My Two Cents: The Evolution of Our Maintenance Agreement Program
Service Contracts Help Preserve a Company’s Future
I was delighted with the response to the Sept. 8 column and especially the interest in maintenance agreements. We received many requests for the forms we use for maintenance agreements, and many readers had some very good questions regarding our program. As a result, I thought it would be worthwhile to further explain how we started and continue our maintenance agreement program.
Crawl, Walk, Run
We began the program with a large number of customers and no maintenance agreements. Our first step was to put together a brochure outlining all of the services we planned to perform on a maintenance agreement call. (I’m still happy to send this to you, just contact me at the email address under my picture.) We also learned from others it was necessary to include some additional incentives to encourage participation in the program. We established those to be: A 10 percent discount on parts, priority service, and a discount on our diagnostic fee. We then took all of these benefits, added some additional information about our company, touted our 100 years of business experience (at that time), and developed a one-page, two-sided, tri-fold brochure.
Next, we established the pricing necessary to at least break even on this work. We felt the benefits of locking in the customer for future service and replacement work were significant, and, as a result, we didn’t need to make an excessive profit on the maintenance agreements themselves. Therefore, we looked at the average maintenance agreement call and determined it would take 45 minutes per piece of furnace or air conditioning equipment. We average 15 minutes per drive, per call. As a result, the time involved in providing maintenance on one furnace and one air conditioner per year would be two hours. Adding in our overhead and a minimal profit, this allowed us to establish a set price.
This price wasn’t established as a ridiculously low number that would require us to sell something during the call. Overselling unnecessary items is strictly against our company policy. The maintenance agreement pricing had to stand on its own and not be a get-them-in-the-door arrangement.
Since we had the sales brochure and the pricing, it was time to go to the best maintenance agreement salesmen in the company: the service techs. We held an intensive meeting and aimed to make them knowledgeable and comfortable with the program, so they could sell them with ease. This included not only the benefits to the customer, but the benefits to the techs, as well. By selling themselves and a maintenance agreement, they were helping to provide work for themselves in the traditionally slow times.
We then added another carrot. A service tech received a commission of around 4 percent on every maintenance agreement he or she sold. Armed with the printed brochure and the knowledge of how these sales benefit the customer and company, the maintenance agreements immediately started selling. We’ve tweaked the process over the years and now give a 2.5 percent commission on maintenance agreement renewals. We also added a sales incentive for our office personnel to encourage them to sell maintenance agreements, as well.
The benefits to the company are obvious; they lock in the customer, bring cash in earlier, and provide work for the service techs during the traditionally slow times of the year. Since we only put a minimal amount of profit in the pricing, it’s important we are as efficient as possible in scheduling these maintenance calls. Originally, we attempted to call those customers with maintenance agreements and found it very difficult to reach them.
As a result, we now send postcards out every few days to batches of maintenance agreement customers living in the same general area, reminding them to call and set up an appointment. We keep sheets with all of the subdivisions and main areas where we have maintenance agreements and then establish certain days we will be going into each area. When a customer calls, we advise them we can schedule them on one of the “following days” — the days we are scheduled in the neighborhood. Occasionally, it is necessary to schedule a maintenance agreement call on a date that is not the most convenient for us, but this is, by far, the minority.
Finally, it becomes imperative for your dispatcher to monitor the techs and their productivity. Since the call is pre-paid for the customer, he or she really doesn’t care how long the call takes. Therefore, it often requires some prodding to keep the techs moving in the time frame we have allowed.
If you follow these steps diligently and patiently, you will find the effort will bring returns many times over. Just remember, you are not trying to make a killing with your maintenance agreements, you are simply preserving your company’s future for many years ahead.
Publication date: 1/12/2015