What Happens When a Customer Breaks Your Product?

It’s inevitable that some customers will accidentally break the products they purchase. But that doesn’t mean you as the merchant will automatically lose them as customers.

In our Amazon-dominated world, brands can’t afford to mishandle customer claims about product damage. The process you establish now to handle these situations can mean the difference between keeping a customer or tarnishing your brand. 

Do you personally handle breaks on a case-by-case basis? Do you offer a protection plan from the provider your competition uses? Do you look for solutions outside your industry?

Discovering how a brand handles a broken product can lead to an even more disappointing customer experience or, on the flip side, it can give the customer a reason to shop with you again. The choice is yours.

Let’s consider a real-world example and walk through your options for how to handle it.

You’re a stereo retailer, and you receive a call from a customer who purchased a stereo unit 30 days prior. They claim the volume knob broke off during a social gathering. This issue has not been reported before, so you assume the customer was careless.
What do you do?

A. Rely on the manufacturer’s warranty and don’t offer any product protection.

You consider your products durable, so you don’t anticipate a steady stream of breakage claims. Plus, your products come with a manufacturer’s warranty that covers defects and factory errors for a limited time. Because you stand by your product and don’t want additional administrative work, you decide not to offer product protection.

B. Offer a protection plan through a company that’s provided service in your industry for decades.

While researching your competition, you notice that a handful of other stereo retailers offer protection plans through SquareTrade, Asurion, and Assurant. It seems fairly straightforward to partner with them. You assume they’ll also make it easy for customers to resolve claims.

C. Offer a modern product protection plan that provides service to many industries in addition to yours.

You want to offer your customers a protection product, but you want a provider that covers the widest range of products. You notice many modern plan providers offer extensive coverage and adjudicate claims digitally. Some providers work with other stereo retailers like you, so you decide to align with the provider used by some of your competitors.

If A: The customer wants you to replace and ship a new stereo. Do you:

A1. Refuse to pay for the product?

Instead, you offer a 20% discount on a new stereo. The next day on Yelp, you see a one-star review from the customer. They call your products “cheap,” and they discourage others from doing business with you. You’re surprised to see such a scathing review since you were courteous with the customer on the phone and offered a discount.

The truth is, the customer didn’t get what they wanted — a replacement product — so it’s not surprising they’re disappointed. Because of this interaction, you’ve likely lost the customer’s business. According to a Qualtrics study, only one in five consumers will forgive a bad experience at a company whose customer service they rate as “very poor.”

A2. Send a replacement and eat the cost?

In the interest of keeping the customer, you give them the benefit of the doubt and send a replacement. The customer leaves a positive review and explains how you handled the situation.

Seeing the review, other customers with a broken product expect a replacement, too. You then have to make a difficult decision — do you raise prices to cover replacement costs, or do you refuse to send replacements for all claims?

Eating the cost of the replacement with a price increase isn’t a long-term strategy and could affect your bottom line. Customers may balk at the price rise if it’s significant or if it seems unjustified.

“Research shows that after the size of the price increase, the perceived fairness of the motive for it is the second-biggest driver of how customers react,” says Utpal M. Dholakia of Harvard Business Review.

If your price motives ring hollow, you could lose loyal customers.

Likewise, offering a replacement to every customer with a broken product may hurt your bottom line in the long run. You’ll have to give up inventory along with paying for shipping it to customers.

If B: The customer files a claim to replace the stereo. Do you:

B1. Trust the protection plan provider to handle everything, no questions asked?

You expect a plan provider that’s been around for decades to share your high standards for customer service. And while many legacy providers aim to do the right thing, their approach to managing claims often frustrates customers.

In many cases, the plan provider isn’t handling everything. The provider may adjudicate the claim while another company holds all the claim risk and pays the cost of the claim, so the provider can’t offer flexible coverage. For example, if a customer purchases a Frontier Secure protection plan, it’s actually Asurion that pays out the approved claim.

Many legacy providers also give the illusion of speedy claim resolution by allowing customers to file a claim online. But if two firms are managing the claim — the administrator and the provider— the resolution process can take time.

You also trust the provider to charge a price that makes sense for both your customers and you. You’re pulling revenue from plan purchases, after all, and you also want the customer to get a reasonable level of coverage. How can you be sure the plan provider is charging the best price?‍

B2. Check in with your provider regularly?‍

You prefer a more hands-on approach with your plan provider. You call them weekly, and you learn how many plans were sold and how many claims were filed. Everything seems fine from the provider’s standpoint, but you’ve noticed an uptick in customers calling about unpleasant experiences.

One customer complained that the provider wouldn’t cover a pet accident on a stereo remote. You ask the plan provider about it, and they tell you they didn’t see enough of those cases to justify paying for a replacement. As a result, they didn’t include it in the plan coverage.

Another customer said it took forever to finally get a response from the provider. They had filed a claim online but didn’t hear back for days. They tried to call in the hopes of getting a faster claims decision, and after three attempts and long hold times, they learned their claim was rejected.

You never hear from that customer again. You’re frustrated because the customer associated the difficult claims experience with your brand, even though you had nothing to do with it. Your weekly calls did nothing to prepare you for this situation.‍

If C: The customer files a claim to replace the stereo. Do you:

C1. Trust the plan provider to handle everything?‍

You decide to work with a modern plan provider whose plan offerings integrate seamlessly with your product pages. If they make it so frictionless to purchase their plans, you suppose their claims process must be equally frictionless.

You learn your provider really can handle everything. They manage both the adjudication of claims and hold most of the risk, so they can cover many types of mishaps and adapt their plan pricing accordingly. Their API can also dynamically relay any pricing updates to your website, so you know the customer is always getting the best price.

Because your modern provider handles the entire product protection process, they can adjudicate claims in minutes, while legacy providers can take days or weeks. This means your customers can both file claims online and get a hassle-free resolution.‍

C2. Check in with your provider regularly?‍

You want to be somewhat hands-on in the product protection process, so you call your provider once a month for an update. They offer recommendations to improve your product protection plans based on your company’s unique customers and industry.

For example, they might suggest promoting the plans in a popup window because it’s a proven method for helping customers purchase plans without negatively affecting sales of your products. You’re encouraged they want their plans to work for you as much as for your customers.

You get the occasional customer call about their claims experience, and they are largely positive. One customer accidentally knocked a glass of wine against a stereo speaker and almost hesitated to file a claim because they already deleted the email containing their receipt.

They finally decided to start a claim online, and it turned out their email address was sufficient to find their product. They learned within 90 seconds that a replacement had been approved. They immediately received a voucher, which they used to buy a more expensive product.

All in all, you’re amazed that this external provider is giving your customers the same high-quality service you strive for as a company.‍

Modern protection plans are the best path forward.‍

Customers don’t just care about replacing their broken products—they also care about the experience of replacing their broken products. Even if they get a new stereo, too many friction points along the way can make them question whether to shop with you again.

Extend’s modern protection plans give customers multiple reasons to return. To see how we can help you manage accidental damage claims, contact us here for a demo.