12 Reasons Why Sears Maintenance Agreements are a Scam
By Winston Wu
A former Sears Brand Central Salesman
(Note: The following applies to my experience as a Sears Brand Central Salesman back in 1998)
Here are the reasons why I think the Sears Maintenance Agreements and other types of extended warranties are a scam, rip-off, and sucker bet:
1) The main reason is that most brand new appliances don't usually break during the 3 year period of the MA. They usually last without any problems up to 7 or 15 years or more. That's why most people who have the MA will not need to use it, and Sears knows that, which is why the revenue generated from the MA far exceeds the cost of it. That's the KEY to understanding the profitability of MA's and other extended warranties. Of course, if everyone's product actually broke during the 3 year period of the MA, then Sears' costs would belly up and they'd no longer be able to afford to offer the MA! lol
2) There is a term in the product reliability field called the bathtub curve. It reveals that during a product's infancy, a spike of errors has a chance of occurring if you remember to often run the product continuously for a few days at a time to test it out. Any defects should come out during this stage if you do that, and would be covered by the basic warranty. After this infancy stage comes the long period of the product's main life cycle where the product works with very little failures. Then as the product reaches near the end of its useful life cycle, failures begin to increase. When the probability of product failure is graphed out according to these stages of the life cycle, it looks like the shape of a bathtub. The lowest chance of problems occurring with the product is during the long period between the infancy stage and near the end of the product life cycle. This long period where very few problems occur is what the MA's and extended warranties try to cover. They are essentially overpriced for the amount of risk.
Sears and other companies have calculated all this out, and that's why they know the majority of people will not need to use the MA during its 3 year term. THAT'S why it's so profitable for them.
3) For most people the MA ends up being a waste of money, because they either don't use it or forget to use it. After all who has time to remember to get an annual maintenance check, especially if it's a shop MA where you have to bring it into the repair shop, as in the case of a portable item like a microwave?
4) Think of it in terms of tradeoffs. If the MA really benefited the consumer, then Sears wouldn't be offering it, because if it actually saved people money, then Sears would be losing money! For example, if it saved people the high cost of repairs, then for Sears it would be a lost opportunity to charge people with the high cost of repairs, which it already still has because most appliance failures occur AFTER the term of the MA!!!!!!!!! You see the tradeoff analogy now?
5) So you see, the MA is really a sucker bet. Suppose you were at a casino table and you had $100 worth in chips. In front of you are two bets you can place the chips on, one marked "10 percent chance of the product breaking within 3 years" and the other marked "90 percent chance of the product breaking well after 3 years." When you buy the MA, what you're essentially doing is placing the chips on the 10 percent circle. If you win, then yes it might save you some money. But if you lose, which there's a 90 percent chance of, then it'll just be another hundred dollars for the casino to collect in its big scheme program to brainwash you into thinking that the 10 percent bet is for your own good and will "save you time and money, and maybe even your sanity." (exact words from the MA brochure) Either way, the odds are heavily stacked against your bet. Therefore what the MA essentially is is a "sucker bet."
6) Now after the 3 year term of the MA, you can renew it for either another term of 1 to 3 years at the same price you originally bought it at or even more! (depending on current policy) But if you do the math though, you would find that if you were to renew it for every term, eventually you would pay more for the MA's than you would if you were to buy another brand new appliance! Of course, some people will actually do this even though they know that because they've develop a sentimentality for their product since it's been with them for so long, and that sentimentality is fantastic for Sears because those customers are willing to pay more for MA renewals than for a brand new product! Unfortunately for them though, Sears reserves the right to deem a product non-MAable when it reaches a certain age or condition, such as near the end of the product's useful life cycle. This means that those customers eventually get jipped because they won't have MA coverage during the product life cycle when product failures begin to increase.
7) The fact that the MA can't sell itself, but instead has to be sold with persistency, brainwashing, and inserting fears and worries into the customer testifies right there that it lacks any inherent worthiness! It also says that the motives for selling it are not entirely honest to the customers! The MA obviously can't sell itself because:
a) The public obviously has a negative opinion of MA's and extended warranties, and most people don't want to buy them, which is why Sears has to push so hard to sell the MA. As a rule of thumb, if most people think negatively about something, then there obviously must be a very good valid reason for that kind of public perception.
b) The sales associates resort to fear tactics and inserting worries into the customer to sell the MA. They do this by describing the worst possible scenario to the customer about what an appliance failure could do to their lives by resulting in expensive repair costs and huge inconveniences. If we were to always assume the worst about all their appliances' reliability, then why should we even buy any of their appliances at all? lol
c) The fact that Sears tries so hard to sell MA's and even holds a weekly mandatory MA meeting for the associates to get them to sell more MA's is another tell-tale sign that it's all about profits for the top.
d) Sears tries so hard to sell the MA that if you buy an appliance or electronics product without an MA, then a few weeks later the Sears MA office will call you to try to sell it to you again! Some have even said that they've been called twice already! Obviously they are trying hard! lol Now do you think they're trying that hard to benefit you, or them????? lol
8) Sears policy and procedure for selling MA's directly violates its philosophy of "The customer is always right." Here's how: If the customer objects to the MA, we are taught to try to overcome the objection and take up to 3 "No's" before giving up!!!!! Now how's that for respecting your intelligence and judgment???? lol I guess their philosophy of "The customer is always right" obviously doesn't apply to selling MA's does it????? What could be a more obvious tell-tale sign of Sears' true motives than this?!
