Hallmarks of a Great Service Agreement Program
Written by: Suzanne Wedeven
Who would like to increase their revenue by $800,000? If that is you, you are reading the right article!
I am sure you have heard Service Agreements described as “the food” of your business. But what if we changed our thoughts to think of them as “the storehouse” of your business, as Service Agreements provide a way to reach and expand your services through your existing customer base? After all, a storehouse is where valuables are put away for future use, right? Farmers have used a storehouse for years. They put away grain and seeds for their family’s future needs, farm animals, and crops.
Why a storehouse is a better description:
They store future service calls:
Companies complaining about low call volume in any given season often have fewer Service Agreements.
They store future income:
Service Agreements average produce around 50% more revenue per call. There is a relationship/trust here. On average, $650 per call.
They reduce marketing expenses:
Customers are less likely to utilize a “flyer/offer” from a competitor, as they are paying for your Service Agreement plan and have a relationship with your company. They also know the skill set for future needs: Plumbing/HVAC/Electrical/Chimney/Installation (replacement – 12 years on average). These customers are more likely to fill up your schedule.
They store future growth:
A 1-to-3 ratio is a magic number for a service company’s future growth. What I have found is that if a third of a company’s yearly calls come from Service Agreements, growth is more manageable, as growth is almost forced upon the company to meet current demands.
Cautions in Service Agreements:
Sending a part changer:
A parts changer replaces parts only when there is a complete failure. This is bad for the company and bad for the customer. The tech you send on these calls must think more like an aircraft mechanic. They look for abnormal wear and address issues before they result in a complete failure. This tech will sell legitimate repair work when the parts changer won’t. Tech thought process: RELIABILITY of the system as a whole, not just a cleaning.
Offering too steep of discounts:
If your service department generates a net profit of 10 percent and you offer your Service Agreements to customers a 15 percent discount, you are losing 5 percent of every transaction. The key to profitable Service Agreements is knowing your net profits.
Pricing labor too low:
You must know how much it costs to provide labor. Your Service Agreements mainly consist of labor and should generate more billable repair work (an average of $650 per call).
Lack of ownership/responsibility from the management team:
Responsibility/Ownership must be consistent and present. Selling Service Agreements is a CULTURE that requires diagnosis training; tech thought process training (abnormal wear), seasonal offerings and training on them, the best time to schedule for the upcoming season, and performance rewards.
Building a Healthy Supply of Service Agreements
A straightforward process must be put in place by the Management Team to build the culture (example criteria):
Introduce the Service Agreement to your customers on the phone (those not enrolled):
This will set your techs up for success. Ask the CSR/dispatcher to include the following in the Script:
“Mrs. Smith, when Paul gets to your home/business, he will review our service agreement with you. Every home/business owner should have key benefits. One of those Benefits includes savings on today’s service call. Is this okay with you?”
Stimulate interest before the diagnostic by tech (those not enrolled):
Before the tech starts his diagnostic, plant a simple seed about the Service Agreement:
“Mrs. Smith, this is the Service Agreement that John told you about on the phone. I’m going to leave it here for your review. Take a moment and review the Key Benefits every homeowner/business should have. When I’m done, we can review the Agreement together. Is this okay with you?”
Tech to tie the Service Agreement benefits into the diagnostic findings:
Most items in a home/business have the potential to last longer and perform better if they are well maintained. This equates to substantial savings for the customer. His diagnostic findings using the TNFR Service Agreement Script should explain this. In addition, the tech should be trained to focus on the RELIABILITY of the equipment during the diagnosis. This is not just a cleaning job; the tech is not just a parts changer. The focus is on effectiveness, efficiency, and increasing the system’s life span through seasonal offerings.
Remember how I shared you could increase your revenue by $800,000?
Now is your chance to tell me how you view Service Agreements!