How to Grow Service Agreements

The formula is simple and time tested.  In the air conditioning industry, profitable replacement sales are the fruit of a strong service agreement program.  Service agreements grow from the seeds of tune-ups.  Spring is the perfect time to seed your business with tune-ups.

The Benefits of Tune-Ups

Empirical research has long shown that tune-ups are beneficial for homeowners.  They restore efficiency, lowering operating costs.  Though it is hard to isolate, the operating cost savings alone exceed the cost of a tune-up.  In addition, tune-ups recover lost cooling capacity.  They prevent break downs.  They extend equipment life. 

A cynic might ask why a contractor would want to do that.  Isn’t there more money in repairs and replacements?  Of course.  But the real money comes from a broad, loyal customer base that turns to you again and again at higher margins.  Tune-ups allow you to get your foot in the door, leading to service agreements, and then repair work and system replacements.

Around one out of every 15 systems will be replaced in a given year.  When you tune-up older systems, the odds favor the least sales oriented technician stumbling across a few systems that should be replaced.  This is why one out of every ten maintenance or service calls should result in a system replacement lead.  If you do not perform the tune-ups, you will miss these opportunities.

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The Real Value of a Tune-Up

Some contractors do not push tune-ups because they do not think they make enough money on them.  If the tune-up is fully burdened with the same overhead as your service department, that’s probably true.  However, service department and company overhead exist whether a company pursues maintenance work, or not.  Thus, the maintenance department should only be burdened with overhead that would not exist without maintenance (plus direct costs, of course).  The added revenue from maintenance should exceed the additional costs incurred by the program.

While you will not recognize this in your books, divide the value of a replacement lead by ten and add that to your tune-up revenue.  That’s the real value of a tune-up.

Marketing Tune-Ups

Because they are necessary and affordable, tune-ups are great services to market.  This is especially true in the spring when summer heat looms.  Most people know they should get their air conditioner tuned up.  If they have experienced a break down in the preceding year or two the awareness levels are greater.

You might need to compete with some guy performing a deeply discounted “kick and check.”  If so, your marketing must be somewhat educational.  Explain what is done, why it matters, and how it differs from an inspection only type kick and check.

The key benefits for consumers are breakdown prevention, restoration of lost cooling capacity (i.e., greater comfort), equipment life extension, and operating costs savings from restored efficiency that exceeds the cost of the tune-up.  In other words, tune-ups are free.

The Service Agreement is a Marketing Program

If customers are convinced of the value of a tune-up, then it should be easy to persuade them to invest in a service agreement.  After all, if you price your service agreements correctly, the service agreement costs less than two tune-ups and provides other benefits like priority service, discounted repair pricing, and so on.

 You may wonder why you should discount maintenance with a service agreement, not to mention the other benefits.  It’s simple.  The service agreement binds the customer to you.  It will keep the customer from calling a competitor for maintenance or service. 

Service agreements also lower your marketing costs.  It really is true that it costs around five times as much to get a new customer as it does to keep an existing one.  Service agreements help you keep customers so you do not need to spend as much on marketing to attract new customers.  Plain and simple, the service agreement is a customer retention program. 

A service agreement program is also an employee retention program.  Your super service techs may not want to perform tune-ups, but getting paid to do maintenance beats getting sent home when the call volume is slow.  Getting paid keeps techs coming to work.  Sending them home gives them time and incentive to see if your competitors do a better job than you do maintaining a steady call volume.

Since service agreements are pre-paid, they also help with cash flow.  Just make sure you do not spend the cash before you pay your technicians to perform the work.  A simple approach used by many contractors is to create a separate bank account for service agreement revenue.  Each month, they draw 1/12th of the account’s balance and recognize it as income.  The pure approach is to recognize half of the income at the time the first tune-up is performed and the balance when the second is performed.

Don’t Discount For Service Agreement Customers – Charge Everyone Else More

In reality, you should not discount your billable rate for service agreement customers.  You should charge everyone else more.  Since they cost you more to serve than your service agreement customers, they should pay more.

Calculate the billing rate you need to meet your targeted net profit.  This becomes the rate you use with service agreement customers.  Divide it by one minus your service agreement “discount” and you have the rate everyone else pays.  For example, if you calculate a billable rate of $250 per hour and want to offer your service agreement customers a 20% discount, divide $250 by one minus 20%.  $250/(1-20%) = $250/80% = $312.50.

You should use a similar approach with maintenance pricing, recognizing that while you want to at least break even on service agreements on a marginal revenue/marginal costs basis (i.e., charge enough to cover the added direct costs and additional overhead required), this is a marketing program.  Set the final price of your service agreement and tune-ups for non-service agreement customers for marketing purposes.  Make sure that the price of a pair of tune-ups exceeds the price of your service agreement.

