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John Sciacca Writes...

Features, Reviews and a Blog by John Sciacca

Random Thoughts (Blog)

Random Thoughts (Blog)

Line Item Billing: "Manufacturer Screw-ups"

Posted on July 20, 2011 at 4:06 PM

This past Saturday I posted a little missive about how a recent software update to my store’s automation system caused our thermostat and HVAC system to go – for lack of a better word – kablooey. After several hours of sweltering in tropical, getting-ready-for-my-audience-on-Survivor 94 degree weather, the very real fall-out arrived in the mail: a bill from the HVAC repair man for $183.

I, of course, groused about this in a blog asking “Who’s gonna step up to pay up?” Postulating, "Who should pay for these very real manufacturer errors?" I posted this little conjecture/rant on several professional Linked In discussion groups and there has been a flurry of traffic and comments regarding others who have had similar experiences with this same issue. So, I thought I’d revisit this topic, share some comments and further delve into the murky waters of responsibility.

First, I’d like to say that in my case – with the HVAC system -- my rep TOTALLY stepped up. He read my blog (unbidden I might add, which is refreshing) and sent me an e-mail with the single character subject line of “?” followed by a three word message: “Was this us?” When I replied that it was he immediately responded that he would help us get the money back; that there is a difference between being a squeaky wheel and something not being right.  That was not right and that they are a better business partner than that.  This is a legit gripe.

I mentioned that I would definitely update the blog if they took care of me on this, and his answer was real, and honest and kind of all John Wayne stand-up and look here, pilgrim-ey. He said, “I’m not doing it to get an update on the blog.  I'm doing it because it is the right thing to do.” In fact, both the rep – and the company’s PR – asked if I would not mention them. So even though I felt like this would be positive press, some goodwill for them taking care of a problem, and more akin to a friendly lick instead of biting your friends, I am going to honor their request and merely say there are still some companies out there that ARE willing to stand up and do the right thing...

So, before I start into the meat of this matter, I thought I would layout the timeline of a very typical, all-too-common customer service interaction.

1    I design/install/sell client a system. No doubt I’ve told them how great the components are that we’ve selected, even though the reality is that to fit within their shoestring budget we have probably selected middle-of-the-line-up gear.

2    System works! In fact, since I’m so awesome, the system works great! Client is pleased. John gets his check. John is also pleased. John returns to the life of blogging leisure to which he has become accustomed. All is good and well in the world.

3    Tragedy! At some point during the manufacturer’s warranty period, something breaks. Let’s say it’s an amp channel on the receiver. Customer calls. “That system that you sold me isn’t working. You need to come and see what’s wrong.” I probably spend 5 to 10 minutes on the phone troubleshooting the problem. (Hopefully they’ve all read the requisite tech support pre-call in checklist...)

4    I schedule a service call. I dispatch a technician that drives to the client’s home. This probably takes 30 minutes.

5    He arrives and diagnoses the system. It’s hooked up correctly; the wires are correctly connected; all the settings are right; the speakers are working. The amp channel is just out. Act of God? His ancestors somehow wronged the A/V Gods? Girl in China was thinking about pee break instead of soldering? Who knows? But here we are, and getting here probably takes at least another 30 minutes.

6    He disconnects the system and (if the customer did like we told them and kept the box) boxes it up and returns it to the store.

a.    MAYBE we’ll have a loaner so the client isn’t left without their system working. MORE likely we won’t, so my installer will rewire their existing system so they can still do things like watch TV and movies for the next couple of weeks now that their audio has been completely dismantled. Sometimes this will require reprogramming a remote control to allow the new configuration to work. This probably takes at least an hour. (Granted, this is probably beyond the bounds of what a manufacturer can be expected to pay for. But since doing business with a company like mine HAS to be above-and-beyond the minimum expectation, we pretty much HAVE to do this.)

7    Drive back to the store. (30 minutes) If they didn’t keep the box, pull a box out of inventory (cost to us; we had to buy special shipping boxes), bubble wrap the unit ($) and tape up the box ($) get it ready for shipping. Create a UPS shipping label to send the unit for repair. This probably takes around 10 minutes of time, plus the cost of UPS shipping which is usually around $25.

8    Unit comes back after being repaired. Fortunately it WAS under warranty so there is no cost for the actual repair. Now, I’d like to say we immediately pull the unit out and retest it in our store, but, well, 90% of the time we don’t.

9    Schedule another call to go reinstall the unit. Drive out to the house (30 minutes), uninstall the loaner (if necessary) and reinstall the new unit. Go through and reenter all of the settings (speaker levels, digital input assignments, etc.) which are usually blanked in the repair process. Reprogram the remote if needed. Test and demonstrate to the customer. (Probably all totalling an hour). Drive back to the store.

10    Think about getting home and that tall glass of brown-brown liquor that is waiting for me. (Hoping that I can still afford said brown-brown after I’ve just eaten all of these non-returnable costs...)