Now let me share with you the steps we are taught to try to overcome an objection to an MA. The steps are as follows:
1. Clarify the objection - meaning that you restate the objection in your own words to show that you understand the customer.
2. Cushion the objection - meaning that you soften the power of the objection.
3. Answer the objection - meaning that you explain it away by solving it.
4. Seek Agreement - meaning that you try to get the customer to agree with your answer to their objection.
So for example, say that the customer's objection is "$99 for an MA? Now that's kind of expensive!" So I would clarify the objection by saying "So you're doubtful as to the value of the MA right?" and then cushioning it by saying "Well I understand, no one should have to pay an extra cost for something without knowing why." and answering it with "However, the high cost of repairs these days can run into the hundreds of dollars and become a huge inconvenience. The Sears Maintenance Agreement would spare you from all that, and give you peace of mind as well. Furthermore, our annual preventive maintenance check will keep your product running smoothly and help extend the life of it." and finally I would seek agreement by saying "Now don't you agree Mr. and Mrs. Jones that the value of saving time, money and inconvenience as well as extending the life of your product are well worth the small price of the Maintenance Agreement?" You see how that works now? Now, if I get another objection after that, then I am to start the 4 step process all over again and to take up to 3 "No's" before giving up!!!!! Of course, most associates know better than to have to take 3 "No's" but that is Sears' official policy on overcoming objections to MA's. What do you all think of that? Is that a sign that Sears respects your judgment and intelligence? Is that even consistent with Sears' philosophy that "The customer is always right"?
9) Furthermore, Sears also considers any customer who doesn't want the MA to be "uneducated" about the MA! More like "unbrainwashed" about the MA to me! lol They actually assume that educating you will convince you that the MA is worth your money, when in fact the reverse is actually true. In fact, the more people become educated about what MA's really are (from reports like this), the less they want them. So even if a real "educated" person doesn't think they need the MA, Sears considers them "uneducated"! Now again how's that for respecting your intelligence? What Sears actually means in not so direct words is that if you don't want the MA, then you've got to be "brainwashed" into wanting it! But any critical thinker can tell that their "brainwashing" claims have no real validity. Sears' claims about the MA objector being "uneducated" is based on a false assumption that the MA has intrinsic inherent worth that needs to be discovered, when in fact the more you dissect the MA, the more you see its uselessness.
10) Even my Brand Central Manager in not so many words commanded me to "brainwash" my customers into needing the MA!!! One time I wasn't getting any $30 MA's on any $100 to $150 microwaves, and when the manager came up to me about that I said,
"Yeah well I'm trying to sell the MA's on these microwaves, but the customer just doesn't think that it's worth it to buy a $30 MA on something they can easily replace if broken."
This got him mad and he replied,
"No you can't think like that! It's your job to convince them to see the value of getting the MA. You're doing them a great disservice to them by not giving them the MA. Who do you think they're going to blame when that microwave breaks in a few weeks?"
How closed minded can you get? Is he even allowing me to respect you, the customer, in how you think????? Gee whiz! I wanted to blast him with my logic and rationality, but I couldn't do anything cause he was my boss. And this was the same guy who told me during the job interview that it is wrong to sell the customer something they don't need!!!!!! What a hypocrite! Now, I can accept being told what to "do" by my boss, but being told how to "think"? That's where I draw the line! Wouldn't you agree?
Personally, I hated trying to sell the MA's because most customers just don't want them. And it made me feel guilty when I have to try to pressure them into wanting it in order to fill my quota and be at standard. And I felt that that was kind of sleazy. I felt that if the customer didn't think they need the MA, then we should respect their intelligence and judgment on that. But that kind of thinking is unacceptable to Sears, according to my Brand Central Manager!
11) The more people learn about the MA, the less people want it. But Sears continues to desperately push it in order to make huge profits. As people learn about the MA from experience, they eventually discover that it's just a way for Sears and other companies who sell them to profit off of people.
12) In fact, the public already has a negative opinion about MA's and extended warranties, and most people don't want to buy them. That right there is an obvious tell-tale sign. If MA's were really good for people, there wouldn't be so many negative opinions and criticisms of it.