Perpetual Agreements

More and more contracting companies are charging for service agreements by the month, dinging customer credit cards.  This lowers the apparent price to the homeowner. 

Affinity Agreements

An affinity agreement is customized for an organization or charity that a large number of people support.  The organization receives your standard sales spiff or commission for every affinity agreement sold and marketing the agreement to their patrons is their responsibility.

Use Modern Collateral

The service agreement was introduced to the industry in the 1980s and many contractors haven’t upgraded their printed collateral material since then.  Make the service agreement sales oriented.  Stress the benefits of the program, not just a checklist of tasks the consumer doesn’t understand.

Involve Everyone

Make sure the entire company understands the importance of service agreements, owns one if they own a home, and can collect a spiff for selling one.  Each employee should feel no qualms about offering their family and friends such a beneficial product.

© 2016 Matt Michel

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Let’s Make Some Business Resolutions

It’s a new year.  It’s a time for new beginnings.  It’s a time for you to take your business to new heights.  Here’s how.  We always make resolutions for ourselves.  We resolve to lose weight, to start exercising, to eat less, etc.  Let’s make some resolutions for our businesses.  Here’s a checklist to help you get started…

This year, I resolve to:

r  Calculate what I need to charge for a double digit net profit and raise prices.

r  Read a new, business related book each month.

r  Set goals for the company and share them with the team.

r  Get on top of my financial statements each month.

r  Identify my key performance indicators and spend one afternoon each week analyzing them.

r  Wrap my white trucks in a bold design.

r  Join the Service Roundtable and concentrate your purchases from the 100+ Roundtable Rewards partners to more than pay for your membership with cash rebates.

r  Hire for attitude and train for skills.

r  Get out of the truck and stay out.

r  Create and document processes for the business.

r  Improve the weekly service/training meetings.

r  Train more frequently.

r  Attend the International Roundtable in Atlanta, April 6-8 (Click for more information)

r  Leave something behind on every service call (e.g., magnets, jar openers, valve tags, etc.)

r  Focus on building your brand.

r  Update your company’s Google Plus page.

r  Attend a training/development event each quarter.

r  Attend the brand new Service World Expo in Las Vegas, October 26-28.

r  Join a service/civic club.

r  Start an affinity marketing program.

r  Find something to be thankful for at the end of every business day.

r  Mail or email your customers a quarterly newsletter.

r  Review and enhance your service agreement program.

r  Offer one new product each quarter.

r  Hold one employee appreciate event each quarter.

r  Enter the company into one or more contests.

r  Get involved with social media for the business.

r  Learn something new every week.

r  Use a marketing calendar.

r  Pay as much attention to your field service team’s grooming as you do to your trucks.

r  Each quarter call the owner of a service business in a different industry and buy lunch to talk about business.

r  Get involved with your local trade association.

r  Read one trade magazine a week.

r  Create a YouTube video for the company each month (it doesn’t have to be perfect).

r  Create a unique selling proposition.

r  Complement someone on your team every day.

r  Consider joining the Service Nation Alliance best practices group.

r  Have fun (it’s a decision).

More important than making resolutions is executing.  The first week in January is the most crowded week of the year at the gym because everyone makes New Year’s resolutions about fitness and weight.  By February, it’s back to normal.  Don’t let that happen to you and your business.  Execute.  And if you need support and accountability, consider the Service Nation Alliance.  I don’t want to make this a commercial, but the cost is about the same as a truck payment and the returns are easily ten times that much.

©2016 Matt Michel

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14 Techniques to Improve CSR Performance

14 Techniques to Improve CSR Performance

The first point of human contact between your company and your prospects and customers is your customer service representative (CSR).  The CSR sets the tone for everything that happens.  Good CSRs close more calls while bad CSRs drive away business.  Here are 14 actions your CSR can take to improve performance.

1.     Give Choices

Giving customers choices between something and something, instead of something and nothing is not new.  It is effective.  Instead of asking if Monday is good, ask whether Monday or Tuesday would be better.  Instead of asking if the customer is interested in a service agreement, ask if the customer would rather pay regular prices or the discounted prices service agreement customers pay.

2.     Assume Yes

As Charlie Greer likes to say, people do not call just to chat someone up.  They call because they have a need or problem they believe the company can solve.  Assume a serviceperson will be dispatched and proceed accordingly.

3.     Say What You Can Do

CSRs should banish the words, “no,” “can’t,” and “won’t” from their vocabulary.  Tell people what can be done, not what cannot.  Instead of saying, “We can’t/don’t/won’t do that,” say “Here’s what we can do.”  Or better yet, “We can do X or Y.  Which would you prefer?”