OK. That is SUPER typical of a repair timeframe. Including the last part, which pretty much happens at the end of each day regardless. The only thing that might be different is if something can be repaired in-house. For instance, we have had to repair numerous – I’m going to say at least FIFTY if not more – subwoofers that were manufactured with a bad volume control. So on top of everything else, for these repairs factor in the 30-45 minutes needed to actually perform the repair. Which, of course, you aren’t billing for. Huzzah! And short of item #8, it is the custom installer that is doing everything. And eating the bills the entire way. Now, I probably (hopefully) made a few bucks on that receiver. But in this little chain of events, I have given it ALL back to the House and then some.  Between travel and on the job time, this little “mishap” has probably taken around 4-5 hours to resolve. And those are 4-5 hours that I am NOT out doing/installing/selling something else. Double loss!

Now depending on how long a system has been installed, we’ll often bill the customer for some of this. And that usually evokes this kind of a dialog:

“Hey, I got a bill from your for fixing my receiver.”

“Yes. I detailed all of the work that we did to get it repaired and reinstalled for you.”

“I looked it up, and my receiver was under warranty. Parts AND labor warranty." Incredulous tone. "This isn't covered?”

“Well, that is the manufacturer’s warranty and it includes the cost of them actually REPAIRING the unit. Not for me having to come out and pick it up to get it serviced and then reinstalled.”

“But you sold it to me. I thought you would fix it.”

“Unfortunately, we’re not a repair center. We send it to the manufacturer’s authorized repair center.”

“And you charge me for that?”

“Unfortunately, yes.”

“That doesn’t seem right.”

“I’m sorry...”

Dejected sigh and then a heavily sarcasm infused, “Fine.” The kind of “fine” that says, “Fine, I’ll pay it, but I’m not happy. And I’m probably going to think twice about calling you again in the future. Thanks!” And that’s the “thanks” that you usually reserve for DMV employees and airline workers where you are doing everything in your power to not get yourself selected for “special screening” by the TSA for any potentially unresolved anger management issues.

Now, since pretty much EVERY manufacturer’s warranty includes “Parts and Labor” why shouldn’t it include MY labor too? Because I can assure you, without MY labor, it isn't going to get fixed just as much as it isn't going to get fixed if the circuit-board-swap-out-guy doesn't do his job. (Kind of off-topic a bit, but the one thing that DOES come with an in-home repair is most new, large-sized flat-panel TVs. Except in my experience, NOT ONE SINGLE TV repair company will pull a TV off the wall mount. They will ONLY work on a TV that has been removed from the wall-mount. So guess who that means? Me. Driving out there. To pull the TV off the mount. Then driving BACK out there. To put it back on the mount. Covered as part of the in-home repair? Hells to the no! But, seriously! In the 21st Century, being a flat panel TV repair person should absolutely, positively come with the job expectation of removing a TV from the wall. Am I wrong here?!?)

So, from my Linked In discussions, here are some of the posts that I wanted to highlight or eviscerate, err, I mean discuss, further.

I was astonished to learn some time ago how bad this issue is. I was shocked -- shocked -- that a dealer had to pay postage to return a bad-out-of-box amp that weighed like 100 pounds.

Return shipping seems to be one of those “deny at all costs” kinds of things. Paying return shipping is sometimes possible on straight-up out-of-box (OBF) failure, but after like 14 days, it is almost always on the dealer. (“But I just opened it!” “Sorry, you ordered it a month ago.” “But it was part of my inventory.” “Sorry.") And almost always costs at least $25. (We returned a projector once that was $250 including the insurance!)

Any manufacturer will be glad to replace defective product and likely over-compensate for the trouble. But once installed or used, not only would complete compensation for lost time be prohibitive, but there will always be doubt as to the method of installation - was there abuse, was it not used properly, was there an accident and now a cover-up? We would all have these suspicions. We have to be realistic about what everyone can do.

(First off, I happen to know this guy’s parents. I actually have played golf with them and go to church with his mom. Ironic, no? But think that is going to have me taking it easy on him? Do you know nothing of the Sciacca by this point?)  Second off, uh, no. Over-compensate? How about barely compensate, or minimally compensate. And, seriously? “abuse…accident and now a cover up”?! Really?! You think that is what is happening when a receiver, amp, DVD, remote, TV, processor, etc. breaks? We’re all just a bunch of incompetent dishonest screw-ups out here; busting sh—up and then asking for someone else to pay for it? I’m sure that is the case in some instances. But when something has been installed and working for like 6 months, umm, it pretty much didn’t stop working because it was installed wrong. And an accident – “Oops! Damn! Spilled my beer!” or “Whoops! Remote slipped out of my hand…onto the concrete floor!” – is usually pretty obvious. (Believe me; I spilled a cup of coffee ALL over my laptop and there was NO way I was going to just slip that one by HP's warranty department...) I think the instances where this occurs is very low.

"In the last 60 days I have come out of pocket as a rep $475 to help 2 accounts, where the manufacturer wasn't doing the 'right' thing."

Posted by Rich Jackson

Rich, I’m going to leave your name up because this is solid, and the sign of a good business partner. I’m sure your accounts realize and appreciate the above board service and probably reward you with more business in turn. (If I find out you’re lying though...oh...and I’m not gonna be gentle like before...)

