“Do you want an extended warranty?” may be 6 of the most stressful words in the English language.
The source of that stress? Information asymmetry.
According to one study on TV purchases, customers overestimated the likelihood of a product breaking by 3x. Merchants capitalize on this false intuition by offering highly profitable warranty products (50%+ margins) — and 20 to 40% of consumers end up buying them.
Extend has raised $57m to improve the experience
The startup’s investors include Meritech Capital and fintech giant PayPal, which is always looking to back cutting-edge financial solutions.
Extend’s CEO Woody Levin tells The Hustle that the gold standard in the extended warranty space is AppleCare+.
“Getting AppleCare+ is so smooth that people don’t realize it’s an extended warranty,” he says. “We want to let all merchants — not just the top 1% — offer the same experience.”
To do so, Extend has created a “digitally native” warranty solution (e.g., transparent pricing, a chatbot, and a dashboard of products) that online merchants can add in a few lines of code.
Kayley the chatbot is available 24 hours a day for customers…
… and so far has processed 98% of Extend’s claims, which are underwritten in partnership with big insurers like AIG.
Extend currently covers $27B in gross merchandise value — everything from $1.99 spark plugs to $30k Rolex watches. Its biggest merchant partners include Peloton, Advance Auto Parts, and iRobot.
“Merchants who add a 3rd party extended warranty see a double-digit percent increase in overall product purchase conversions,” Levin tells us.
Low stress = big bucks.
