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January 20, 2006     Barnstable Patriot
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January 20, 2006
 
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Extended warranties mean extended profitability By Stan Elias TensorComm@comcast.net One of the most fre- quent add-ons that eager sales person- nelpushisthe extended war- ranty. They are pushed be- cause they are often among the most profitable items the store sells. Here's a startling quote from arecent BusinessWeek Online: "As TVs, portable DVDplayers,and other stuff flyoff their shelves,Best Buy Co. and Circuit City Inc. aren't banking on them to rake in the profits. Instead, they're counting on the ex- tended warranty contracts that they sell aggressively along with the goods." Reliability engineershave shownthat product reliabil- ity,graphed asprobability of failure versus time, follows a curve that is shaped like a bathtub. That is, as time increases (from left to right on the graph), the probabil- ity of failure drops sharply and then becomes low and horizontal for a long period oftime,after whichthe curve graduallyslopesupward un- til the probability of failure approaches 100 percent. Interpreting the curve is straightforward. The short period in the beginning, when the probability of fail- ure drops sharplybefore lev- eling off,iscalled the infant mortality period. We have all experienced this - you bringsomethinghome from the store, take it out of the box,plugit in and it doesn't work.Clearly,it slipped past the finaltest andinspection before packing.No big deal. We return it for a refund or exchange. If we put something into service and it works satis- factorily from the outset, chances are it will continue to work wellfor along time, the duration of which is dependent on the item. This long time of reliable operation is called the ser- vice life. The service life can varywidelybetweentypesof products,and also between individual products of the same type. At the end of the service lif.e the item will gradually starttowearout andbecome more prone to breakdown until it fails completely. This gradual increase of the failure probability to near certainty is called se- nescence. This scenario holds true for a wide variety of items, rangingfrom printingpress- es to cars to hair dryers to electronic equipment. Manufacturers' warranties are set up to cover theinfant mortality period. Usually, if something goes wrong within the first year or so with most consumer prod- ucts, the failure can be at- tributed to defective work- manship or materials, and the manufacturer rightfully assumes responsibility for repair or replacement.Ifthe product survivesthe infant mortality period, usually a long service life will follow. Duringwhat is considered a normalservicelife,there isa small but finite probability that the unitwillfail.Thisis where retailers play on the fears of consumers unaware of the bathtub-shaped reli- ability curve. This is where extended warranties come in. The customer -that'syou -wantsto be protected from product failure after the manufacturer 's warranty expires. The accommodat- ing retailer offers to extend themanufacturer'swarranty to twiceitsoriginallengthor longer, for a price. From ex- perience,the retailer knows the average servicelife ofhis products,and the extended warranties are carefully de- signed to end during the servicelife,before the prod- uct reaches the senescence period.Inother words,while the product is covered, it is unlikely that the warranty will be used, but soon after the warranty expires, prod- uct operation may become more problematic. But, says the customer, if my unit fails during the extended warranty period, I'mcovered.Absolutelytrue. But in effect, the customer is paying for a repair in ad- vance - a repair that may never be needed. Thisiswhy extended warranties are so profitable to retailers -they are seldomused.Toincrease overall profitability, sales personnel are often graded on how much warranty rev- enuetheygenerate,sothere CONTINUED ON PAGE A:10 Opposition regroups under newly-formed non-profit By David Still II dstill@barnstablepatriot.com Formed around the issue of Barnsta- ble'sdecisiontoinstitute ahighertaxrate for commercial properties , a non-profit aims to show it was a bad decision. Fairness Matters, Inc. was organized as a non-profit , charitable corporation in December for the purpose of defend- ing fairness. According to its articles of organiza- tion,the group will"promote and defend fairness," and "promote research and educational activities, projects and programs that will enhance an under- standingof and commitment to fairness; includingthe lessening of neighborhood tensions,the defense of human and civil rightssecured bylaw,andthe elimination of prejudice and discrimination." That broad description is something that the group could grow into, but the initial focus willbe the split tax. In November, the town council voted to adopted a 15-percent higher tax rate for commercial properties, along with residential and small business exemp- tions. "The initial discussions are to address the split tax and issues in Barnstable," President Dave Chase of Marstons Mills said. "That's really what brought us all together." Those on the new corporation'sboard participated inthe campaign committee opposing the split tax. Chase said that as campaign committee members looked at ways to use the money remaining after the election, a decision was made to move ahead with the formal