Beating Warranty Fraud – A simple way to improve your bottom line and protect your brand

• Currently manufacturing and material supply businesses are paying about 3%-7%¹ of their total revenue to fund the warranty claims of people using inauthentic products.
• Modern authentication technology provides the option to effectively shut down false warranty claims. Such systems are designed to be simple and easy to deploy in existing production processes and just as importantly, to make economic sense in manufacturing industries where margins are slim.
• The same authentication technologies that provide your business with the ability to protect itself against warranty fraud can also be used to protect your business from the erosion of sales caused by counterfeiting, over-production and grey marketing.

Warranty fraud occurs when inauthentic or illegitimate product fails in service and the owners of the failed product, either deliberately or unwittingly, want your business to pay the costs associated with remediating the mess.

In businesses that manufacture or supply goods, warranty fraud causes losses of approximately 3%-7% of business revenue.

A favorite sport of the unscrupulous, warranty fraud is perpetrated by almost anyone who has dealings with business, including but not limited to: clients, contractors, distributors and partners¹.

It follows therefore that if your business is involved in the manufacture or supply of goods and your business does not have an active program to identify and/or deter warranty fraud, then a significant portion of your revenues are at risk. The stronger your brand’s reputation and/or your quality guarantees the higher your risk.

A victim of warranty fraud may find itself in the following situation:

1.  first the counterfeiters, grey marketers, over-run manufacturers and/or their retail clients steal your investment in IP, Brand Development and distribution and you lose sales,
2.  then your business sacrifices a further 3%-7% of its revenue in order to underwrite the warranty risk of the people that stole from your business in the first place

Can businesses, especially those businesses that manufacture and/or supply goods, fight back? Is there a practical way of tackling warranty fraud and the closely related issues of counterfeiting, grey marketers and over-run manufacturers?

The answer is yes.  It is now cheap, simple and easy to integrate an authentication system into your existing production, which can effectively identify warranty fraud in the field in real time.

Authentication technologies now exist that are designed from the ground up to suit the needs of the margin sensitive manufacturing and product supply industries.  In addition, if your product needs robust long term authentication, if you need to be able to authenticate an adhesive or high performance coating in seconds, months or even years after application, these same authentication products can do that.

The Value of Action

Being able to confirm the authenticity of a warranty claim in the field in around 30 second provides your business with several significant advantages:

1.  you can say good riddance to the 3%-7% drain on your current revenues arising from false warranty claims.
2.  in the case of businesses that are looking down the barrel of massive liquidated damages claims from the alleged failure of their product, the ability to rapidly and unequivocally debunk the authenticity of a failed product such as a coating or adhesive could be the difference between a thriving business and the business going under.
3.  you can immediately identify genuine warranty claims in the field, which will allow you to minimize remediation delays to your valued clients.
4.  you can inform users, distributors and applicators that you can easily detect fraudulent warranty claims. This should significantly deter future incidents of fraudulent warranty claims
5.  you can inform distributors that you can simply detect counterfeits, over-runs and grey market product in the distribution system. Where illicit distribution is detected you can cancel distribution contracts and seek damages…
6.  you can pitch specifiers and similar clients that you can authenticate your genuine product in the distribution system and in service in situ. For clients, such as specifiers that are seeking a guarantee of performance on critical projects, this is potentially a significant value adding feature for your product.
7.  by being able to simply identify counterfeit, over-run and grey market product and withdrawing your previous warranty support from such illicit materials, you can potentially increase sales of your product.

¹ Price Waterhouse Coopers, Effectively managing the multi-billion dollar threat from product warranty and support abuse