Retain Customers Through Service Agreements

March 26, 2004
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Many contractors already have discovered that service agreements are their bread and butter. They help even out cash flow, fill in the slow periods, and can grow the value of a company by five to eight times, giving your company real bankable value instead of just the hope that your sales will maintain themselves.

Service agreements are also the ultimate customer retention tool.

As you know, most replacement sales come from repeat customers or referrals. If your customer has had a service agreement with your company for years, and now they need equipment replaced, who are they going to call? A full 94 percent will call you and 84 percent of those will buy from you - pretty impressive numbers. Those who build in a Bonus Bucks discount with their service agreements will do even better.

When you're in someone's home at least twice a year fulfilling your service agreement commitment, trust develops. This trait is the single largest factor in sales, and if you're not building it, you're losing it.

The same is true for repair work. Between the spring and fall equipment checks, who gets the repair work? The customer is paying to maintain a service agreement with you, and they get a discount from your company. And they get priority service.

With an "auto renew" feature in place, service agreements continue without having to be resold; they're only scheduled. As you build relationships, you will not only have a faithfully renewing customer, but also one that will give you repair work, equipment replacements, and referrals. And as far as I can tell, you haven't spent another dime in lead generation.

These relationships become so strong that studies show that 96 percent of service agreement customers will not switch to a competitor even if that company offers a better price.

Service agreements are a strong component of a solid customer retention program, right along with your newsletters. If you don't have a customer retention program in place, I'm sure your competition appreciates it.

Strategy Summary

April is big for IAQ and for continuing tune-up plus service agreement sales. It's better to cast a broad net for tune-ups, then go for service agreements instead of trying to accomplish this in one step. The only place you can sell an agreement effectively in one step is in your newsletter. Use ads and postcards to spread the message.

Media Watch

Newspaper: Continue direct response service ad or insert. Cooler areas are at the end of direct response furnace replacement offers. Warmer climates are gearing up for preseason air conditioning and spring plumbing upgrade offers. Continue top-of-mind awareness ads.

Newsletters: If you didn't send these out this month, you're almost too late. You have probably already lost some customers. A newsletter builds sales, referrals, image, and real relationships. Call me for a free sample.

Direct mail letters: Target your equipment replacement letters for either deferred payments or monthly payments. With summer around the corner, plumbers can send irrigation installment, pool inspection/repair, and other upgrade letters.

Postcards: Direct response service postcards for tune-ups or preventive maintenance should be in full swing. Get your service department trained on upselling service agreements. You can do very well with these. Focus on giving the highest value at a competitive price. Don't bait with low-ball prices.

Radio: Only use radio now to support your mail or newspaper offers. Make the same ad and offer in radio as in print. Track the leads to see which one callers remember.

On-hold messages: Continue to push preventive maintenance now.

Yellow Pages: If your ad renews soon, get it redesigned for maximum lead generation at the lowest cost. Fax us your ad for a free critique.

Next Month: Gather all the names and sales you possibly can during April to use in your May through summer mailings. Replacement and IAQ business should stay strong.

Hudson is president of Hudson, Ink. For more free marketing tips, contact the company at 800-489-9099, 334-262-1115 (fax), or

Publication date: 03/29/2004

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