What's your warranty policy?

January 15, 2012
Arthur De Gennaro

Consider if selling an extended warranty makes sense for your dispensary.

Something has changed since my wife and I purchased the last refrigerator-the warranty. In years past, refrigerators came with a 5-year manufacturer's warranty. This was not surprising, as I expect such a big ticket item to last at least that long without needing repair, especially a major component.

The warranty on the new refrigerator, however, is only for 1 year. This means that, out of the box, I could be looking at an expensive repair within a 5-year window. That is not a comforting feeling. During the sales transaction, the sales person dutifully offered an optional warranty for which, of course, there was a charge.

This policy of extending warranties is not true for many commercial chains, however. One case in point is a particular optical retailer (LensCrafters). When patients buy frames from this optical retailer, they receive a 90-day warranty against manufacturer's defects. Breakage that occurs beyond 90 days is not covered. Accidental breakage is not covered either.

The optical retailer sells an extended warranty, however. The for-sale warranty extends for 1 year beyond the initial 90-day period and includes accidental breakage as well. There is a fee for the warranty and a fee when the patient uses the warranty.

The interesting point here is that the optical retailer does not extend the manufacturer's warranty to the patient but chooses to sell warranty coverage, even though the manufacturer warrants the frame to the retailer for most of the 15-month period.

What is fascinating is that the retailer is owned by Luxottica and sells Luxottica frames. This means that Luxottica does not extend the customary manufacturer's warranty to its retail customers even on its own frames. What this means in practical terms is that if a patient buys a Luxottica frame at the optical retailer and then buys the identical frame from a dispensing ophthalmologist, the frame from the optical retailer will have a 90-day warranty and the dispensary frame will have a 1-year warranty.

The decision not to extend the warranty beyond 90 days is obviously intentional to encourage the sale of extended warranties. There is nothing wrong with that; however, it does raise the question of whether one should sell an extended warranty.

To sell or not to sell?

Some dispensers feel that extending the manufacturer's warranty is a moral imperative; that is, not extending it somehow is inappropriate or deceptive. They also feel that extending the warranty adds value to the sale by offering something that the commercial chains do not-a competitive advantage.

Other dispensers feel that the optical retailer is on to something, and that selling a warranty will create a new revenue stream and offer the patient additional benefits, such as the "no-fault" breakage policy. They argue that customers did not see the 1-year warranty as valuable and therefore, it was not a determining factor in the purchase decision.

I won't take sides in this debate. My advice is that you look into this issue and decide for yourself. Consider if selling an extended warranty makes sense. If you choose to do so, good. If you choose not to do so, I urge you to make a special effort to discuss thoroughly with the patient the warranty you are extending. It will add little value to the sale if you do not explain it in detail and contrast it to a competitor's more limited warranty.

Arthur De Gennaro is president of Arthur De Gennaro & Associates LLC, an ophthalmic practice management firm that specializes in optical dispensary issues. De Gennaro is the author of the book The Dispensing Ophthalmologist. He can be reached at 803/359-7887, arthur@adegennaro.com
, or through the company's Web site, http://www.adegennaro.com/. He maintains a blog at http://www.adgablog.wordpress.com/.

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