I recently published a report that explored the link between connected products and new warranty services that manufacturers can offer. While this market is still developing, IDC Manufacturing Insights sees significant potential in connected warranty services.
Warranty services are taking on new roles in customer experience and service innovation with the rise of connected products. Historically relegated to a background position in the overall customer service toolbox, the rise of connected products and the valuable data they generate are causing enterprising manufacturers to reconsider warranty's role. IDC Manufacturing Insights believes that connected warranty services will provide opportunities for both cost savings and new levels of customer engagement.
In today's customer-centric world, OEMs often lack direct contact with the customer or consumer of their product except in several very specific instances, and warranty is one of them. From warranty registration to warranty claims management, OEMs and their channels must provide a seamless experience because often the brand reputation is on the line. Despite the dramatic tone of this sentiment, it is undeniable that highly visible warranty events across manufacturing segments from consumer electronics to automotive continue to plague many OEMs. Consider recent high-profile recalls including the Takata airbags, Samsung mobile phones, and Cuisinart food processor blades. These recall events bring with them high costs, and manufacturing segments such as automotive and consumer electronic devices are facing another year of elevated warranty expenses.
Beyond recalls, warranty services can be revenue sources for some manufacturing categories, including automotive, appliance and electronics manufacturers that have mastered the extended warranty offer. Shifting the focus from the cost of warranty events to the benefits of providing new margin-friendly warranty services is one way manufacturers can re-cast warranty's traditional role.
How do connected products fit in? Once these products are connected, the data that comes from the sensors can uncover a trove of useful insight, from root cause analysis of part failures to equipment that is operated in environmental conditions that void warranty coverage. In IDC FutureScape: Worldwide Manufacturing Product and Service Innovation 2017 Predictions (subscribers can access here), we state that "by 2020, 20% of complex installed equipment will autonomously report their own health, request service calls, identify design improvements, and validate warranty claims."
This future vision will be made possible by connected products that leverage the 3rd Platform and IoT sensors to facilitate many of the processes in the service life cycle that are partially manual today, including warranty claims. The potential services that OEMs can offer range from warranty claims validation to warranty fraud detection to extended warranty service. The results will be greater efficiency and cost savings, but also the effort will have a positive impact on customer satisfaction and brand loyalty, driving a virtuous cycle for OEMs to continue to deliver value in new ways to their installed bases.
Our recent IDC Perspective on Early Opportunities for Warranty and Connected Service in Manufacturing (subscribers can access here) explores the link between IoT and warranty further, including details of a number of early use cases and recommendations for how manufacturers can navigate the challenges of combining technology, systems integration, and business process change to transform their warranty services. While it is still early days for combining connected products with warranty service offerings, we believe the potential impact on costs savings, increased customer engagement, and new connected warranty services are reasons enough for manufacturers to actively evaluate this emerging area.