Service Cancellations Affecting HVAC Contractors’ Bottom Lines
Study shows high cancellation rates cause contractors to lower prices
SAME SERVICE, DIFFERENT DATE: Instead of looking at cancellation rates, Travis Smith, president of Sky Heating & Air Conditioning in Portland, Oregon, finds it more important to focus on rescheduling when a customer calls to cancel.
Customers can sometimes be an elusive thing for HVAC contractors. Most every service company has had prospective customers call in to schedule an appointment with a dispatcher, only to cancel that same appointment at a later time. It could be because of a number of factors: They found a competitor with lower prices, someone who could come out sooner, and the list goes on. However, not every service contractor measures their cancellation rates.
Workiz Inc., a service management software solution, decided to look into the massive data generated by its users to see what kind of trends were available.
“We do this all the time for our customers — to provide them with all kinds of data, so they can improve their operations,” said Itay Erez, vice president of marketing, Workiz. “And we do it for each industry — plumbing, HVAC, and electricians. And what happened was, we saw an interesting pattern emerge, especially in HVAC. We began to see a correlation between prices and cancellation rates. Quite surprisingly, we found the lower the price, the higher the cancellation rate and vice versa.”
For its research study, Workiz analyzed 300,000 HVAC jobs performed by 1,500 Workiz user profiles over the past six months. Per the study, the average price per job in New York was $605, with an average cancellation rate of 18 percent, while in Colorado, the average job price is $252, with an average cancellation rate of 30 percent. Maryland saw an average job price of $199 and a cancellation rate of 42 percent.
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NOT ADDING UP: According to the Workiz study, a company charging an average price of $369 per job had an 18 percent cancellation rate, a company charging $332 per job had a 36 percent cancellation rate, and a company charging $254 per job had a 62 percent cancellation rate.
Workiz broke the data down further because, even within the same city, prices and cancellation rates vary between companies. For example, in Fort Lauderdale, Florida, HVAC contractors charge an average of anywhere between $254 and $369 for a job. The lower the cancellation rate, the higher the average job price. According to the study, a company charging an average price of $369 per job had an 18 percent cancellation rate, a company charging an average price of $332 per job had a 36 percent cancellation rate, and a company charging an average price of $254 per job had a 62 percent cancellation rate.
“Cancellation averages around 30 percent,” Erez said. “The cancellation rate doesn’t rise if you lower your price. It’s because, if you have a high cancellation rate, you are forced to lower your prices.
“We want to communicate to our customers ways they can improve their cancellation rates,” he continued. “By doing so, not only can they increase their revenues by raising their prices, but they can also save a lot of money because there’s not overhead on canceled jobs. Improving your cancellation rate can really improve your business.”
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TRACKING CANCELLATIONS
Pompano Beach, Florida-based Must Air USA uses Workiz service management software to track its cancellation rates, among other things. According to Janika Symonette, office manager for the company, cancellations are not common for service calls.
“Our customers usually call when there is an issue that they can’t assess themselves,” she said. “If our customers cancel, it is because the issue has ceased and they no longer need services or because they forgot their appointment.”
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SEND REMINDERS: Customers are forgetful, just like the rest of us. If a customer has a scheduled appointment, send them an automatic reminder before the appointment via text message. This will reduce the chance that they’ll somehow forget, costing time, money, and aggravation.
Must Air USA measures cancellations to improve its customer satisfaction, Symonette noted.
“You cannot improve what you don’t know is wrong,” she said. “The goal is always to lower our cancellation rate, so we can improve service to our customers and hopefully also increase our profits. When you measure your cancellation rate, you can better see your HVAC business’ blind spots and areas you need to improve and actively work on improving them. Field service software is a great way to understand what your cancellation rate is and understand … why customers are cancelling.”
Symonette added that the company has one basic service call fee, which does not include parts. However, it has a list of all the parts stocked in the technician’s truck and a pricing menu for each one.
The company also keeps in touch with its customers days and/or months after a service call or install was completed in order to build rapport and make sure they were satisfied with their service.
“We call the customer that canceled to see if there was anything we could have done differently,” Symonette said. “If it was canceled because of something on our end, we apologize and provide a complimentary item to the customer. We also now call our clients a day before and/or one hour before our techs arrive to ensure the customer will be home. Our cancellations rates decreased by 21 percent in one year.”
According to Scott Merritt, owner, Fire & Ice Heating & Air Conditioning Inc., Columbus, Ohio, his company normally takes care of customers fairly quickly, so they don’t often cancel service.
“Any call that is canceled is recorded in our operating system,” he said. “So when there is a cancellation, it lets us know why and if there are any issues we need to address.”
Fire & Ice uses flat-rate pricing for customers, Merritt said.
“Contractors with lower cancellation rates can charge more per job because, if they aren’t having cancellations, then they have a larger pool of clients to draw from,” he explained. “And so if one call doesn’t pay very well, others will. Furthermore, marketing can be lower and therefore, overhead is lower. That leaves a larger profit for each call on average.”
