As an experienced Amazon seller, one of the top questions I get asked is: "Should I offer an Amazon buyer protection plan?"
In short – yes, you generally want to provide a protection plan if Amazon makes it available for your products. But what exactly are these plans, and how do they benefit your business?
In this comprehensive guide, I‘ll explain everything you need to know as a seller about Amazon protection plans. I‘ll cover:
- What protection plans are and how they work
- The pros and cons of offering protection plans
- How plans impact your profit margins
- Differences between plans and manufacturer warranties
- What coverage is included (and excluded)
- How protection plans strengthen brand reputation
- Other brand protection tips beyond protection plans
After reading, you‘ll understand the value protection plans bring to your business and customers. Let‘s dive in!
What Is an Amazon Buyer Protection Plan?
An Amazon protection plan is an optional extended warranty service you can offer to give customers extra coverage on products purchased on Amazon. These plans are backed by reputable third party providers like SquareTrade, Asurion, and Assurant.
When a customer purchases an eligible product, they‘ll have the choice at checkout to add a protection plan for 1, 2, or 3 years. This protection kicks in after the 1 year manufacturer‘s warranty expires.
If the product breaks or stops functioning properly during the protection plan period, the buyer can file a claim to get it repaired or replaced. The protection plan provider handles the logistics and cost of fixing issues.
Over 50% of surveyed Amazon customers said retailer warranties make them more likely to purchase a product online. So protection plans can give you a competitive edge.
How Do Amazon Protection Plans Work?
Here is a step-by-step overview of how Amazon protection plans work:
For the Buyer:
- At checkout, buyer is offered optional protection plans for eligible items
- Buyer selects plan length (1-3 years) and pays extra fee
- If product breaks after manufacturer warranty, buyer files claim
- Protection provider arranges repair or replacement of defective item
- Provider ships item to buyer for free after service
For the Seller:
- Enable protection plans for new eligible products in Seller Central
- Amazon partners handle provider contracts and payments
- You pay Amazon a service fee of up to 30% of protection plan revenue
- If claim approved, provider covers repair/replacement costs
- Earn higher margins on products with protection plans
I always recommend enabling protection plans as a seller because the benefits clearly outweigh the costs. Keep reading to understand why.
The Pros and Cons of Amazon Protection Plans
Benefits for Buyers
- Peace of mind – More confidence buying expensive products online knowing they‘re protected beyond just 1 year
- Convenience – 24/7 support and fast turnaround handling damages/defects
- Free shipping – No delivery costs for sending broken items or replacements
- Replacement guarantee – If product can‘t be repaired, provider will replace it
Potential Drawbacks for Buyers
- Added cost – Protection plans require paying 10-20% of product price upfront
- Plan limits – Specific inclusions/exclusions depending on product and provider
- May overlap manufacturer warranty – Some plans start after 1-year warranty expires
Benefits for Sellers
- Increased profit margins – Earn 20-30% more revenue from protection plan fees
- Higher conversion rates – More customers willing to buy knowing purchases are protected
- Reduced workload – Providers handle replacements/repairs instead of the seller
- Improved reputation – Protection plans reinforce trust and credibility of your brand
According to SquareTrade data, products with their protection plans available have conversion rates over 25% higher compared to unprotected products.
Potential Drawbacks for Sellers
- Amazon service fees – Amazon takes 15-30% cut of protection plan profits
- No control over claims – Sellers depend on provider‘s claim approval process
- Only for new items – Protection plans aren‘t offered for used, refurbished, or renewed items
Overall, the benefits of offering protection plans far exceed the drawbacks for most sellers. Let‘s look at how they impact your bottom line.
How Do Protection Plans Affect Profit Margins?
Protection plans allow you to earn 20-30% higher margins on protected item sales. Here are two examples:
- Laptop price: $999
- 2-year Protection plan: $149 (15% of product price)
- Manufacturer warranty: 1 year included
Without protection plan:
- Product price: $999
- Total profit margin: $200 (20% of price)
With protection plan:
- Product price: $999
- Protection plan: $149
- Total revenue: $1,148
- Total profit margin: $310 (27% of revenue)
- TV price: $549
- 3-year Protection plan: $99 (18% of price)
- Manufacturer warranty: 1 year
Without protection plan:
- Product price: $549
- Total profit margin: $110 (20% of price)
With protection plan:
- Product price: $549
- Protection plan: $99
- Total revenue: $648
- Total profit margin: $194 (30% of revenue)
As you can see, the extra fees buyers pay for protection plans add significantly to your bottom line. Depending on the product price and plan fee, you can expect 20-30% higher profit margins per protected item sold.