4.     Take an Acting Class

Once we hired an unemployed professional actor to work in our call center.  Rejection never bothered him.  Angry or abusive customers never bothered him.  He was nonplused no matter what the customer said or did.  I finally figured it out.  He didn’t see himself making calls.  He saw himself playing a role.

Take an acting class from a local community theater.  The skills and techniques used in acting will serve you well when you are on the phone.  Moreover, it makes it more fun.

5.     Stay Calm

When a caller seems upset, the CSR is not the reason for the rage, only the recipient.  This is why acting classes can help.  Let the anger wash over you without taking it personally.  While CSRs should not make light of any situation that has a customer upset, it’s okay to see the humor in it, especially if that helps in keeping calm.

6.     Install a Smile Mirror

People can hear a smile through the phone.  CSRs should put a small mirror next to the phone and tape the word, “smile” at the top to serve as a reminder.

7.     Be Prompt

The CSR’s role is critical.  The whole day breaks down when the CSR is not on station and ready to go when the phones go live.  CSRs should plan on arriving a little early, every day.

8.     Take Breaks

Let’s face it.  Managing the phones and dealing with customers can be a beat down.  It’s important to take breaks, to decompress.  If the company only has one CSR, someone else in the office should be cross trained to provide back up and be able to spot the CSR several times during the day.

9.     Ask Questions

The art of customer service starts with asking the right questions.  When someone calls and asks for a price, ask questions.  Probe.  Find out more about the prospect’s situation and the reason for the call.  Then, ask the customer what day or time would be better to send someone out.

10.  Take Good Notes

Hopefully, the computer system allows CSRs to add notes to each customer’s file.  Write lots of notes.  The more the better.  Capture details (especially the address) and make relationship notes.  For example, if a customer says something about the dog, write it down.  The next time the customer calls, the CSR or another CSR can scan the notes and ask about the dog, making the relationship between the customer and the company feel more personal.

11.  Repeat For Accuracy

Especially when it involves and address, contact information, or a problem, record what the customer says and repeat it to ensure you have accurately captured the information. 

12.  Be Proactive

When the phone isn’t ringing, be proactive.  Make happy calls.  Call customers who rejected a serviceperson’s recommendation in the last three months to see how they are doing and if they have rethought the need to proceed.  Call customers nearing the end of their warranty to ask if everything is performing well and reminding them that the warranty will soon expire.  Often, this leads to more work.

13.  Set Performance Goals

Even if the company has performance goals for CSRs, CSRs can set their own.  Theirs can be higher.  Or, they can be different and more detailed.  Make it a game.  Make it fun.  Track your performance, whether it’s service calls booked, inbound calls taken, outbound calls made, percentage of calls converted, or some other measure.  Your performance will inevitably improve.

14.  Remind Yourself Every Caller is a Person

Every person who calls is a wife or husband, mother or father, son or daughter.  Everyone who calls is a person with hopes and dreams, fears and anxieties.  The CSR is in a position to calm at least some of the fears and to sooth some of the anxieties.  The CSR is in a position to make a difference for the person calling and for the company. 

Do it.  Make a difference today.

©2015 Matt Michel

Should You Share a Brand?

One morning you are catching up on the news online and stare open mouthed at a headline on Drudge accusing your company of refusing to serve police officers.  Within minutes the phone starts ringing with angry customers.  What is happening?  It is a nightmare.

You fight down the panic long enough to plunge into the story.  You hit Google to find other stories.  The story is spreading like wildfire across the Internet.  As you dig in, you realize that the story is not about your company per se.  It is about your brand.  It was the action of a knucklehead employee of a fellow franchisee.

If you think it is bad enough riding herd on your employees, imagine getting tarnished by people who do not even work for you.  This is exactly what happened to a local fast food franchise.  This is the risk of sharing a brand with other contractors.  No matter how stellar you and your team act, in only takes one knucklehead across the franchise system to stain everyone.

It could be much worse than a knucklehead.  Imagine a guy showing up in a brightly logoed company truck and murdering a pair of coeds in their apartment.  It happened.

Fortunately, murder and violent crimes are rare.  Bad service experiences, however, are far more common.  According to the Census, 40 million Americans move annually.  Nearly half move to a different county or state.  Newcomers who arrive in your market bring the biases from their past experiences, which admittedly can be good or bad.  Nevertheless, by sharing a brand you are giving up part of your ability to shape public perception.

