Maintenance Agreements Protect Profits
Originally published: 09.01.06 by Ruth King
Maintenance agreements are one of the best ways to even out the seasonality of your business.
Sometimes, such as during cool summers, maintenance agreements literally can save the profitability of your company. During such summers, I've heard repeatedly: "If it weren't for our service-agreement customers, we would be dead in the water right now." While this summer has been hot in most areas of the country, now's the time to begin building a good base of service agreements for the future — when the weather might not be as cooperative.
Besides, with maintenance agreements, both you and your customers win. For your customers, you're providing a valuable service. For you, once the program is created, it's reasonably inexpensive and easy to market. In addition, the program is yet another way to attract new customers.
However, creating a profitable program requires planning and persistence. You must get your staff on board, develop and deliver direct mail and advertising pieces, and train the office and field personnel how to sell and fulfill the agreements.
It helps first to assess your own commitment to maintenance agreements to make sure you're communicating a positive message about them to your staff. Do you have an agreement on your home or office building? Do you allow the technicians to perform—on company time — maintenance on your office building, your home or their colleagues' homes? If not, you should consider encouraging them to do so. Even better, have a technician perform maintenance on your dispatcher's home while the dispatcher watches. The more you demonstrate the value of maintenance agreements to your staff, the better they'll be able to sell or more confidently answer questions about your offerings. Commitment must start from the top. Make sure you are sending the right message.
Next, make sure everyone on staff fully understands your maintenance plan offerings. They must know the features included in each package and each package's price. In addition, they must know which additional features are available and how much each costs. Then, when customer questions arise, every employee answers the same way—your customers and potential customers all get the same message.
Now you have a program, but how many agreements should you sell? While the obvious answer is "as many as you can service," a good rule of thumb is to aim for at least 1,000 agreements for every $1 million in residential service and replacement sales. (Note that this does not include new construction or commercial sales). Once you've set a sales target, you can establish a contest for maintenance agreement sales to help you reach the goal. Everyone in your company should participate—even if an employee is likely to sell only one agreement. However, you should require your technicians to sell, at a minimum, one agreement for every three people they talk to about them.
Hold a meeting to explain what the overall sales goal is and ask for input. Once you get input, create the contest. It's best to have a group contest, where everyone wins or everyone loses. If you have an individual contest and one person gets out front, then everyone else might stop trying. With a group contest, individuals who are selling the most will encourage and help those who haven't made their individual sales goal—winning becomes a team effort.
In addition to a group prize for meeting the goal, set a penalty for not meeting it. My favorite penalty is to have each person teach a class and bring the donuts. Even dispatchers can teach a class—usually on paperwork!
If the group goal is high enough, the prize could be a weekend getaway (not everyone can take it at the same time) for each employee and spouse/significant other. Or you could offer gasoline cards, food cards, or a choice among them, with a predetermined cash value.
Post the goals prominently, so everyone can see the number of agreements they've each committed to sell within a set period of time, say, during the months of September through December. As the months go by, post the actual amounts sold, so everyone can track the progress. Hopefully the group will reach the target at the end of the contest period, and you can award the prize rather than the penalty.
Once you have the internal plan completed and communicated to the staff, it is time for the externals: letting the world know about what you are doing, through public relations, marketing, advertising, and asking for referrals. Here are a few things to consider about getting your message out (For additional advice on advertising, see "Ten Commandments of Good Advertising" in the August edition, page 5, or on the Web at www.hvacrbusiness.com/Issue/Default.aspx?IssueID=6.
1. My favorite form of advertising—after customer referrals, clean trucks and informative business cards—is direct mail. Unlike television or radio advertising, direct mail lets you control exactly who receives the information. You don't waste money on apartment dwellers or homes in geographic areas that you don't cover.
Yes, I know, most direct mail gets thrown out—but not for the reasons you might think. Much of it is tossed because it's poorly conceived. You can avoid this by creating mailers that grab the readers' attention and by making sure you're mailing to the right list.
2. From my experience, the best service to sell via postcards is a fall-maintenance special. It gets your technician into the home to conduct a proper diagnosis of what the customer needs, such as additional service or replacement parts. More important, it gives the technician an opportunity to sell your maintenance program.
3. Use a brightly colored postcard. Since it is fall, you might choose a bright orange, but don't use red. The post office charges more to process red mail because many of its printing machines use red ink.
4. Once your customers flip your postcard over, you have three seconds to get their attention. Use a benefit headline. Answer the question, "Why should I get a fall maintenance check?" To save money, to ensure safety and to avoid the inconvenience of an unexpected breakdown are obvious — and compelling — answers. Use them in your headline.
5. Send more than one postcard. A series of three will give you a good gauge of the effectiveness of your direct mail. If you are sending to customers who haven't done business with you in at least 18 months, you can expect a response- rate of more than 5%. But you should still send more than one postcard to maximize the response.
6. Make sure you put a telephone number on the postcard and specify the name of a person the customer should ask for, such as "Call Mary at 555-1234." The name of the person doesn't have to be a real person. By putting a different name on each postcard, you will be able to identify which postcards are most effective in getting customers to call.
7. Track your results. Gut feel doesn't count. Knowing how many telephone calls you received, how many calls you converted into service agreements or service and replacement orders, will let you determine the success of your direct mail effort.
8. When the technicians are at the customers' homes, they must talk about the maintenance plans and demonstrate to the customer the benefits of buying one — to save money, have peace of mind, etc.
Holding a contest, creating postcard mailers, and making sure that you sell one agreement for every three customers each technician talks to will put you well on your way to increased customers, decreased seasonality, and increased profits.
Articles by Ruth King
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