Protection Plans vs. Manufacturer Warranties
How exactly do Amazon protection plans differ from the standard manufacturer‘s warranty? Here‘s an overview:
|Manufacturer‘s Warranty||Amazon Protection Plan|
|Coverage Length||Typically 1 year||1-3 years|
|Coverage Start||Date of purchase||After warranty expires|
|Provider||Manufacturer||Third party (SquareTrade, Assurant, Asurion)|
|Cost to Consumer||Free with purchase||Extra fee paid at checkout|
|Coverage||Manufacturer defects only||Defects, drops, spills wear & tear|
|Claims Process||Through manufacturer||Through protection plan provider|
The key takeaway is that protection plans act as an extension of the manufacturer‘s warranty, offering more coverage for a longer period of time through a different provider.
What Do Protection Plans Cover?
While specific coverage varies by provider and product type, protection plans generally include:
- Manufacturer defects – Flaws in design, materials, or workmanship
- Accidental damage – Drops, cracked screens, liquid spills
- Power surges – Damage from electrical power spikes
- Normal wear and tear – General breakdown from regular usage over time
- 24/7 customer support – Phone/chat access to file claims or ask questions
- Free return shipping – No cost to customer to send in damaged items
- Product replacement – New or refurbished replacement if unrepairable
Some common exclusions:
- Intentional or cosmetic damage
- Theft or mysterious disappearance
- Damage from misuse/abuse
Coverage also depends on the product type. For example, phone plans often include battery replacements while laptop plans cover more drops/spills.
I recommend customers read the protection plan terms closely before purchasing so they understand what is and isn‘t covered.
How Protection Plans Strengthen Your Brand Reputation
Beyond boosting profits, protection plans also benefit your brand reputation on Amazon. Here‘s how:
- Improves trust – Buyers feel more confident purchasing expensive or fragile items knowing they‘re protected. This establishes you as a trusted seller.
- Reduces negative reviews – Quality issues get resolved through the protection provider, preventing angry reviews blaming your brand.
- Equals peace of mind – Customers appreciate that you care about their experience if anything stops working or breaks.
- Encourages loyalty – Protected customers are more likely to leave positive feedback and buy from you again.
- Sets you apart – Offering protection shows you go above and beyond other sellers to satisfy customers.
According to a SquareTrade survey, 66% of consumers said protection plans make them more loyal to a retailer.
5 More Ways to Protect Your Brand on Amazon
While protection plans provide coverage for customers, you need additional brand protection strategies as a seller on Amazon. Here are 5 tips:
1. Register for Amazon Brand Registry – This gives official brand owners control over product listings to prevent counterfeits.
2. Automate pricing – Use repricers to stay competitive and win the Buy Box so knockoffs don‘t undercut you.
3. Run promotions – Lightning Deals and coupons drive traffic to your official listings over other sellers.
4. Monitor listings for hijackers – Do test buys to check for other sellers listing your items. Report issues to Amazon.
5. Build your brand store – Create an Amazon storefront with brand info, images, and videos so customers recognize you as the official source.
A strong offense is the best defense when it comes to protecting your brand on Amazon!
Final Thoughts on Amazon Protection Plans
As an experienced Amazon seller, I highly recommend offering Amazon protection plans for your eligible new products. The benefits clearly outweigh the minimal drawbacks.
Protection plans allow you to increase profit margins by 20-30% while providing genuine value to your customers. This strengthens brand loyalty and reputation over the long term.
Just make sure to educate yourself on how protection plans work, what‘s covered for your particular products, and how to incorporate them into your overall brand strategy on Amazon.
If you have any other questions about protection plans, feel free to reach out! I‘m always happy to share my insight as an Amazon seller.