I am not saying that the one with the highest margin has to cover it, just that the [profit] margins of no one single product allow for complete compensation. You mention in your blog post it wouldn't be fair that the customer should pay for manufacturing mistakes. I don't agree.  If current margins don't allow for full compensation for the installer, there's no other way. Raising prices will put a manufacturer at a competitive disadvantage. And yes, it would be a benefit to any installer, but with the amount of research consumers (rightly) do these days, they are likely to find a similar alternative at a better price. And in the current economic climate, price is a prime differentiator. In practice, we currently do what we can and look at it on a case-by-case basis.

This was – not too surprisingly – from a manufacturer. And let me give you the Cliff’s Notes on how I read this: “Whaaa! I’m not making any money selling my products either! Whaaa! Business is tough and I can’t be held responsible if my stuff breaks! Make someone else pay! Like, the customer! Yeah! He should pay! If I raise my prices to cover these kinds of costs, no one will buy my product! Whaaaaaa!” Here’s what I’m saying: The one whose product breaks is the one who should pay. Period. Full stop. End of story. If it is too expensive to repair it, make it better. Then it won’t break. Then we won’t have this problem. Then you won’t have to bear the burden of paying to fix your mistake. Circle of life, baby. Circle of life...

I think this commenter had a Jedi Knight Force-tingle sense that his first comment was only going to rouse my anger without beddin’ her back down again as he followed it up a bit later with this:

Just as a clarification, I am not saying that a higher margin product should cover lower margin deficient products. I am just saying margins in general aren't there, which makes this a difficult issue. And I agree that the cost of an issue - whatever that might be - is a lot higher than the margin of a product. So no, it's not fair if a CI is absorbing all the cost.

So, while he hasn’t fully agreed that manufacturers should step up and cover these costs, he has at least admitted that I shouldn’t have to pay, so we can definitely agree on that last part...

As CI's we don’t have the luxury of an acceptable ‘fault rate.’ We can't suppose that 0.5% of our projects fail and just except that the 0.5% folks didn’t pay enough. A company in our business would be around for about ten minutes if that were the case. And creating an argument based on the fact that some products have higher margins than others and that somehow that higher margined product should cover the added expense of a deficient lower margin product is crazy. The fact is, when a product fails in the field you can take your costs to deploy the product and multiply those costs x 3. Let’s say an electric screen is found defective when as CI's we factored in the cost of hanging the screen, powering it and integrating control to whatever degree. If that screen is doa...we now have to uninstall, move it , ship it, order a replacement, receive the new one, role two guys to the site and install it again. Those are real costs...and don’t consider the efficiency losses, project delays, dilution of credibility and not to mention we cannot bill out the project until it is 100% complete. I think the problem with manufacturers is that they have never been on this end of the business and therefore don't truly understand. I would gladly pay more for a product that was far less likely to fail to begin with, and when it did, have a true partner in the manufacturer to share in the true costs of their deficiency. It’s not what manufacturers want to hear but the reality is that whether times are good or bad the losses are still be taken by the CI...

For once, I have nothing to add here. I could have written this mini-rant myself. You only know that I didn’t actually write it because it isn’t long enough. And he missed a few opportunities to throw in the word “skullduggery” which is something I wouldn’t have done. Otherwise, A+.

I appreciate your point about competitive margins, but I'm not sure I agree that the client should pick up the tab. I can't imagine too many clients doing so willingly under those circumstances, which means the extra cost would need to be ‘buried.’ That's a slippery slope. Part of being successful as a manufacturer or a dealer is making a reliable product. ‘Screw ups’ do happen, but they should be rare, and the responsible party should step up and learn for next time, in my opinion.

Can I get an amen? Can I get a Hallelujah? Can I get a testify for my installation brother in arms?!

Allow me just itemize some of the “buried” costs that I AM already absorbing like a big, giant, overly generous super-sized Bounty rag in my business. The kinds of things that I need that precious little dewdrop of profit in order to be able to cover and actually STAY in business. Let’s see… I’ve got several different kinds of business insurance. Since I am still insane enough, uh, I mean since I am still FORTUNATE enough to have a showroom – I kid because I mostly love… -- there are all of the costs associated with that: rent, utilities, inventory, etc. I have employees, and they like to get paid (greedy bastards!). Along with their pay I’ve got to cover their taxes and unemployment payments and Social Security and insurance. There's my phonebook ad (vampires!) so that we can get some business up in here. We’ve got a fleet of vans which have maintenance, gas and insurance needs. We need to buy a lot of specialized tools and widgets and cell phones to stay in touch and whatnot. I’m sure there’s a BUNCH of other things that I can’t itemize out on the client’s bill for them, and when I look at this I’m a damn sponge of absorbency, and I’m all plum-tuckered out for absorbing costs! But these are all just considered “costs of doing business" and I accept them.

But want to know what shouldn’t go on that list? Me having to pay to fix someone else’s screw up. THEY should pay that. And if I’m lyin’, I’m dyin’...

Lance those boils of pent-up anger and comment it out. The healing process begins now...

Categories: July 2011, Rants, Electronics