Top 5 Warranty Management Metrics: Essential for Modern Warranty Managers

Introduction

The modern business landscape calls for businesses to be proactive and stay ahead of the competition. Today, manufacturers providing warranty should employ metrics that would not only help them solve the problems in a proactive manner but also enhance customer experience without causing any delays in providing a resolution. Optimising business operations is a factor that every business must understand and employ a strategic approach that takes into consideration analytics and insights. An effective warranty management system is directly reflected in the customer experience of any manufacturer. This not just affects the brand loyalty, but also the financial performance of the business.

Warranty managers must harness the power of warranty management metrics to ensure business success. Customer expectations are higher than ever and they want reliability of service and support in the after-sales. Every business looks for market dominance with little margin for error or complacency. Warranty managers must do a comprehensive analysis of each metric and equip themselves with the right tools, knowledge and strategies.

In this blog, we will discuss the key warranty management metrics that every warranty manager must employ to achieve success in this highly competitive business.

Warranty Cost as a Percentage of Sales

Every activity in a business always implies a cost for it and warranty management is no exception. Warranty managers must understand one of the fundamental aspects of warranty management that it is a percentage of the total sales or revenue. This shows the total cost that is directed towards managing the warranty in terms of revenue or sales if the organisation. But the question comes of how do we calculate this metric. This is calculated by dividing the total cost of warranty by total sales and multiplying the obtained value by hundred.

For example, if the warranty cost as a percentage of sales comes at 5%, it means that 5 cents out of 1 dollar are dedicated towards maintaining and managing warranty.

If the percentages are high, it could suggest issues with the product quality, flaws in the design of the product or inefficiencies in the warranty processes. This metric provides an insight into the product performance as well. If there are sudden surges in the percentage, it could mean that the product is prone to defects or there are issues with the quality.

Warranty managers need to monitor this metric such that the business can allocate the revenues more efficiently, invest in improvements in quality of the product and work towards enhancing the profitability of the business.

Mean Time to Repair (MTTR)

This is an indication of the average time taken in addressing and resolving a warranty claim. It is calculated form the time a claim is reported and the time until it is resolved. This is a reflection of the efficiency of the organisation’s repair process.

For example, if the data suggests that the time taken to repair is more than 4 days, it means the average time taken to repair and return the product is 4 days.

If the MTTR of a company is high, it would result in dissatisfaction among customers, high costs of operations and loss in opportunities of revenue generation. Advanced analytics are used by modern warranty managers that optimise the workflows in the service domain, reduces the downtime which ultimately improves the repair times.

First-Time Fix Rate (FTFR)

This is a metric that provides a deep insight into the resolution of warranty claims in the initial visit and there were no follow up visits needed to be done for that particular issue. This is a metric that gives an insight on the ability of the tech team and operations team. This shows how well the service team is able to diagnose the issues in the first visit and repair them.

If a company has an FTFR of 85%, it would suggest 85 out 100 cases have been resolved in the first visit itself. These issues would not need for any follow up visits.

High FTFR values indicate a operations and service teams are working well whereas a low score in FTFR would mean there is scope of improvement in the service and operations team. Low FTFR values would call for repeated visits which would have increased service costs, longer downtimes for customers which would eventually be visible in the diminishing brand reputation.

Modern day warranty managers utilise this metric to measure the performance of service teams. This also helps in the identification of the need for training the workforce and what measures can be taken to improve the time taken to repair. Companies, while giving a special focus to this result, can work towards streamlining their business operations, optimise the utilisation of the workforce and work towards providing a superior experience to customers in terms of service quality.

Warranty Claims Fraud Detection Rate

Manufacturers incur huge losses in terms of warranty frauds of they go undetected. The detection of warranty frauds is crucial for businesses to flourish. The warranty claims fraud detection metric measures the potency of fraud detection and mitigating such activities.

For example, if a company achieves a fraud detection rate of 90%, it signifies that 90% of the fraudulent activities are exposed and mitigated before any financial losses are reported. Modern day warranty managers utilize advanced analytics coupled with machine learning algorithms and techniques that employ data mining that help analyse the claim patterns. These measures also help warranty managers in identification of anomalies and proactive mitigation of risks in frauds. This calls for companies to invest in fraud detection techniques to protect the integrity of the brand and remain fair towards genuine customer claims.

Customer Satisfaction Index (CSI):

The customer satisfaction index presents a holistic benchmark to evaluate how the customers perceive the service experience, resolution of warranty issues and most importantly, product quality. This is also a representation of how satisfied the customers are with the brand and its service.

For example, if the customer satisfaction index stands at 90%, it signifies that 90% customers are satisfied with the warranty service provided.

Modern day warranty managers collect customer feedback through various mechanisms and channels. These include surveys, revies and feedback through social channels. The CSI data can help identify gaps and pain points of customers and identify scope of improvements for brands to drive sustainable growth.

Conclusion

As the market is continuously evolving, businesses need to adapt and employ improved techniques to measure the overall effectiveness of their strategies pertaining to warranties. These metrics are essential for delivering superior customer satisfaction and value. Through immaculate focus on metrics such as the ones discussed in this blog, modern day warranty managers can mitigate risks and identify fraudulent patterns in warranty claims before it does any financial damage to the organisation. This relies heavily on undertaking a data-backed approach and use advanced technology such as machine learning and predictive analytics that empower warranty managers to stay ahead of the curve and build a better brand experience for their customers.