Warranty claims and their costs are a huge expense for building materials manufacturers. There are many costs associated with dealing with a claim. Sales people may have to take time away from selling to investigate. Perhaps technical people have to fly to the job site. People have to make decisions. Someone may have to negotiate a settlement. Then there is the potential for damaging the customer relationship and the companies reputation.
In addition to the potential cost of paying a claim, is the tremendous cost of legal advice and even litigation. Even when the manufacturer feels they are in the right, it may be less costly to just pay the claim.
I see the cost of warranty claims largely from the inability of building materials companies to break down the department silos.
You have the CFO who wants to lower the warranty costs. His solution, many times is to make it more difficult to get paid on a warranty claim. This may reduce warranty payouts but it doesn’t include the value of employees time who have to deal with the claim. It also doesn’t include the loss of future sales from an unhappy customer. These costs aren’t included in his silo.
The legal department thinks they can protect the company by overwhelming the customer with lots of words that are printed in small type so no one actually reads them. The company may technically be protected, just like the CFO, there are costs to this that aren’t part of the legal silo.
The Product is Not The Problem
Nine times out of ten, there is not a problem with the actual product. The problem usually stems from an improper installation. The installer may not be experienced or trained. Maybe worse, the installer may be very experienced and think he knows better. He does things the way he always has even though products have evolved and require different techniques.
The marketing department is frequently charged with creating the installation instructions. This is one of those projects that are not viewed as being very critical. The marketing department has a budget and they want to produce the installation instructions as inexpensively as possible. They want to devote more of their time and budget to sexy creative things like ads and websites.
They won’t win an award or even get a pat on the back for creating better installation instructions. They frequently hand the project to their agency who are not experts in training and they then put their junior people on the project.
The product or technical people are usually charged with providing input and reviewing the installation instructions. They see the world as if the installation is taking place within a laboratory. They seldom take into account the reality of the jobsite. They also look at the installation of their product as a singular event rather a component in a system. They also ignore the habits contractors have learned over the years that may be adding to the problems.
Lawyers who sue building materials companies have some of the largest libraries of installation instructions. There are probably a higher percentage of lawyers with your installation instructions than contractors. Lawyers love your installation instructions.
Imagine the Savings
Imagine, if the CEO forced everyone to sit down together. The CFO, legal counsel, sales, product, technical and marketing people with the task of reducing warranty claims. The first step would be to assign a true total cost to the company of warranty claims. Then to decide on how far the costs of claims could be reduced and what is the company willing to invest to make that happen. Do not expect marketing to take it out of their budget. This needs it’s own budget and you shouldn’t skimp as you will benefit for years.
I would then identify a company who specializes in installation instructions or teaching and engage them instead of your ad agency. They do not need to be experts in building materials, in fact, it may be an advantage if they are not experienced in building materials. They should have the budget to spend time with installers and on job sites to identify the real issues. For example, are you trying to teach a new skill or to undo an accepted but incorrect method? They then should determine the best media or method to reach the installers and develop a measurement system to make sure the message is reaching the installers as well as that they are actually using the correct techniques that will reduce the number of warranty claims.
Finally, the CFO should set up a system to measure the reduction in warranty claims.
The benefits of breaking down the walls between these silos and getting everyone working towards the common goal of reducing warranty claims could be huge. Too often companies try to reduce costs by chasing nickels and dimes instead of making real changes.
There is also a competitive advantage to being the company with fewer warranty claims.
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