Service vs. Maintenance Agreements
NOTE: In answer to a question posed by
The NEWS’ editor-in-chief, Mike Murphy, guest columnist John Lombardi
provides his viewpoint on planned service.
We have to distinguish between maintenance agreements and service agreements. Maintenance agreements are just that, agreements to do maintenance. The customer gets priority service and a discount on repairs and accessories, usually 10-15 percent. Service agreements also provide maintenance and priority service, but also cover repairs up to a certain dollar amount. That dollar amount is usually set at the price point of an out-of-warranty compressor or heat exchanger. Some people do it differently, but that is what I have found to be most common.
While at a previous company, we had both types of agreements, and our service plans covered all repairs, except compressors and heat exchangers. We also had the option to decline to issue a service plan at our discretion. If the equipment was old and decrepit, we could simply say no. It was in the fine print. All systems are eligible for a maintenance agreement regardless of condition. So right out of the gate, there is the potential to offend a customer who has an old system.
The last thing I would ever want to do is chase away a homeowner with a replacement waiting to happen. In addition to that, have you ever had to field a call from a ticked off service plan customer who has a bad compressor that is not covered? No matter how many times you refer to the fine print, you have probably lost them as a customer. Customers are too valuable to tick off.
I prefer maintenance agreements over service plans. It removes the confusion inherent with choices. With two or three levels; there are many variables. One plan also makes the tech’s job easier. I am sure someone could show me where service plans make money. I am sure that there are shops out there that do not have problems with keeping the plans clear and concise. If my shop had both types, I would work with it and do my best to get as many as we can. I do not dislike service plans. I just like to keep things as simple as possible.
I look at these plans as relationship builders. I want to make money on our service and maintenance work, and we do. Service plans cost more per year and the ones that do not have many repairs are as good as gold. Rarely does a service plan end up costing the company money. The repair ceiling ensures that. The main motivation for offering these plans should be in building a life-long customer.
Bottom line, some version of a customer agreement is necessary, unless the company goes about them half-baked. Techs can sell them, the company benefits, and people want them - everyone wins. The problem is that many companies institute a maintenance program, but have poor follow through. They do a bad job scheduling the visits, a bad job renewing the agreements, and a bad job tracking everything. All the good things they did to get a customer on an agreement are ruined due to poor follow-up.
I would suggest that anyone who bad mouths maintenance agreements is basically saying “I do not want to take the time and expense to do it right.” Others may not feel they have the expertise or knowledge to do it. Again, the information is out there and can easily be obtained if the contractor wants it. It is hard to do a maintenance program. It takes effort, ongoing training and some intelligence (although it is easier than ever because of the programs and associations you can join and steal from).
But it’s worth it. We have doubled our revenues in almost two years since we implemented the program.
Up here in Wisconsin, we can count on the cold to keep us busy. Summers are pretty busy too. Where we have grown and improved is in the milder months where previously we struggled to keep busy. The maintenance program has reduced our slow times. We are more productive year round and consequently, when it gets busy, we are staffed and ready to tackle it. One benefit of our setup is we have significantly reduced our emergency installs. Very rarely do the guys have to work late into the night getting someone heat.
Customers are happy. The techs are earning additional money providing a service the customers want. Revenues are up. Why would anyone not want that?
Publication date: 08/06/2007
We have to distinguish between maintenance agreements and service agreements. Maintenance agreements are just that, agreements to do maintenance. The customer gets priority service and a discount on repairs and accessories, usually 10-15 percent. Service agreements also provide maintenance and priority service, but also cover repairs up to a certain dollar amount. That dollar amount is usually set at the price point of an out-of-warranty compressor or heat exchanger. Some people do it differently, but that is what I have found to be most common.
While at a previous company, we had both types of agreements, and our service plans covered all repairs, except compressors and heat exchangers. We also had the option to decline to issue a service plan at our discretion. If the equipment was old and decrepit, we could simply say no. It was in the fine print. All systems are eligible for a maintenance agreement regardless of condition. So right out of the gate, there is the potential to offend a customer who has an old system.
The last thing I would ever want to do is chase away a homeowner with a replacement waiting to happen. In addition to that, have you ever had to field a call from a ticked off service plan customer who has a bad compressor that is not covered? No matter how many times you refer to the fine print, you have probably lost them as a customer. Customers are too valuable to tick off.
I prefer maintenance agreements over service plans. It removes the confusion inherent with choices. With two or three levels; there are many variables. One plan also makes the tech’s job easier. I am sure someone could show me where service plans make money. I am sure that there are shops out there that do not have problems with keeping the plans clear and concise. If my shop had both types, I would work with it and do my best to get as many as we can. I do not dislike service plans. I just like to keep things as simple as possible.
I look at these plans as relationship builders. I want to make money on our service and maintenance work, and we do. Service plans cost more per year and the ones that do not have many repairs are as good as gold. Rarely does a service plan end up costing the company money. The repair ceiling ensures that. The main motivation for offering these plans should be in building a life-long customer.
Bottom line, some version of a customer agreement is necessary, unless the company goes about them half-baked. Techs can sell them, the company benefits, and people want them - everyone wins. The problem is that many companies institute a maintenance program, but have poor follow through. They do a bad job scheduling the visits, a bad job renewing the agreements, and a bad job tracking everything. All the good things they did to get a customer on an agreement are ruined due to poor follow-up.
I would suggest that anyone who bad mouths maintenance agreements is basically saying “I do not want to take the time and expense to do it right.” Others may not feel they have the expertise or knowledge to do it. Again, the information is out there and can easily be obtained if the contractor wants it. It is hard to do a maintenance program. It takes effort, ongoing training and some intelligence (although it is easier than ever because of the programs and associations you can join and steal from).
DOING IT RIGHT TAKES AN INVESTMENT
We do a half-day review of customer service and maintenance plans once in the spring and again in the fall. Our whole staff spends five hours twice a year reviewing the program. Two hundred man hours (not to mention the prep time and steak dinner we have at the conclusion of the training) at an average of $22 per hour straight time = $4,400 per year without factoring burden and overhead and all that other stuff. That is just for maintaining the program. The upfront costs are probably three times that amount.But it’s worth it. We have doubled our revenues in almost two years since we implemented the program.
Up here in Wisconsin, we can count on the cold to keep us busy. Summers are pretty busy too. Where we have grown and improved is in the milder months where previously we struggled to keep busy. The maintenance program has reduced our slow times. We are more productive year round and consequently, when it gets busy, we are staffed and ready to tackle it. One benefit of our setup is we have significantly reduced our emergency installs. Very rarely do the guys have to work late into the night getting someone heat.
Customers are happy. The techs are earning additional money providing a service the customers want. Revenues are up. Why would anyone not want that?
Publication date: 08/06/2007