non-profit. Quantifying the affect of the com- mercial tax increase on businesses will be a primary goal of the group in its first year. According to a press statement , "The group believes that actions have consequences and that amidst the public fervor whipped up by propo- nents of the split-tax measure , the town did not take into account the consequences of making one resident pay for the real growth in value of another person 's home." Chase said that the group has talked about commissioningastudy to research and report on those consequences. "Will it put people out of business? I don'tknow,but it'sgoingto hurt people," Chase said. "I'm convinced of that." The group, which held its first board meeting last week, was formed from the core people involved with the "No on 1" campaign, including Skip Simpson of the Anchor Inn. Other members of the founding board are Rick Angelini, Doug- las Murphy, Chuck Carey, Kimberly Elio, Lucien Poyant and Philip Scudder. Supporters of the split tax indicated after the election that they contemplated forming a broader taxpayers associa- tion. That group took the name FAIR, Fair Assessments to Increase Responsibility, which was converted into the slogan "Fairness Matters " by those opposed to the split tax. Al DeFlorio of Marstons Mills served as FAIR'S treasurer. In an interview this week, he said that the plan for a taxpayer's association remains, but the group is on something of awinter hiatus. He believes that the formation of Fairness Matters , Inc. will only help. "It shows that homeowners need to get organized themselves,"DeFlorio said or the business-oriented group. "It'sagreat tool for organizing." There isno immediate schedule before Fairness Matters , Inc., Chase said,but a work plan and budget will be developed in the coming months. The idea is to have research and information available in time for the town council's tax vote for 2007. "Will it put people out of business? I don't know, but it's going to hurt people. I'm convinced of that." Dave Chase, president Fairness Matters, Inc. Fairness Matters to take aim at split tax Penn family salutes Irish Village owner Jack Hynes wins award named for Puritan's founder WONDER WHERE THEY BUY THEIR SUITS - A well-dressed group celebrates the awarding of the seventh annual Abraham Penn Community Award Wednesday at Puritan Cape Cod in Hyannis. Left to right: Yarmouth Chamber of Commerce President Kevin Morris, Jim Penn, recipient Jack Hynes of Cape Cod Irish Village in Yarmouth, Rick Penn, and Milton Penn. The award was named for the Penns' father and grandfather , Puritan founder Abraham Penn. His grandfather, Rick Penn said, "would rather make a friend than make a sale." On Wednesday, Penn joined family members Jim and Milton Penn to con- gratulate a new friend, Cape Cod Irish Village owner Jack Hynes of West Yarmouth, who received the seventh annual Abraham Penn Com- munity Award at Puritan Cape Cod's Main Street, Hyannis store. Hynes was nominated by the Yarmouth Chamber of Commerce as someone who "treats his business like a family," a theme sure to resonate with the multi- generational Puritan execu- tives. "He cares for his employ- ees like they are his adult children and his guests as if they are his favorite out-of- town relatives," Rick Penn said. Hynes's charitable out- reach embraces work with the Yarmouthchamber, the local police relief associa- tion, Holy Trinity Church, Toys for Tots, and many more organizations. When it was his turn, Hynes returned the compli- ment. "You guys have really shown community involve- ment for years and years," he told the Penns. "To get this award from you is a great honor." Past winners of the award include Tony Shepley of Shepley Wood Products, Inc., Mark Liepinski of Village Toy Store, Rich- ard Waystack of Waystack Realty, Deborah Converse of Housing Assistance Corpo- ration, Sid Snow of Snow's Home and Garden , and Melinda Gallant of Mashpee,( Commons. Nominations are made by local chambers of com- \ merce. The Yarmouth chamber received a check for $1,000 as the winning nominator. EFM emaroney@barnstablepatriot.com Yearningfor change in Osterville A grocerymayreturntothe heart ofthis villageif Dan Hostetter has his way. There have been reports of activity in the old A&p and owner Hostetter said Wednesday that the space is being cleaned out. "I wish I had something to report" about a new market , Hostetter said, adding that he was clicking away on his computer regarding a proposal for just that use. Another rumored change, the arrival of one of Christy Mihos's Christy's con- venience stores in the village center, has "fallen through at this point ."Mihos said from his Hyannis office Wednesday. "It'ssomething we've thought about," he said. "It'sjust sort of languished." U Custom Made Machine Embroidered J ¦ Nap kins f or All Occasions I I Weddings * Anniversaries * Birthdays I U Bar& Bat Mitzvahs • Corporate Functions J ¦ Call Anne Hoxie Oliver for details U % 508-888-0198 fl When it comes to insurance, our service is really worth tracking down. Our team of insurance professionals can ^jfc help you rind the right insurance for your W^^L needs-auto, homeowners, recreational "w4f ft vehicles, business-almost anything. ? Lj > \ / &. When you need insurance , you'll find 'd[lf \ Y/ the extra service we provide is really ~_ T } Jn. worth tracking down. \i^^X| "JP% Give us a call... £^ms^) \{Jj g ^ m\J^ ipFFair Insurance Agency, Inc. Centerville Four Comers.619 Main Street. 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