In order to reduce cancellation rates, Fire & Ice fluctuates its scheduling to accommodate for weather. That way, it can be busy with trouble calls without displacing maintenance calls.
OTHER METRICS TO MEASURE
Travis Smith, president, Sky Heating & Air Conditioning, Portland, Oregon, said his company does not track service cancellations. According to Smith, cancellations are not a very common occurrence, but occasionally, people have to reschedule or will find another company that will arrive sooner.
“Everyone has different needs, and some would rather go with a new company to get it faster,” Smith explained. “Others will wait for the quality service they expect. We don’t measure cancellations because it is mostly irrelevant to our scheduling process. Cancellations are going to be higher during extreme weather when we are booked out and happen less often during more relaxed times of the year.”
Instead of looking at cancellation rates, Smith finds it more important to focus on how well his employees are doing at rescheduling when a customer calls to cancel.
“If they can’t make the appointment, can we schedule for another time,” he said. “If the furnace suddenly started working, can we schedule a maintenance visit. If another company can get there sooner, can we do a follow-up to see how the repair went, as many others won’t carry universal parts on their trucks, like we do.”
Smith said his most important metric to measure is the call booking rate. According to CallCap, the trades have a 46 percent call booking rate. Sky Heating & Air Conditioning has a call booking goal of 85 percent.
“We are currently in the process of transitioning all recorded lines to CallCap, so we can fully track our call booking rate versus approximating it from the few calls we do sample and listen to,” Smith said.
Though Sky Heating & Air Conditioning may not measure cancellation rates, the company has implemented several procedures in order to reduce cancellations. This includes having better trained customer service representatives (CSRs) answering the phone as well as asking why a customer is cancelling, so the company can determine if the customer needs to reschedule.
“A canceled service call could mean the loss of a new customer that costs as much as $80 to acquire, plus the loss in value of their lifetime potential revenue, which could easily be over $10,000,” Smith said. “So when looking at cancellations, they need to be taken very seriously, and while we don’t track them, we do train all of our phone CSRs to work with the topic to keep them as a customer or find out if we can still solve their problem.”
Smith added that he just began working with Power Selling Pros, and it has made a major difference in how his company handles call cancellations as well as call scheduling.
“If you don’t listen to your phone calls and train your CSRs, you will be letting go of customers that cost you advertising dollars,” he said. “The most effective advertising can only drive calls to you. Your CSRs are the ones that make the difference between scheduling 46 percent of the calls or 85 percent of the calls.”
10 WAYS TO REDUCE CANCELLATION RATES
Workiz Inc. provided 10 tips for contractors to reduce service cancellation rates:
- No used car salesman-type ads – Stay clear of confusing, misleading ads that could be subject to customer misinterpretation.
- Well-trained dispatchers are worth their weight in gold – It’s important to make sure dispatchers are trained to clearly understand customer issues and the job that the customer actually needs. Sending the tech with the wrong skill set, or even the wrong parts, can result in a cancelled job.
- Call them back ASAP – When techs go to job sites, have them call the customers as soon as they are on their way, to provide reassurance that help is coming. This eliminates customers from guessing about whether or not someone is actually coming to fix their issue.
- Don’t let it go to voicemail – An unheard voicemail is equivalent to leaving money on the table. There’s some great technology that can transcribe voicemails into text messages, which can then be converted into a job in just one click.
- Send reminders – Customers are forgetful, just like the rest of us. If a customer has a scheduled appointment, send them an automatic reminder before the appointment via text message. This will reduce the chance that they’ll somehow forget, costing time, money, and aggravation.
- Running late? Let them know – Be sure to communicate all delays to customers with a quick text message or call, so they stay in the loop and don’t feel forgotten.
- Skills, baby, skills – Sending the wrong technician or part oftentimes will wind up costing the job. Make sure to get it right the first time by only sending the technician with the relevant skill set to the job. The same goes for parts.
- Appearances matter, dress the part – It’s important for techs to look legitimate and to demonstrate trust by wearing a uniform and name tag and arriving in a marked car with the company logo. All of this goes to create customer confidence and reduce cancellations.
- Go digital – When techs come to a job armed with a tablet or cellphone with digital invoices that customers can actually review and sign, it certainly beats the good old days of paper invoices with spilled coffee stains.
- It’s not the customer, it’s the technician – Sometimes, too many cancelled jobs, especially from a certain technician, can be an indicator of employee theft. The beauty of field service software is that it records employee calls to analyze their performance and track their location with GPS. Information like this turns trust-based businesses into fact-based, objective ones.
Publication date: 2/11/2019
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Click graphic to enlarge
NOT ADDING UP: According to the Workiz study, a company charging an average price of $369 per job had an 18 percent cancellation rate, a company charging $332 per job had a 36 percent cancellation rate, and a company charging $254 per job had a 62 percent cancellation rate.
Click graphic to enlarge
SEND REMINDERS: Customers are forgetful, just like the rest of us. If a customer has a scheduled appointment, send them an automatic reminder before the appointment via text message. This will reduce the chance that they’ll somehow forget, costing time, money, and aggravation.
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