Stop Selling Your Service Agreement

By Drew Cameron - May 1, 2019

As seen on:

The most successful, profitable, longest-standing, customer-oriented, best-reviewed, and highest-rated residential HVAC companies have a bunch of service agreement customers. This committed captive audience yields guaranteed maintenance (and repair) visits along with the potential of ancillary product and service purchases and future replacement equipment sales.

The key performance indicator (KPI) for a healthy company is 1000 agreements per million dollars of residential revenue. A vibrant and thriving company has 1500 agreements per million dollars of revenue. Another KPI is for the company to have 50% or more of their customers secured on service agreements. These KPIs are great, but also limiting in their scope and potential opportunity.

The problem I see with most companies is that their service agreement program offers a singular agreement. A choice of one is a choice of none. We need to offer customers options, not ultimatums (by definition a final proposition, especially one whose rejection will end negotiations and cause a resort to force or other direct action, often in the opposite desired direction).

Think about this way: If you were a car dealer and you ask people who are in the market for a car, “Would you like to buy car from us?,” many people would say no. But what if you ask, “Of the various cars we offer, which model is most appealing to you: the sports coupe, the sedan or the hatchback?” Now the customer has choices or options and a couple things to say no to. Some customers will still say no to buying a car at all from me now (they may come back later), but many more will select one of the choices offered. In the second scenario, the customer must state they don’t want anything that was offered (a 75% chance of earning the customer’s business – 3 choices vs. no), whereas in the first scenario the customer can say ‘yes’ or ‘no’ – a 50% chance based on math, but less than a 25% chance based on buyer psychology and statistics when the only choices offered are yes and no, and in order to have options the customer has to consider other dealers.

We all know the more active customers (someone who has paid for a product or service in the last 36 months) you have, the greater the revenue and profit generation potential. Service agreement customers meet this criteria since they pay for their agreement each year. However, if you only offer one level of agreement to lock in customers, the odds of you locking in the maximum amount of people are less than if you were to offer people a series of choices to become an agreement customer.

This is why we recommend that our clients offer multiple options when it comes to service agreements. Offering multiple levels of service allows customers to choose the level of access, service and engagement that makes sense to them, and some things to which they can say no.

People pay for access, service, and value-added benefits on a spectrum of DIY to “done cheap” to “best value” to “done for me,” “done right” and “one less thing I have to worry about.” People will pay a premium for pain- and problems-avoided or solved, life impacts, and extraordinary and exclusive experiences.

Vary the level of access, service, and benefits from “service at our leisure, not at your convenience” to “service at your convenience, not our leisure.” All customers get a world-class service and customer care experience, company newsletter, money and energy saving tips, exclusive offers, and access to special events.

Example of a tiered benefit and access agreement program (dollar amounts and percentages are for demonstration purposes only):

Pals:

FREE to join for people providing contact information (and who like us on Facebook)

  • Dedicated live-person 24/7 customer care line
  • Standard trip and diagnostic fee
  • 5% off twice annual precision tune-ups (optional)
  • 5% off repairs
  • 3% off equipment
  • Standard repair warranty
  • Priority 2 service access
  • No accumulative spend accrual account with point banking from year to year
  • 1 point per $2 spent Accumulative spend accrual account with point banking from year to year

Peeps:

$5/mo.

  • Inspect all home mechanicals
  • Dedicated elite live person 24/7 customer care line
  • $20 discount off trip and diagnostic fee
  • 10% off twice annual precision tune-ups
  • 10% off repairs
  • 5% off equipment
  • Tier 2 Extended repair warranty
  • Priority 1 service access
  • 1 point per $1 spent Accumulative spend accrual account with point banking from year to year

Patrons:

$16.50/mo.

  • Inspect all home mechanicals
  • HVAC tune-ups with NCI protocols and iManifold testing
  • Dedicated elite live person 24/7 customer care line
  • Chat with an eExpert for FREE on minor concerns or D.I.Y.
  • $40 discount off trip and diagnostic fee
  • 15% off twice annual precision tune-ups
  • 15% off repairs
  • No-breakdown guarantee
  • Tier 1 Extended repair warranty
  • 7% off equipment
  • Priority 1 service access
  • 2 points per $1 spent Accumulative spend accrual account with point banking from year to year

Partners:

$24.50/mo.

  • Inspect all home mechanicals
  • HVAC tune-ups with NCI protocols and iManifold testing
  • Water heater tune-up
  • Smart home - remote thermostat, access and control
  • Dedicated elite live person 24/7 customer care line
  • Chat with an expert for FREE on minor concerns or D.I.Y.
  • $0 trip and diagnostic fee
  • 15% off twice annual precision tune-ups
  • 15% off repairs
  • No-breakdown guarantee
  • Tier 1 Extended repair warranty
  • 10% off equipment
  • Priority 1 service access
  • 2 points per $1 spent Accumulative spend accrual account with point banking from year to year

Power Players:

$36.50/mo.

  • Inspect all home mechanicals
  • HVAC tune-ups with NCI protocols and iManifold system performance testing
  • Water heater tune-up
  • Smart home technology - remote thermostat, keyless door lock, doorbell camera, access and control
  • Dedicated elite live person 24/7 customer care line
  • Chat with an expert for FREE on minor concern or D.I.Y.
  • $0 trip and diagnostic fee
  • 20% off twice annual precision tune-ups
  • 20% off repairs
  • No-breakdown guarantee
  • Tier 1 Extended repair warranty
  • 10% off equipment
  • Priority 1 service access
  • 3 points per $1 spent Accumulative spend accrual account with point banking from year to year

Creating more opportunities for connection to your company is more sustainable with less of a marketing expense to create future marketing and purchase opportunities for other services. This model will make you more sticky to more customers and help your build your ecosystem.

ABOUT THE AUTHOR

Drew Cameron

President, HVAC Sellutions & Energy Design System, Inc.

HVACSellutions.com

Drew Cameron, America’s Most Sought After Sales & Marketing Strategy Adviser to Home Services Contractors, is president of HVAC Sellutions & Energy Design Systems, Inc.; the premier alliance providing industry-leading marketing planning, budgeting, content and support; sales recruiting, education, coaching, consulting and performance enhancement for Home Services Contractors; and design and economic analysis sales software for HVAC and Home Performance companies. Drew’s 40 years of experience in all facets of running a residential contracting business helps contractors implement effective lead development strategies and build multi-million-dollar profit-generating home services companies. Drew is a renowned author, educator, coach, consultant, inspirational/educational/”irritational” speaker, software developer, industry philanthropist, and a Tom McCart International Consultant Award Winner as well as a Board member, a Foundation Board Trustee, and a Contractor University Founder & Faculty member for Electric & Gas industries Association (EGIA); a Service Roundtable Consult & Coach Partner & Preferred Vendor; and an Air Conditioning Contractors of America (ACCA) member.