The problem of shared brands is broader than franchise organizations.  A growing trend among local churches is to stand independent of the denominational brands, which can be affected by events beyond the local church’s control.  For example, 16 of the 20 largest churches in the Southern Baptist Convention do not use the word, “Baptist” in their name.  These churches are not running from their denomination, only from the shared brand.

You may have heard the term, “brand equity.”  According to BusinessDictionary.com, this is “a brand's power derived from the goodwill and name recognition that it has earned over time, which translates into higher sales volume and higher profit margins against competing brands.” 

If you build equity in a brand you own, you can enjoy the benefits forever, such as higher margins and ultimately, a higher sale price for your business.  Building equity in a brand you do not own is like depositing money in someone else’s bank account.  It may not be there when you want to withdraw it.

So what’s the lesson?  Simple.  Build your brand and no one else’s.  Do not rent a brand.  Do not license a brand.  Do not share a brand.  Own a brand.  Own and build a brand that is yours exclusively.  Make it valuable and enjoy the benefits.

© 2015 Matt Michel

Make Yours Outrageous

You would think that delivering great customer service would be top of mind for anyone who needs to make a living.  You would think. But you would be wrong.

You might also think that the guy who has spent a lifetime preaching Positively Outrageous Service would be hypersensitive to the nuances of loving on customers.  You would think.  And again you would be wrong!

Yesterday I called the dentist who we had been seeing for years and canceled an appointment.  My wife asked, “What made you decide to do that?”

Rather than answering her question, I have a few questions for you. The answers might help you in two ways. First, you might pick up more customers than ever through positive word of mouth.  Second you might lose fewer customers like me who without thinking had just canceled a long term customer relationship almost without conscious consideration.

Here are your questions:

• Are you confident that everyone in your company will deliver a Positively Outrageous Service experience when left on their own and do you know when they don’t?

• Do you know what your customers really want and are the people you hire capable of delivering?

I’m looking forward to keynoting Service Roundtable where we’re going to answer those questions and more!  See you in St. Louis!

                 

     - T. Scott Gross, Author and upcoming Service World Keynote

Service Roundtable members get the lowest rate available anywhere. Call us today at 877.262.3341 to join. Or click here. 

Please Don’t Leave Me!

When the heat is on in the HVAC industry and the phones are ringing non-stop, nobody cares about the need for leads.  Contractors have more leads than they can handle.  They care about getting the work done and keeping their people theirs.  In other words, they worry about competitors poaching technicians and installers.  Here’s how to stop them.

Pay Well

If you are not paying top wages for your market, expect to lose good people to companies who are compensating people at the top of the market.  And yes, paying well means pricing at a level that supports your payroll.

Offer Good Benefits

Young, single technicians are immortal and invincible.  They care about pay, not benefits.  Older, married technicians are a different story.  Being a little generous in benefits can have more impact than added pay.  What is the difference per hour between 100% and 80% company paid healthcare?  Spread it by hour and it’s not much, yet it’s perceived to be incredibly generous.  If you do not offer them, consider dental and low cost term life insurance.

Acknowledge the Spouse’s Sacrifice

Long summer hours do not affect the technicians alone.  They also affect wives and kids.  There may not be an option to work less, but you can show the family you understand the toll they pay and find ways to lessen it.  Send a note or thank you card expressing your understanding of the added burden the summer places on the family and your appreciation of their support.  Include a gift card for a nice restaurant, movie tickets, water park passes, and/or a spa treatment.  Send one in June and another in July.

Pack a Lunch

Your technicians may prefer their own lunch choices, but consider packing lunches for them in the summer with a choice of drinks in a cooler.  Work an arrangement with a local deli to prepare the sandwiches and a competitive price. 

Visit Your Installers

Sometime during the day, take some water or sports drinks to your installers.  If gives you a chance to check on the job, ask how things are going, and show how much you appreciate them.

Stock a Refrigerator

Keep cold drinks and frozen snacks in a refrigerator in the shop for your technicians.  It’s an inexpensive thank you and something to look forward to at the end of the day.

Have Fun

How can you make work fun?  When Service Nation Alliance Vice President of Programs, Bob Viering worked for a Dallas air conditioning contractor he created a contest that involved everyone in the company.  Office staff were teamed with field personnel to offer support, encouragement, and all-around cheerleading.  Bob produced a daily “sportscast” of how the teams were doing with the score and statistics measured by team sales, average ticket, and other measures.  Everyone had fun and it got the competitive juices flowing.  Plus, when the contest concluded, the winning team was treated to a steak dinner at a nice restaurant, while everyone else was served baked beans.  Members can download a copy of “The Great Steak and Beans Contest” from the Service Roundtable if they want to create their own contest.

