Ask the Experts | Converting Customers to Service Agreements
Question: We have a database of almost 3,000 consistent clients that seem to use us exclusively. We want to convert these into formal service agreements. Can you offer some advice on how to go about that process?
Gary Elekes; Founder, EPC Training:
First, come to the EGIA workshop on service agreements, there’s a ton of stuff that’s in there. It’s great that you have 3000 consistent customers, that’s awesome.
As a rule of thumb, you want about 1000 agreements per million dollars of residential revenue – that’s residential service, replacement, residential maintenance, IAQ, etc. You combine that set of numbers and if that’s a million dollars, you should have 1000 agreements. Ideally, we’d like to see that at 1500.
The other metric is that 50% of that database – 1500 of those customers – ought to be logged on to what we would consider to be a formal service agreement. I’m going to define a formal service agreement in this answer as somebody that’s not doing precision tune-ups but is actually on a prepaid or a monthly debit or credit program where you have given extended benefits attached to the service agreement. So, it’s not just calling them in spring or fall or doing a $79 tune-up.
That could also extend to what we call an MVP, which is a one-year agreement where we cover parts and labor. So, there’s lots of different ways to attack the club program. We’ll leave that as the definition.
How do you go about getting a customer on a service agreement plan? Schedule them so that they are getting the precision tune-up and you want your service agreement to offer a benefit Matrix that extends past the tune-up. An example is I give a lifetime guarantee on repairs, parts and labor, and that includes no diagnostic fee if they’re on the club agreement program. We would not do that for somebody that was just doing precision tune-ups because at that point, they aren’t an exclusive customer to our business.
So, the idea would be if it’s a $79 Precision Tune Up and you did two – let’s call that $160 a year – you might want to price your maintenance agreement to be in line with that. Some companies will price a little higher, some companies want to price a little bit lower. We price it pretty much the same. The goal would be that the client actually gets more benefits for essentially the same price that they would get if they access the two tune-ups per year.
I also think that you’re probably going to need tech training. How you’re approaching your technician training is really the key. Your call center training defines your customer relationship at the front end. When people call in we’re scripting and instantly discussing the idea of a club agreement. The prompt to the question is to be able to have the conversation – would you enjoy it if our technician explained to you the benefits of that program? And oh, by the way, you can save 20% off any repairs and a wave of the diagnostic fee. That’s just an arbitrary example.
Your call center needs to have a scripting process at intake that identifies what you as a company want to say to the client. Your technicians, your marketing collateral materials, your pricing strategy, everything around your business culturally needs to be tied into service agreements. You can have incentive contest for the guys, compensation for the guys, compensation for the team in the office, shared compensation systems, etc.
I could literally spend hours talking about how to do this. It is a workshop that we teach at EGIA, it’s a full one-day workshop and it could go more than one day because there’s so many different things you can actually do. I think it comes down to one thing and that’s that the owner being committed. The service department must buy into that culture and the owner must reinforce that on a day-to-day basis by measuring success.
We always measure gets done. It’s not something that’s going to happen in one day or one week or one month. Most likely it’s going to take several years to get you up to the level you’re describing but it’s very beneficial to do that.
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