HOT TOPIC A new look at old problems NO FAULT WARRANTY

The danger of no-fault warranties

Other industries found them to be irresponsible and costly, so what about optical?

By John Granby

No-fault warranties present a real danger to the optical industry. Other, much larger, business categories found that these no-questions-asked warranties had a devastating effect on revenues and so have replaced them with conditional warranties. They found the no-fault warranty had been taken advantage of by both consumers and customers and finally determined it was unreasonable to absorb the rising costs associated with them anymore.

Is it time for optical to consider alternatives as well?

It's definitely a hot topic, and one that will continue to be addressed in the pages of EB. An article in Warranty Management magazine had this to say: "Today as never before, the management of the warranty promise is one of the most challenging issues confronting management."

RETAILERS RETREAT

Wear and tear, as well as service extras are no longer free across the retail spectrum. Tire manufacturers used to replace tires without question if they suspected a defect. But now, if tires are purchased and returned before they are worn out, there is a charge for the amount of usage.

Return running shoes for a rip along a seam, and instead of replacing them at no charge like they used to, most retailers charge for the usage up to the date of return. Jewelers also now charge, for example, to clean and tune up jewelry due to consumer abuse of their purchases.

Remember when mechanics would evaluate a used car prior to a purchase? This was done at no charge in hopes of gaining a new customer afterwards. Now mechanics charge for this because they found that doing it for free did not increase customer loyalty.

OPTICAL'S TAKE

So, what exactly is a warranty? In Webster's Dictionary, it is defined as: "A written guarantee of the integrity of a product and of the maker's responsibility for the repair and replacement of defective parts."

The definition is clear, but its applications are not. Today we see a plethora of warranty types that are qualified with words like limited, extended, or enhanced. No matter what we call it, a warranty still remains a promise—one that must be managed.

That being said, however, a problem is that the no-fault warranty is almost impossible to manage and monitor. The result is that this kind of warranty, and the resulting free redos, are costing optical millions of dollars because it allows consumers to abuse the product they purchased and businesses to use warranties as a way to close sales.

The result is a costly stream of non-paying consumers.

THE BOTTOM LINE

Here are some problems optical faces with today's redo policies.

• PURCHASE CYCLE. Some experts say that a free, one-time redo has contributed to a lengthened purchase cycle in optical, which is now up to just over 25 months. Is part of the reason that patients can get a new "pair" for free with a warranty?

• TIME IS MONEY. What about the time factor? No-fault warranties have encouraged the patient to return to the clinic or office, and, in doing so, occupy the valuable time of the dispensers, receptionists, and doctors.

This disrupts the smooth flow of scheduled patients at the office or clinic, and generally increases the stress in the workplace. We delay serving paying patients in the dispensary.

All of this for free. Remember the saying, "time is money?" Well, it certainly applies here!

• ONE-TIME EXPERIENCE. Increasingly, consumers demand a one-time experience for whatever they purchase. Eyewear is no different. Consider for a moment the negative feelings they experience when they must return to have a purchase corrected.

Laboratories have warranty programs that help offices and clinics with redos for non-adapts, scratched lenses, and problem frames. But, if our goal is to create the one-time experience that consumers want, then we certainly shouldn't promote redos

• PERCEIVED VALUE. If there's one thing we don't need in this industry, it's the notion that eyeglasses are a commodity product and, therefore, are not important to maintain. Instead, we should be sending the message that it's important to take care of new eyewear because it is an expensive purchase and an important component in the quality of one's life.

• DISPENSER TURNOVER. Many independent labs have seen almost a doubling of redos in the last five years.

Some attribute this to no-fault warranties. Others blame it on the inexperience of dispensers available today. In fact, many talented dispensers are leaving our industry because they feel that they aren't given the support necessary to do a competent job. Dispensers today are no different then they were 20 years ago. They want to do the best job for the consumer that they can. But, if the cost of redos is preventing a business from investing in training and staff support, then who, we should ask, is really is to blame?

We all work very hard to produce the highest quality eyewear. And, employees at labs and offices want to know what they do is important, accurate, and valued.

However, too many talented dispensers and lab techs leave optical because they no longer feel they are doing something meaningful or they move on to higher paying jobs outside our industry.

VICIOUS CYCLE

With customers returning to the office without generating any revenue, we can't afford to train dispensers and lab techs or to pay them appropriately.

With labs not charging back for the warranty, they can't retain and pay technicians enough to stay in the industry. Losing these talented, experienced employees negatively impacts our businesses and the industry as a whole.

It's a vicious cycle. Why is this happening? At least in part because of the promotion of free care in the form of no-fault warranties.

Today's laboratories have the latest technology—and when this technology is presented to patients, consumers understand they are getting the finest products available. Why compromise these technologies with a warranty that encourages consumers to come back to the office for a free redo?

It's all about the law of diminishing returns—which is defined as, "the tendency for a continuing application of effort or skill toward a particular project or goal to decline in effectiveness after a certain level of result has been achieved."

We have long since passed that point of diminishing return with warranties in optical. As an industry, we embraced no-fault warranties as a way to promote business. We are now paying the price for this policy.

So, what do we do? We'll address that question in May, when EB will feature part two of this series on warranties. EB

John Granby is president of Deschutes Optical, with locations in Bend, Ore. and Boise, Idaho.