Give Random Rewards

Get to know your people personally so that you know what some of their personal desires are.  One Service Nation Alliance Member surprised a technician with basketball playoff tickets.  Other technicians might be given weekend use of a lake-house and boat.

Say Thanks – Say It A Lot

Every employee survey shows that people leave over a lack of appreciation more than any other reason.  For those who are money motivated or task driven, it’s hard to imagine the need for, and power of a little heartfelt appreciation.  Say thank you.  Often.  Applaud good work.  Complement people in front of others.  This may be more powerful than anything else you do.

© 2015 Matt Michel

Climbing to the Top

Recently, I had the opportunity to climb Camelback Mountain in Phoenix.  I couldn't help but notice the parallels between making the climb and building a business.

At the foot of Camelback, it doesn't look too difficult.  The trail only ascends 1280 feet.  It starts with a well-maintained, graded path that is steep, but not too strenuous.  Nevertheless, I felt it.  I was slightly out-of-breath and sweating by the second switchback.  Pretending to enjoy the view, I stopped to catch my breath.

After ascending 240 feet, a sign on Echo Saddle warns climbers against proceeding further.  The trail rating so far was moderate.  After the sign, the trail rating to the summit was given two black diamonds and declared to be “extremely strenuous.” Climbers were warned about the potential for “broken bones, heat stroke, heart attack, or even death.”

No worries, I thought.  I can handle it.  I couldn't imagine stopping only a short way into the climb and imagined few did.

The trail did change after that.  The climb became less walking along a trail and more, scrambling over boulders, and steep climbs.  At a couple of the steepest points, handrails were present.  I wasn't ashamed to use them.

I wasn't always sure where the trail went.  I watched other hikers, paying special attention to the climbers who looked like they climbed the mountain regularly. 

When viewed from a distance, Camelback looks barren.  While climbing it, I noticed lots of flowering vegetation and wildlife, ranging from lizards to birds to chipmunks.  And of course, bees.  More on the bees later.

As I climbed, I found I needed to stop and rest more frequently.  It was irritating that far younger and older climbers seemed to fly effortless past me, up the mountain.  My irritation felt shameful when some of these same climbers offered me words of encouragement.

When I stopped, I would look down to see how far I’d come.  Each time it seemed amazing how much progress I’d made and the last time I stopped and what had seemed incredibly high a few minutes before, no longer seemed high at all.

Several times, it looked like I was about to crest the summit.  I’d push a little harder only to find the trail continued up, but I couldn't see the next rise from below.  Finally, I crested the top and gasped at the view.  Well, I gasped in general.  It was a remarkable view of the Valley of the Sun. 

Then, the bees arrived.

A sign at the bottom of the trail warned of bees.  Okay, I thought, there are a few bees around.  Why the sign?  At the top, we found out.  A swarm swept across the peak of Camelback and I discovered I had a lot more energy than I thought as I rushed down the mountain to get out of their way.

Going down the mountain proved more difficult for me than climbing up.  I had to be careful not to slip.  The handrails were even more helpful on the climb down.

So why is this like building a business?

·       Like climbing a mountain, building a business seems a lot easier before you start.

·       Like the sign on Camelback warning you of the dangers of proceeding, there are always naysayers who will tell you why you will fail and why you should give up.  The only sure way to fail is by listening to them.

·       On a mountain and in business, there are times that are far more strenuous than others.  There are times when you need to take a break, catch your breath, and pause so that you can climb even faster.  Stephen Covey called this “sharpening your saw.”

·       The path up a mountain or in business is not always clear.  There is often more than one way up.

·       Like watching other climbers for clues about a faster way to the top, it helps in business if you can learn the easier path from other business owners and avoid mistakes they made in the past.

Matt Michel at the top.

·       If other climbers scaled Camelback faster than I did, it didn't hurt me.  It also doesn't hurt you when other businesses around you, grow faster.  I climbed at a pace I could manage.  Likewise, you grow a business at a pace you can manage. 

·       Like climbers seem to feel a camaraderie, business owners relate to each other.  They encourage each other.  They know what you are going through.

·       Like Camelback, the opportunities for your business may seem barren, but if you look, you will notice rich opportunities others cannot see.  Even for you to see them, you need to pause from your struggle for a minute or two and take a look around.  It’s amazing what abundance surround every industry and business.

·       The view from the top is always better and more satisfying, and at each stage of your business’ growth, your earlier milestones seem almost trivial.

·       It’s also a lot more fun climbing up a mountain than going down.  Similarly, running a growing business is more fun than a shrinking one.

·       If you’re climbing Camelback, you need to watch out for the bees.  If you’re running a contracting company, watch out for the stings.

© 2015 Matt Michel