GUEST BLOGER Jim Martinez, RightStoryGroup, LLC
The extended warranty/service contract industry is playing Russian roulette with its public image.
It may be the only $50 billion industry in America that operates without a spokesperson to defend against unfair allegations or isolated misdeeds.
That means no one is responsible for balancing negative publicity that stems from misdeeds by a company like US Fidelis, which collapsed in 2009 amid fraud allegations. No one defends the industry against warranty-smearing reports from organizations like Consumer Reports. And no one serves as a source about the industry’s positive stories.
In short, while plenty of media are happy to publicize problems with extended warranties and service contracts, no one is responsible for telling the good ones. The bad news gets reported and the good news is overlooked.
Sadly, there is plenty of bad news. Search “service contract rip offs” and Google returns 34.5 million results.
Stories that raise doubts about the value of extended warranties need to be balanced with stories about the very real benefits they provide. Good reputations are the product of hard work and aggressive truth telling.
Other industries understand the importance of a spokesman:
• When health reformers said drug companies share responsibility for spiraling costs, individual companies did not respond. The industry association, Pharmaceutical Researchers and Manufacturers of America (PhRMA), did.
• Similarly, when consumer advocates questioned the safety of using cellphones while driving, individual wireless providers did not speak out but the Wireless Association did.
• And when environmentalists complained about fracking, the Independent Petroleum Association responded.
But the service contract industry seems to think it is immune to public criticism. After all, service contracts have only gotten more popular with consumers – despite the critical publicity.
Many industries that ignored consumer complaints and bad publicity have failed. Blockbuster just closed its last video store. Very few people play record albums. And those dirty and expensive pay phones are virtually impossible to find.
All these industries were highly profitable just a few years ago, but were surpassed by industries that better addressed consumer complaints, customer inconveniences and bad public perceptions. Equally interesting, the replacement industries all understand the value of communications.
In the absence of an industry voice, individual companies in the space must take the lead in defending service contracts. This may require them to weigh in on stories about competitors. At a minimum, it will require businesses to more actively and publicly defend themselves.
But these are only short-term solutions. Ultimately, the industry must embrace proactive public relations that protects it from the mistakes of individual companies and balance bad publicity with stories about the value service contracts provide.
Despite all the negative stories about extended warranties, people who have bought them understand how important they can be. But it’s the industry’s responsibility to make sure that story is told.
Jim Martinez, managing communicator at RightStoryGroup LLC, is an expert in crisis communications and has counseled companies and industries to shield them from reputation damage.