In the Nov. 18 issue of The NEWS, Butch Welsch, president and owner, Welsch Heating and Cooling Co., St. Louis, asked a simple question of his fellow contractors: is your number of service calls on the rise or is it decreasing? Welsch had seen an alarming decline in service calls over the last four years, and he wondered if others were finding the same trend in their area. And the responses came pouring in.
While some contractors reported that their number of service calls remained robust, the vast majority noted that they, too, were experiencing a decline. As Rich Morgan, president, Magic Touch Mechanical Inc., Mesa, Ariz., stated, “Since 2011 we have seen a gradual decrease in service calls. We also saw this happen shortly after Sept. 11, 2001, when people were hesitant to spend any money unless absolutely necessary; however, that was short lived, whereas this seems to be becoming the new norm.”
A Perfect Storm
In Welsch’s fall column, he mentioned some of the possible reasons for the decline in service calls, and, after pondering it a little longer, he narrowed it down to three:
1. Maintenance: The fact that contractors have been emphasizing maintenance all these years is having some effect;
2. Extended warranties: The equipment is getting better, as evidenced by manufacturers extending their warranties; and
3. High-efficiency equipment: A lot of equipment has been replaced with high-efficiency units, which are more robust and have not yet needed to be repaired.
“I think all those things put together are causing a decrease in service calls,” said Welsch.” I don’t think it’s one single thing, rather a combination of factors occurring at the same time. I’ve heard from a lot of contractors who say the same thing, so I’m glad to know that it wasn’t just us completely dropping the ball.”
Coming off a year that featured the highest ever increase in new maintenance agreements and renewals, Morgan agrees that regular maintenance is probably playing a role in the decreasing number of service calls. “During regular maintenance, we catch problems before they arise or worsen, so it stands to reason this would reflect on emergency demand service. Longer warranties are also playing a role, as most manufacturers require proof of maintenance to keep the warranty intact. After getting stiffed a few times, contractors are doing a better job communicating that fact to customers, so that is definitely driving better and more consistent maintenance.”
Better installation techniques are contributing to the slowdown in service calls as well, said Gary Ward, president and co-owner, Gary’s Heating and Air Conditioning. Amarillo, Texas. “Incorrect installation has been the chief problem of equipment failure for decades. I think the manufacturers have finally started widening the tolerances to allow for less-than-perfect installations. But the installation process has also improved dramatically, thanks to education efforts by organizations like AirTime 500 and ACCA.”
Technology and Tax Credits
Improvements in technology have also increased equipment longevity, thus reducing the need for service calls, said Joe Gwozdecki, owner, Ethan Clark Air Conditioning, Houston. “We now have automatic pilot light shut offs on furnaces, and those extend heat exchanger life indefinitely. We also have second-generation scroll compressors that are virtually bug-free and bulletproof, so poor maintenance won’t damage them.”
Greg Crumpton, president and founder, AirTight Mechanical Inc., Charlotte, N.C., added that technology has also improved the overall ability of the OEMs to deliver leak-free systems to the field. “Components have reached a point where the OEMs are more assemblers of goods than true manufacturers. Bending and painting sheet metal isn’t difficult — the hard part is ensuring that refrigerant, water, steam, or whatever medium we are transferring heat with, stays inside the tubing, coil, compressor, etc.”
Another factor impacting service call volume is the huge number of people who installed new equipment in 2010 in order to take advantage of federal tax credits. “In 2010, we sold 35 percent more furnaces than the four-year average of the two years preceding and the two years following,” said Dan Weis, vice president and co-owner, Weis Comfort Systems Inc., Fenton, Mo. “We sold 20 percent more condensers that year as well.
“I am only one of 300-plus heating and cooling contractors in our area, and if everyone had a similar sales pattern that year, we retired many furnaces that would be potential service calls at this time. If that is the case, our service call numbers will start to rise in the next three to five years.”
“When you combine tax credits with higher-quality installations, more reliable equipment, etc., it makes sense that there would be less demand for service to go around,” said Morgan. “I do believe it ebbs and flows over the years, however, because of the factors described already, I think that those of us in this industry have to expand our horizons and not wait for the phones to ring with demand service.”
Finding Your Cheese
To counteract the decline in service calls, Morgan has expanded his services both geographically and vertically. “We’ve also added a wide variety of new products and services with marketing to match, and this has helped tremendously. I’m often reminded of the book, Who Moved My Cheese? by Dr. Spencer Johnson. When the cheese is moved, you can keep going back to the same place to see if it’s there or else you can go find more cheese. We have opted for the latter.”
Ward’s plan of attack is to advertise tuneups more aggressively, as he has had a great deal of success turning those customers into maintenance-agreement customers. “We market these tuneups in March, April, and May, so we can fix anything that’s needed, then our customers are prepared for when June, July, and August roll around, and it’s hotter than Hades. Of course, all these tuneups probably reduce our number of service calls, but we try to convert each tuneup to a maintenance agreement. If you look at it this way, there are 80,000 homes in the Amarillo area, and if I have 2,000-5,000 of them on maintenance agreements, and on average a system breaks down every three to six years, you can see how the dynamics of those numbers could have a direct effect on our business.”
Boosting the number of maintenance agreements is also how Crumpton is addressing the decline in service calls. By targeting accounts that have older equipment that may not have been maintained very well, he hopes to encourage those owners to purchase maintenance agreements. “We like to work with owners to establish a plan of remediation. This has worked well for us, as it gets the equipment back up to snuff, while providing billable man-hours for us.”
Weis plans to continue to build his maintenance program, as well, hoping that the “closer we can become to our clients, the higher the probability of referred service or replacement opportunities.” He did add that the extremely cold weather this winter was having a positive impact on sales calls. “Apparently, all it takes to revive the service business is some severely cold weather and 12 inches of snow. We were slammed, as was everyone else in our area.”
Gwozdecki is not doing anything differently in response to the decline of service calls, noting that when people need and want heating and cooling, they have to call somebody. What is helping with the decline, however, is the fact that many high-efficiency units utilize complex electronics, so service calls often take much longer. “And, they cost a whole lot more money. For example, when we get a service call to replace some electronics and parts in a furnace, it is not unusual for the bill to be $1,000 or more.”
As for Welsch, the number of service calls is starting to plateau, and in the last few months, calls are even running a little ahead of last year. “Another fact of life is that we are a 119-year-old company, and a lot of our customers have passed away. So our plan is to gear our marketing toward the younger generation in order to go after some new and different customers. We have also greatly expanded our architectural sheet metal efforts and have found that to be a very good market for us. Maybe we’ll add some other new products and services, but I think we will probably concentrate on what we know best, which is servicing and installing heating and air conditioning equipment.”
Publication date: 3/10/2014