Truth Exposed About Sears Maintenance Agreements
and other Extended Warranties
By Winston Wu
A Former Sears Brand Central Salesman
(Note: The following applies to my experience as a Sears Brand Central Salesman in 1998)
· What a Maintenance Agreement is
· Is the MA really any different from an extended warranty?
· Sears’ claims vs. unbiased studies
· Sears' vain attempt to distance themselves from Consumer Reports' reviews
· How Sears pressures us to sell the MA
· Pressure on sales associates leads to pressure on customers
· Sears considers MA objectors to be “Uneducated”!
· The steps we are taught to take to overcome objections to the MA
· I was commanded to “brainwash” the customer!
· 5 Tell-tale signs that the MA lacks inherent worthiness
· Why the MA's are profitable to Sears, but NOT to You!
· Understanding the "science" behind the MA in terms of the bathtub curve
· What you're betting on when you buy the MA
· Do MA's really give you "peace of mind"?
· Negative public opinion is a bad tell-tale sign
· The consumers' right to be informed
· Some exceptions
· What I'm not saying here
· Sears’ dire state – from a former employee
· Conclusion and recommendations
· Reader Responses
· Addendum A: The Truth About The Sears Credit Protection Plan
· Addendum B: From a Sears Salesperson
Next time you're in Sears or another store buying appliances or electronics, watch out when you hear:
"This product is also eligible for our 3 year Maintenance Agreement program which covers repairs and replacements for any damages due to wear and tear, and includes an annual preventive maintenance check all of which will save you the expensive cost of repairs and give you peace of mind....."
This is a statement you will often now hear during a sales presentation from an associate at Sears Brand Central and other stores that sell appliances and electronics. Maintenance Agreements and other types of extended warranties are big business these days. Companies that sell them are making huge profits from them, and because of that, they are pushing an aggressive marketing program to promote them through their salespeople. Obviously the revenue generated from an extended warranty far exceeds the cost of them, and that's why they are continually offered and pushed. The sleaze in all this is that companies such as Sears want you to think that their MA's and extended warranties are benefiting YOU, when in reality they are benefiting THEM! Therefore they are profitable to the companies that sell them, but not to the consumers who are pushed into buying them. Well I think their tactics are wrong and misleading and that consumers should be educated about the tactics behind MA's and extended warranties so that they don't get scammed into paying extra money for something they don't need. And that's why I'm writing this report to tell you the truth so that you'll know what MA's and extended warranties are really all about. I believe that the American people have a right to know about all this. I used to work for Sears in Brand Central and sold MA's myself, so I can tell you the inside story as well on MA's and the tactics we were taught to push them. The bottom line here and the thesis of this report is: Maintenance Agreements and extended warranties are profitable to the companies that push them, NOT to you! In addition to understanding MA's, you'll also learn in this report about the inside mechanics behind high pressure sales in general, whether it be from insurance salesmen, door-to-door salesmen, car salesmen, telemarketers, health club recruiters, etc. It is my hope that with this deeper understanding, you the consumer will be better informed and able to see through all the quota-driven sales pitches you're exposed to all the time.
What a Maintenance Agreement is
First of all, if you don't know what a Maintenance Agreement is, it is Sears' version of an extended warranty, which is a contract which when purchased will obligate Sears to cover the product for repairs or replacements due to wear and tear throughout the duration of the MA, which is only about 3 years. However, Sears itself will NEVER ever say that it is anything like an extended warranty because 1) most Americans have a negative view of extended warranties from both common sense and word of mouth, 2) Sears wants to distance themselves from the media's criticism of extended warranties, and 3) Sears wants people to see it as something special that only Sears offers. Instead, they call it a Maintenance Agreement. Other stores that sell electronics and appliances like Circuit City, Radio Shack and Best Buy all have their own version of extended warranties too along with their own "pet names" for them as well. According to Sears, what their 3 year MA covers are parts and labor for repairs and replacements due to normal wear and tear (not abuse), unlimited service calls, unlimited instructional calls, and an annual preventive maintenance check.
Is the MA really any different from an extended warranty?
Sears claims that their MA is very different from an extended warranty. The only thing they have to support this claim is that the MA includes an annual preventive maintenance check which an extended warranty does not. However the pm check isn't really necessary for a product that's still basically new in those 3 years, so it really doesn't accomplish anything and is not really necessary. So all the MA offers beyond an extended warranty is just another thing that you don't really need for the period it covers. Therefore, the MA is not much different from an extended warranty, although Sears wants people to think that it is so it will look like something special so they can sell more of them.
