Pitching Product Protection to Your CFO? Focus on These Benefits
If you’ve ever had a customer request a replacement product after a household accident, you’ve probably done some research on product protection plans. Your competitors might offer them, and maybe you’ve read about how they help protect your bottom line.
Based on your research, you might decide to adopt these plans — but you’ll still need sign-off from your CFO. Your pitch should include these items:
- How product protection plans improve the ecommerce customer experience.
- How they increase profitability, reduce costs over time, and mitigate risk to your brand.
- How they help your CFO achieve their unique goals. Suppose they need to present three business “growth levers” to the CEO. In this case, you can highlight product protection’s ability to boost profit margins by driving higher average order value (AOV) and incremental revenue on protection plan sales. You can also mention how it reins in customer acquisition costs by encouraging retention.
When you align product protection’s benefits with the CFO’s goals, you’ll be in a better position to roll out this value-added service to your customers. Here are the key benefits to mention.
Product protection lowers implementation and overhead costs
Your CFO will want to know that the benefits of product protection begin before the plans become available to customers. The last thing they want is for the cost and setup time of a new service to outweigh or delay its promised benefits.
Modern product protection providers like Extend prevent this situation. While implementation times vary slightly, Shopify customer Hauslane said it was up and running with Extend “within a week.”
The speed of implementation partially comes from the rapid syncing of your ecommerce product catalog with Extend. Once Extend calculates plan pricing for your eligible products, it automatically pairs the plan with its associated product.
And thanks to Extend’s API, you quickly sync product protection plans with Magento, Salesforce, NetSuite, BigCommerce, and other ecommerce platforms.
Once the plans are live, Extend handles all the overhead connected with administering plans and processing claims. Now you’re free to focus on selling your products without worrying about overhead costs eating away at your profit margins.
Anticipate this objection:
CFOs will want to know if product protection implementation causes any temporary disruption in day-to-day ecommerce operations. Revenue forecasting is a critical CFO responsibility, so they’ll want to know if they should expect a dip in a given month or quarter.
The short answer is: no. The backend work of implementation doesn’t create friction in the customer experience. And once “turned on,” the plans don’t “compete” with product sales. Many Extend merchants are up and running in a matter of weeks, thanks to an experienced team of engineers and product protection experts.
Customers buy a plan as easily as they add a product to their shopping cart.
Produces incremental revenue
Modern product protection plan providers often share revenue from plan sales with merchants. As a result, when a customer buys a plan alongside a product, their average order value goes up, a fact your CFO will want to know.
Higher AOVs help offset the costs of running an ecommerce business, which include shipping, technology subscriptions, marketing costs, and more. In a 2022 Namogoo study, 61% of ecommerce leaders called “cost optimization” a “high priority.”
Thanks to Extend’s revenue-sharing arrangement, hair tool brand TYME saw its average order values increase by 50.36%.
Anticipate this objection:
While the prospect of higher average order values will pique a CFO’s interest, they’ll want to know if the amount of incremental revenue is worth the investment.
Inform the CFO that revenue sharing requires no additional implementation costs or monthly fees. But the amount of incoming incremental revenue depends on the number of plans you sell. Your success at marketing the plans’ benefits plays a significant role in how many you sell.
CFOs might look at marketing the plans as an additional cost. But Extend has a co-marketing team to assist with assets and recommend best practices, reducing the strain on your team.
It’s also true that because the cost of a protection plan is often directly related to the cost of the item, a merchant selling $5,000 sofas might sell fewer plans than a merchant selling $200 waterproof speakers. But the higher price of a plan covering the sofas can include more incremental revenue than plans covering the speakers.
Creates no additional strain on customer support team
Customer support is a significant expense in terms of personnel and technology. Since CFOs want to make the best use of labor costs, they’ll love to know that product protection providers handle all plan-related support tasks. Your agents won’t see their workloads increase, which means they can continue offering the high-level service you expect.
It’s no secret that quality customer support and business growth go hand in hand. Zendesk’s 2022 CX Trends Report found that 81% of customers would be more likely to make another purchase from a brand that offered exceptional customer service.
