Why Do We Need a 10-year Warranty?
Although the title of this article may sound like doomsday for manufacturers, distributors and the like, it is a feeling that could overwhelm you. In today’s lighting industry everyone sells longer life products, that dwarf the life ratings of previous lamp and fixture technologies. However, its not the long life L70 ratings that will bring the black cloud over the industry. No, this black cloud is made of the precipitous warranty claims from end users and consumers. Like a summer forecast of scattered thunderstorms, it always starts with a little light drizzle, and then a down pour.
For those companies who have been well entrenched in LED Lighting, the drizzle has been felt for a long time. For those newer companies to the lighting industry it may be safe to say, these folks are standing palm up, feeling a rain drop and asking themselves, is the storm about to come?
Since the inception of LED Lighting, someone along the way (we don’t know who actually started it), came up with the idea of offering consumers a five (5) year warranty against premature failure due to factory defect. Obviously, when an LED PAR Lamp was selling for over $95.00 per lamp, this “Long term warranty” was used as a means to justify the higher price. Except the warranty stuck even after the price declined. Now a days, anyone outside of the spec-lock new construction industry can’t hold a high price as everyone including online distributors such as Amazon race to the bottom selling LED products with claims of 100,000 hour life and 5 year warranty. Instead resellers of LED Lighting have to base the justification on a higher price based on quality and service both pre/post sales. As most are aware, companies like CREE, Inc. US LED, and may others back up these quality and service claims not by proving the raw quality of the product or the exception service, but by offering an even better warranty of Ten (10) Years.
As an industry, a huge mistake has proven itself to be extremely costly, and has already claimed the lives of several manufacturers and OEM components companies. That mistake is talking about warranty. The industry leads with it, as if it is sometimes the most important benefit when explaining FFB (Features Functions and Benefits). As a selling tool, talking about the great warranty of up to (10 Years) does work to some degree, but is it really necessary?
Let’s ask a few questions to prove whether or not the LED Warranty really matters. The first questions would be: What is the warranty on the new IPhone or Samsung phone? If you don’t already know the answer, it is One (1) year from the date of purchase. What is the warranty on a new Samsung LED Television? The answer: Twelve Months. That’s right, all of the worlds leading consumer products companies of electronic devices have only a one year warranty. So why does the lighting industry which for all intensive purposes is selling consumer electronics of a different kind offer warranties five or ten times that of the top-wealthiest industry leaders? The answer is simple… The lighting industry screwed up. The industry led themselves into a trap where most consumers can’t tell you what the warranty on an IPhone is, but they certainly know and remember the warranty on their LED’s. Why? Because it became the most important selling feature-benefit plain and simple.
When is the last time you heard someone say they weren’t going to invest in an IPhone or Samsung Tablet because the warranty wasn’t long enough? Probably never. Consumers spend hundreds of dollars if not thousands of dollars on these devices, and when they break, stop working or slow down they simply buy new ones. That is unless they bought that dreaded extended warranty or paid for the extra insurance. And that folks is where the lighting industry misses the mark. The industry should reconfigure itself to be warranty aligned with other consumer products companies like Apple, Samsung or Sony. What would the industry look like instead of manufacturers spending millions of dollars, and man hours processing warranty claims on three year old products, if instead the warranty was one year. Then manufacturers, or others in the industry could create revenue generating extended warranty or insurance programs, generating profits instead of losses.
The industry is not prepared for the warranty storm ahead that is building. Despite many manufacturers claiming their warranty rates are less than 1%, a series of national recalls, product discontinuations, and industry gossip points to a different narrative. Perhaps the LED itself didn’t fail, but drivers, MOV (Metal Oxide Varistors), solder joints, water penetrations and every other possible failure has occurred that far exceeds a 1% claim, and the failures are across every brand line. Unfortunately, as most manufacturers have come to realize, proving power spikes is one thing, and a bad name or reputation because of failures of any kind can be even more costly than covering the warranty costs at fault or not.
In todays even more competitive market, if one manufacturer holds margins in order to factor in warranty costs, they will lose market share quickly because others whom are racing to replace the socket won’t do the same. So a manufacturer gets forced to lower their numbers, or lower their costs of production to keep the sales pipeline moving in a positive direction. This in itself raises the chance of thunderstorms ahead. If we don’t hold a factoring margin for warranty, all warranty is a loss in profit. If a manufacturer lessens the cost of their product to keep sales, if means a sacrifice in quality to get the cost down, which in turn could lead to more warranty losses.
The lighting industry as a whole has to decide what is more important. Nobody stops buying cell phones because they break two to three years down the road. Surely with todays climate in lighting, nobody would stop buying LED lighting if it carried the same one year warranty.
The final question does not read “Who is going to lower their warranty?” The final question reads: “Who is going to do this first and turn warranty losses into extended warranty profits?” Simply stated, the industry can not support the warranty policies in play for the long haul. This will tear the roofs off and flood out even the largest of companies in a short period of time.
Author: Matt Gregg; Synergy Lighting, Inc.