How Everyone Wins With Service Agreements
How Everyone Wins With
Service Agreements
Any business in the service and repair space should offer
a service or maintenance agreement.
Correctly designed, a service agreement program is one of the biggest
no-brainers around because everyone wins.
The customers win. The employees
win. The Company wins. Everyone wins. Here’s how.
Defining a Service Agreement
First, let’s define a service agreement. It is NOT an insurance program or extended
warranty, similar to what the consumer electronics big box stores offer. It is real maintenance work, discounted
because it is pre-purchased and scheduled during slow periods. For this reason, many service companies seek
any name for their program other than “service agreement.” It can be a maintenance agreement, a
protection plan, a savings agreement, etc.
How Customers Win
Service agreements are a deal for customers. Here are five ways they win.
1. Service Agreement Customers Get Needed Preventative Maintenance
Maybe the biggest benefit is it
encourages them to get beneficial maintenance work performed, which is too easy
to overlook year after year until something breaks. The prevention of product
failure is only the least of it. Good
maintenance extends the life of mechanical equipment. Because the efficiency of mechanical
equipment tends to degrade over time, maintenance restores lost efficiency,
which is a serious benefit given today’s energy prices.
2. Service Agreement Customers Keep Warranties Valid
For recently purchased
products, manufacturers may require maintenance to keep longer term warranties
valid. These clauses are found in
warranty fine print and overlooked until they jump up and bite you. A service agreement ensures compliance.
3. Service Agreement Customers Pay Less
Consumers can get maintenance
performed a la carte. However, they will
pay more. Work performed under a service
agreement is discounted so customers pay less.
4. Service Agreement Customers Receive Discounts
Service agreement customers are
also treated better. Typically, they
receive direct discounts on repairs of 15% or more. In addition, some companies reduce the price
for after-hours emergency service for service agreement customers, waive
response charges, and so on.
5. Service Agreement Customers Get Better Service
Since service companies view
service agreement customers as their best customers, they treat them
better. Their demand service calls move
up in priority over non-service agreement customers. Faster is better.
How Employees Win
Company employees are also big winners with service
agreements. Here are three ways
employees win.
1. Employees Get Work During Slack Times
Because maintenance work can be
scheduled at the company’s convenience, it’s usually performed during seasonal
slowdowns or other periods of slack demand.
This means hourly employees have work to do and are not sent home.
2. Employees Can Earn Extra Money
Since selling or extending a
service agreement results in a monetary spiff, company employees can earn extra
money. This includes field service
personnel and customer service representatives.
The spiffs may not be large, but they add up.
3. Employees Get To Do What’s Right For Customer
Since work under service
agreements are performed during periods of light demand, there is less pressure
to hurry through the work because other people are backed up. Service personnel and take the time to be
thorough and do the job right.
How Companies Win
Companies also win with service agreements. Here are four ways.
1. Companies With Service Agreements Enjoy Greater Cash Flow
Since service agreements are
prepaid or paid on a monthly basis, they help companies with cash flow. Companies with service agreements start the
week, month, quarter, and year with guaranteed business already paid for.
2. Companies With Service Agreements Retain Employees
Because service agreements
means added work during slack times, companies keep their people busy. Busy people are less likely to look elsewhere
for a paycheck.
3. Companies With Service Agreements Strengthen Customer Relationships
Some people claim that the only
true customer a service company has is a service agreement customer. All other customers become prospects at large
the second the service truck hits the road.
In fact, there’s empirical research to support this. Even when making significant purchases like
heating and air conditioning systems, consumers are apt to forget the name of
the installing company within two years of the purchase unless there’s a
service agreement in place. A service
agreement means there is an ongoing relationship.
4. Companies With Service Agreements Increase Their Value
Companies with lots of service
agreements sell for more than companies without service agreements. This is because a customer list with service
agreements is a customer list with relationships. A customer list without them is like a mail
list that can be purchased for ten cents a name.
Without question, service agreements benefit customers,
employees, and the company. They are a
triple win, a slam dunk, a no-brainer, and as sure of a sure thing as you can
get in the world of service. In the next
Comanche, I’ll explain how you can create a service agreement program and
achieve buy-in.
© 2014 Matt Michel