Modern plan providers let customers file and check claims online, removing the need for customers to contact a live agent. Eyewear brand Felix Gray noted that Extend’s online self-service portal, Kaley, makes it possible for customers to file claims in “two to three minutes.”
If your agents use helpdesk software from Gladly or Gorgias, all they need to do is program a chatbot that serves a link to Extend’s self-service portal. When customers enter chat terms like “file a claim,” the link appears automatically. Extend takes it from there.
Anticipate this objection:
CFOs may ask more granular questions about claim initiation. Be ready for an objection like: “If plan holders forget their account passwords or delete the email with their order information, will they need to speak to one of our agents?”
With providers like Extend, customers only need their email address to start a claim. Once they enter their email in Extend’s self-service portal, order and plan details pop up immediately. In the rare case that Kaley can’t fully resolve a claim, Extend maintains its own call center to handle these situations. Again, your agents’ workloads don’t increase.
Lowers customer acquisition costs
Customer acquisition costs (CAC) keep going up thanks to increased competition and waning levels of customer loyalty. With modern product protection plans, you give customers another reason to stay, thanks to a seamless claim-redemption experience. The more customers you keep, the fewer you need to acquire from scratch.
Business leaders are sounding off about the impact of CAC on their bottom line. CommerceNext found that 57% of merchants called rising CAC the greatest challenge to achieving their 2022 ecommerce goals.
And with 8% of customers willing to drop a brand after a single bad experience, according to PwC, brands can’t afford a single lapse — pre- or post-purchase.
Product protection providers like Extend build retention into their post-purchase customer experience. When Extend’s virtual claims assistant, Kaley, approves a claim, the customer gets sent back to your website to purchase a replacement product. If a product repair makes more sense, the customer receives the contact information of a local provider.
Anticipate this objection:
Your CFO will be happy to learn that product protection plans help keep customers in the fold. But what about customers who haven’t yet purchased? Ecommerce businesses of all sizes still need to invest in customer acquisition.
Product protection plans attract new buyers because customers want the peace of mind they offer, which partly explains why the product protection market has a projected CAGR of 8.6% from 2022 to 2031.
Offering these plans sends the message that you care about customers’ investments in your products and brand. For higher-priced items like jewelry and furniture, product protection plans can give prospects the confidence they need to make that first purchase.
Proves ROI is easy to track
CFOs have many data points to absorb as they forecast quarterly and annual revenue. Fortunately, it’s easy to break down the performance of your product protection plans into ecommerce metrics.
These are the key metrics to present in your scheduled reports to the CFO:
Plan attach rate: When a customer adds a product to their shopping cart, you want them to add a plan, as well. Higher attach rates mean more incremental revenue. Compare the total number of products added to carts with the number of products added with plans.
Inventory holding costs: Product protection plans should incentivize customers to purchase products. You should see greater rates of inventory depletion after rolling out these plans. Plus, product protection is a non-physical SKU, meaning it won’t complicate your inventory system or take up more space on your shelves.
Average order value: As plan attach rates rise, you should also see higher average order values.
Customer lifetime value (CLV): Segment customers who file plan claims from customers who purchase plans but don’t file claims. The first segment is more likely to have higher CLVs.
Plan providers like Extend provide a dashboard that automatically calculates KPIs.
Anticipate this objection:
If metrics related to product protection plan performance start to dip month over month, a CFO will need to explain why to the CEO.
Many factors can lead to decreases in CLV and AOV. But when it comes to product protection, recommend new marketing tactics to sell more plans while you try to sell products.
Take online electronics retailer 1MORE. When customers add product protection-eligible items to their shopping carts, a pop-up appears highlighting the plans’ benefits. This is one of three suggested protection plan offer locations, and it’s highly effective.
Extend’s co-marketing team assists with pop-up designs and creates assets for digital ads and email campaigns.
Add business value with Extend’s product protection plans
PwC reports that executives – CFOs included – are almost twice as likely to project at least 11% revenue growth when they manage risk successfully. Product protection plans are among the most effective value-added services, both for business and their customers. Make this idea the cornerstone of your pitch, and you’ve spoken the CFO’s language.
To learn more about how Extend’s plans can add business value to your organization, click here to request a demo.