Sears' claims vs. unbiased studies
Sears claims that 70 percent of the people who buy MA's are so satisfied that they end up renewing it. Now that's hard to believe since most people don't even use it, but coming from Sears, it should be no surprise of course. After all, we all know how easy it is to take a few surveys here and there and skew the findings any way you want to. In other words, statistics can be used to prove anything. In fact, from my research I find almost the exact opposite to be true. From all the dozens of message board and newsgroups postings I've read on the internet, it seems that about 70 percent of those who have bought MA's were actually dissatisfied with them because 1) they never had to use it and thought it was a waste or 2) they didn't like the service because they often had to wait 3 or 4 weeks to get something repaired because the service tech kept having to order certain parts and reschedule visits! On the other hand, I've found that there are exceptions. Those who said they were satisfied with the MA tended to have them on products such as big screen TV's, computers, lawnmowers and snowblowers, whereas those who've had them on appliances and electronics tended to say that it wasn't worth it because they never needed to use it. This makes sense because products with fragile parts would be more prone to failure than products such as appliances which have very durable parts. Anyhow, Sears' 70 percent renewal figure obviously doesn't come from an unbiased study. In almost every unbiased study you can find, ABC's 20/20, Consumer Reports, etc., they've concluded that extended warranties are not generally worth the money.
Sears' vain attempt to distance themselves from Consumer Reports' reviews
Sears tries vainly to distance themselves from Consumer Reports' negative reviews of extended warranties. When customers bring up those reviews, Sears salespeople are taught to respond that CR's review wasn't about Sears MA's because MA's are not extended warranties. This is obviously just a vain attempt to try to protect themselves. Where in Consumer Reports' review of extended warranties does it say that their review does not apply to Sears' extended warranties? lol Nowhere obviously, and that's why Sears has ZERO evidence to back up their vain attempt. The fact is, if CR had anything good to say about Sears MA's, they would have said it, and Sears would be quoting them all the time on it, but they don't of course because CR has nothing good to say about Sears MA's.
How Sears pressures us to sell the MA
Now since I worked for Sears in appliances, I'm going to give you an idea of what it's like and how we were pressued to sell MA's. Believe it or not, Sears Brand Central salespeople are primarily judged on how well they can sell MA's above all else. When I first worked there, I was shocked to find this out. I thought "Now I applied here because I wanted to sell appliances and give people what they want and need. So why then am I primarily judged on whether I can sell something that most people don't want and didn't even come into the store to buy in the first place?" This confused me, and at that point, I smelled corruption in the air.
At Sears they are very religious about their MA's almost to the brink of being cultish about them. It seems like the MA is to Sears what Jesus Christ is to the Church. There is almost a religious fervor about it. It's weird that they treat it like a religion when all it is is a scam to make profits! lol Every week we are required to attend an MA meeting that was like a pep rally to motivate you to sell more MA's. Just like in church when people share testimonies of how they converted others to accept Christ, at Sears MA meetings salespeople share testimonies of how they overcame customers' objections to the MA. If you missed an MA meeting, you would be written up on that, and they would threaten to fire you if you missed it again. At the meeting, hand outs are passed out which show everyone’s MA percentages for the month and year out in the open for all to see. (I guess Sears doesn't care about people's privacy lol) Those with high MA standards are praised while those with lower MA standards feel embarrassed and ashamed because they are considered to be poor performers.
Each division in Brand Central and Hardware has a different MA standard to maintain which is calculated percentage-wise by taking MA sales dollars divided by product sales dollars. For example, the MA standard in my division was 5.75 percent. So say my total product sales for the day are $1000 and my MA sales are $100. Then my MA percentage would be 10 percent (100/1000). Now suppose I sell a $1000 refrigerator and I fail to convince the customer to get an MA on it. Then my MA percentage would plummet to 5 percent because 100/2000 = 5%. Just that one sale would have cut my MA percentage in half! Now if I kept making sales without MA's a few more times, then my MA percentage could get close to being zero percent! That's when you really get in trouble! So you see, with every sale the pressure is on. If your percentage plummets then Sears will look down on you even though it was the customer who declined the MA. But of course, Sears can't blame the customer for not wanting the MA, so they have to take it out on the salespeople. Pretty sleazy huh? If you've ever wondered why high pressure salesmen can't take no for an answer, well now you have a good idea.
This percentage system is in a way worse than a quota system. With a quota system, you only have to sell a certain amount and then the pressure is off. But under this percentage system, no matter how many MA's you sell, the next sale without an MA will drop your percentage, so the pressure never ends. So I have to maintain an MA percent of 5.75 or else I'm not "performing." The funny thing is, sometimes if I start the day with a 20 percent MA on my first sale, then I'm afraid to sell anything else the rest of the day because my MA percentage could plummet if I do!!! lol The prices for the 3 year MA as of now (1999) are as follows: $29.99 for a microwave, $34.99 for an upright vacuum, $59.99 for a canister vacuum, $99.99 for a dishwasher, $109.99 for a range, $109.99 for a refrigerator, etc.
In addition, we are given incentive to sell MA's because the commission rates for them are the highest, ranging between 10 and 15 percent. So if I sell a $99.99 MA, then I would make between $10 and $15 dollars from it. If someone's MA percentage is continually below standard, then they would be subject to termination. So even if someone's MA percentage is low because their customers didn't want the MA, management would take it out on the associate and judge him/her to be a poor performer and might get rid of him/her. Talk about scapegoating!
