewear. Stop using the warranty to close a sale. 2. Don't abuse warranties. Telling patients, "If you have any problems, just bring the glasses back since we have a no-fault warranty," seeds the return. 3. Give patients the lenses free under warranty, but charge for the add-ons. "Patient perception is that this is a fair solution and it adds value to their purchase," one ECP says. 4. Get warranty policy ideas from outside the optical industry, such as car manufacturers. "If you dent your new car driving out of the dealership, they charge for repairs," one observer mentions. 5. Don't warranty everything, and, if you do, limit the warranty. Some ECPs suggest that patients who get an exam every year don't need a two-year warranty. 6. Set a policy. Most managed care programs have different warranty policies. Know what policy each is, then establish a uniform practice warranty system. 7. Assess hiring policies. Since it takes 11 to 18 months' salary to train an employee, it pays to develop hiring criteria that promote retention. This includes accurate employee screening, hiring qualified personnel, and competitive pay rates and benefits. 8. Consider competitors. Some optical chains charge an upfront warranty fee to the patient at the time of purchase, and also charge co-payment fees for replacement materials at the time of warranty replacement. 9. Take advantage of lab-based education. Many labs track results and help educate practices on how to improve. In-office seminars demonstrate high costs involved with warranty work and offer methods to solve the problem. |
SALES HIT
Relying heavily on warranties as a way to do business can severely cut profits, according to most lab executives. "ECPs would see an increase in sales if less work was made under warranty. I see jobs remade at the one- or two-year mark for warranty and I wonder if ECPs realize how many new sales they're losing," a lab executive ponders. "If there is little or no Rx change, some think it's ok to remake under warranty because the patient is happy. But the patient will never buy anything until the warranty is gone."
Many ECPs rely on the warranty system as a driver for their service-based businesses. "Lens manufacturers are the ones who started it all by offering aggressive warranties in the first place," one ECP says. "Competitively, labs have to guarantee their work and their customer's work."
Warranties have become not only a retail sales tool, but also a driver for premium lenses. "I'm happy to have any redo, warranty, or support I can get from my vendors," another ECP says. "Without warranties on premium lens products, we couldn't afford to sell the product."
WARRANTY WITHDRAWAL
The benefits to reducing the amount of warranty work are numerous, including the following:
►Patient perception. As competition increases, it's vitally important to attract new patients and current patients with a highly professional experience the first time.
►Time management. Devoting so much time to warranties is counterproductive. It also cuts into profits, since employees dealing with warranties are unavailable for new sales opportunities.
"No other product on the market today allows consumers to return the product for a brand new one due to negligence," a lab executive observes. "By applying a more practical business approach to how we work with warranties, we can gain respect from the consumer, drive revenue, and increase the efficiency of our business."
GETTING OUT OF THE TRAP
Today's sophisticated tracking systems help labs target accounts with the highest warranty remakes.
In addition to pointing out on a case-by-case basis how warranties are used or abused, labs can offer specialized training to help practices avoid the warranty trap. "Practices that have weekly staff meetings and keep up on training are the most error-free and profitable," a lab manager says.
Some manufacturers, labs, and large retailers already utilize or propose an industry-wide program to help curb errors, redos, and abuses to the warranty system.
Here, according to one lab executive, is the bottom line: "ECPs have the same issues as labs when it comes to warranty work. We all want to stand behind the products we sell, but can't be fooled into thinking there is no cost involved because someone else covers the materials. Products have reached a quality level that should inspire confidence to sell, without touting free replacements."
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What Labs Can Do |
| Labs
nationwide weigh in with their recommendations to help control the number of warranty
redos. 1. At least one lab charges for a portion of its warranties and has written policies for practices to present to their patients. This policy recovers lost revenue for the lab and the practice, and patients view it as fair. 2. Sophisticated lab tracking systems help monitor job type and practice profitability. Some labs "fire" practices that have a high incidence of rejects, since they are not profitable, or reward profitable accounts that have low warranty rates with perks like staff luncheons and events. 3. Labs can also use job tracking to identify practice trouble spots, and take custom-made reports to ECP accounts. "We can show ECPs their losses due to warranties, which are seen in more time spent in customer maintenance rather than in profitable sales," one lab points out. 4. Labs can help ECPs hone their lens choices, for example, from 140 PAL choices to six. This helps inventory management; patient adapt rate; employee training, knowledge, and selling confidence; and results in less warranty redos. 5. Some labs are considering giving cost breaks or incentives to ECPs based on the percentage of warranty/redos the practice may have. 6. Upper management should have the fluidity to go beyond policy for accounts that have positive low or negative high warranty redo numbers. This can help made judgment calls on returns easier. 7. Lab-to-ECP training is key to reducing warranty work. Labs can get new information to practices every week, be it by E-mail, a live weekly meeting with staff, or phone or video conference calls. Most labs offer ABO/NCLE and COPE approved credit education, and several offer seminars specific to warranties and redos. |
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