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ZTAG Extended Care Plan - Financial Analysis

Date: February 17, 2026
Source: ZTAG Extended Care & Community Launch Pack
Requested by: Quan Gan
Routed to: Finance & Sales domain group

Current Pricing Structure

Extended Care Plans

A La Carte Replacement (No Care Plan)

Manufacturer's Warranty (Included)

Break-Even Analysis

1-Year Plan

Customer pays: $930
Covers: Up to 6 ZTAGGERs/year accidental damage

If customer uses full coverage (6 replacements):

If customer uses 50% (3 replacements):

3-Year Plan

Customer pays: $2,500 total (~$833/year)
Covers: Up to 18 ZTAGGERs total (6/year × 3 years)

At full utilization:

At 50% utilization (9 replacements):

5-Year Plan

Customer pays: $4,000 total (~$800/year)
Covers: Up to 30 ZTAGGERs (6/year × 5) + 1 Command Center @ $2,300

At full utilization:

At 50% utilization (15 ZTAGs, no CC claim):

Critical Questions for Finance (Vania)

1. COST BASIS VERIFICATION ⚠️ URGENT

Questions:

Why critical: If COGS > $155/unit, the 1-year plan loses money at full utilization (6 claims/year).

Data needed:

2. UTILIZATION RATE ANALYSIS

Questions:

Insurance model assumption: This is structured like insurance—profitable if most customers claim <3 units/year (50% utilization or less).

Data sources:

3. COMMUNITY LAUNCH PACK COSTING

5-Year Plan includes physical kit (shipped hardware):

Question: What is the one-time cost to produce and ship this physical kit?

Margin preservation: Should be <$500 to avoid eroding 5-year plan profitability.

Vendor pricing needed:

4. COMMAND CENTER COVERAGE RISK

Current structure:

Risk exposure: If customer files a Command Center claim:

Probability question: What % of 5-year customers are likely to file a CC claim?

Mitigation options:

  1. Increase 5-Year price to $4,500-5,000 (build in CC risk buffer)
  2. Cap CC coverage: "50% discount on one replacement" instead of fixed $2,300 price
  3. Add usage-based pricing: "CC coverage for programs >100 students/day only"

5. UPGRADE CREDIT ECONOMICS

3-Year & 5-Year plans include: "Trade-in & upgrade credit after 3 years"

Questions:

Trade-in model assumptions:

6. SUPPORT LOAD COST

All plans include:

Questions:

Hidden cost risk: If support load is high, it could eat into plan profitability even if replacement COGS are favorable.

Summary Table

Plan Annual Revenue Max Liability (6 ZTAGs/yr) Break-Even COGS/Unit Margin at 50% Utilization (3 ZTAGs/yr)
1-Year $930 $1,800 (6 × $300) <$155 Profit if COGS <$310
3-Year $833/yr $1,800/yr <$139 Profit if COGS <$278
5-Year $800/yr $1,800/yr + $3,700 CC <$133 + CC cost Profit if COGS <$267 (no CC claim)

Key insight: 5-Year plan is most profitable PER YEAR at 50% utilization, but carries highest total risk over 5 years (30 potential ZTAG claims + 1 CC claim).

Action Items for Finance Team

1. Pull COGS Data (Deadline: Feb 21)

2. Pull Utilization Data (Deadline: Feb 21)

3. Model Financial Scenarios (Deadline: Feb 24)

Build Excel/Sheets model with three scenarios:

Best Case (30% utilization):

Base Case (50% utilization):

Worst Case (80% utilization):

Model outputs:

4. Pricing Recommendations (Deadline: Feb 28)

Based on scenario modeling:

Additional Considerations

Risk Mitigation Strategies

1. Utilization Caps:

2. Usage Audits:

3. Preventive Support:

4. Refurbishment Revenue:

Competitive Benchmarking

Question for future research: How do similar ed-tech hardware companies structure extended care/warranty plans?

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