Letter: Warrantech Can't Make Money on Sale of $100

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I am writing about Scott Hovanyetz's article ("Warrantech Woos Consumers With Extended Warranty Offers," July 15). I find it difficult to believe that Warrantech can deliver on the statements you made in your article.

First, on a sale of $100, there is no way that Warrantech can make money. Either they are producing a mail piece that will initiate an inbound phone call, or making an outbound solicitation. Either way, there is not enough money in the commission to cover costs.

The conversion rate of 2.5 percent to 7 percent is really the proposed closing rate of net generated leads, not on the gross universe of target customers.

I base my statements on the 15 million outbound phone calls my firm made last year and the 1.6 million mail solicitations. Even if Warrantech kept 75 percent of the $100 retail sale, there would not be enough money to cover costs.

It seems to me that your article was really an ad for Warrantech.

Michael B. Shaftel, President, Dealer Services, Ocean, NJ


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