Pressure on sales associates leads to pressure on customers
The pressure of maintaining this standard makes us put pressure on the customer to buy the MA even if they don't want it! So you see, even if you say that you don't want or need the MA, then they still have NO CHOICE but to try to psychologically manipulate you into buying it! Of course, Sears doesn't tell their salespeople to "psychologically manipulate the customers" in exact words. Instead, they butter up the idea by using a more convenient term such as "convince them of the value of the MA" but you get the idea.
This is why when you go to Sears their salespeople will be so pushy and insistent on you buying their MA's. It's NOT because they really think that you need it. It's because 1) they live in fear of being considered poor MA performers by management and being subject to termination, 2) they don't want their score sheets at the next MA meeting to reflect low MA's in front of all their fellow associates and managers, and 3) they're motivated by the 10-15 percent commission on them! So when the salesperson tells you that you "need the MA" what they really mean is that they need to sell the MA in order to avoid falling below standard in their MA percentages and risk getting terminated!
Of course, the Sears managers who are pressuring the salespeople are also under pressure from the corporate level as well. When their store gets audited by corporate Sears, the store's MA sales better be at a certain level, or else the managers of the store will be in danger of being terminated and replaced. So you see, the pressure starts at the top from the corporate level to the store managers, then to the salespeople, and finally onto YOU the customer!
Sears considers MA objectors to be "Uneducated"!
In our training video on selling MA's, it said something like "Objections to the Sears Maintenance Agreement can sometimes arise simply because the customer is uneducated about them. You can overcome these objections by simply educating customers about the benefits of the MA." So according to Sears, if you object to buying the MA then you're "uneducated" about them. (More like "unbrainwashed" about them to me! lol) They actually assume that "educating" you will convince you that the MA is worth your money, when 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 you genuinely understand the MA and still think you don't need it, Sears still considers you "uneducated" until you are convinced to buy the MA! 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 when analyzed. 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.
The steps we are taught to take to overcome objections to the MA
Now let me share with you the steps we are taught to try to overcome a customer's objection to the 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. We even have a video at the MA meetings that we periodically watch about overcoming objections to the MA. 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"?
I was commanded to "brainwash" the customer!
Even my Sears Brand Central Manager, Bob Randall of the Bellingham, WA branch, 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 customers keep telling me that they just don’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?"
Can you believe that?! He tried to use guilt to pressure me on top of everything else! What he was saying in not so many words is that "I don't care what the customer thinks they want! If they don't think they need the MA, they've got to be made to think they need the MA!" What a jerk! If I were the boss I'd fire him for that! Who does he think he is? What gives him the right to decide what the customer thinks they want?! Is he even allowing me to respect what you, the customer, thinks? Gee whiz! 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! I wanted to blast him with logic and rationality, but I couldn't do anything like that cause he was my boss. Up until then I had thought that he was a nice reasonable guy, but at that point I lost all respect for him right there. 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?
At that point I became confused. What I didn’t understand was why I couldn’t just let customers use their own common sense to decide what they need and don’t need? I thought the customer was always right and our job was to please the customer? Why do I have to decide for them just to fill my MA goal and please Sears? It didn’t make sense to me, and I couldn’t believe my manager actually said that. It's obvious that he was using fear tactics on me to sell the MA's by trying to put the fear in me that the customer would blame me for not selling them the MA if their microwave broke in a few days or weeks! In actuality though, even if the microwave did break in a few weeks, it would be covered by the manufacturer's warranty anyway. Personally, I hated trying to sell the MA's because most customers just didn't want them. I felt that if the customer didn't think they needed 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 Bob Randall! (Note: I am entering his full name and location here for the search engines, to expose his hypocritical attitude)
5 Tell-tale signs that the MA lacks inherent worthiness
These 5 tell-tale signs should tell you something.
1) The MA can't sell itself. The fact that the MA can't sell itself, but instead has to be sold with brainwashing, persistency and instilling fears and worries into the customer testifies right there that it lacks inherent worthiness. It also says that the motives for selling it are not entirely honest to the customers.
2) The public has a negative opinion of MA's and extended warranties. This 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 is a very good reason for that kind of public perception. After all, if the MA had any real inherent value, would the majority of the American people be against it? If MA's were really as good as Sears says, they would have gained a good reputation by word of mouth already, but they haven't.
3) The sales associates have to instill fears and 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
4) The more people know, the less they buy MA's. Sears would rather hide their profit motives and claim that the purpose of selling MA's are to help customers and pay the cost of their national service centers. The problem for Sears is, the more people learn about the MA, the less people want it. As a result, Sears has to continually push it even harder in order to keep selling them. 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.
5) Sears tries too hard to sell MA's. The fact that Sears tries too hard to sell MA's with persistent fear tactics and by holding weekly mandatory MA meetings to sell more MA's is another tell-tale sign that it's all about profits for the top. In fact, if you buy an appliance or electronics product without an MA, a few weeks later the Sears MA office will call you to try to sell it to you again! S