You Need To Know the Age of Your Customers Equipment
Would you like to increase you equipment sales dramatically-without spending one more dime on marketing? Most would say yes. How? It begins with tracking. Do you know how old your customer's equipment is? Most don't. Do you know how many sales leads each tech generates, each month? Again, most don't.
Many reading this article only do plumbing, so when it comes to equipment we are talking water heaters, sub-pumps and the like. Some reading this article also provide heating and/or cooling equipment as well. In your case we are talking about the age of your customers' furnaces, heat pumps and/or air conditioners.
Step one is for management to define what old, medium and new equipment ages are. When we say "old" the question pertains to equipment that is so old the customer needs to seriously consider replacing the equipment.
Part of the reason for replacement would be that the equipment is simply expected to fail within a relatively short period of time. Another reason for replacement of old equipment would be efficiency. Newer models of equipment are simply more efficient; therefore they use less fuel, and are therefore less costly to operate.
Medium equipment age is slanted more to the efficiency side. Although the equipment may be operating properly, the owner may want to consider replacement based on higher efficiency units or newer models with more features.
New equipment, as defined here, describes equipment that the average owner has had for a relatively short period of time and probably would NOT consider replacing.
Step two is to determine the expected number of leads a tech should generate based on the age of equipment he or she looks at. The overall sales lead goal is to convert 12 percent of all service calls into qualified sales leads.
When the tech is looking at "old" equipment, 33 percent of those calls should be turned into qualified sales leads. Most service techs average 5 calls a day. Based on 5 calls a day, over 20 working days a month, that totals 100 total calls a month. At a minimum, the tech would create 12 percent as qualified sales leads, or 12 leads a month. If all the calls were on old equipment the tech should generate 33 percent qualified leads a month. The average tech should, therefore, be generating between 12 and 33 qualified sales leads a month. That may be water heaters, furnaces or air conditioners.
Step three is tracking by tech. I can hear you now: "Tracking is tough, Tom, I can hardly get the techs to fill out a time sheet. Now you want me to have them report on the age of the equipment? It's not going to happen!" Well that may be your attitude now, but lets look at some potential benefits to see if the working of proper reporting is worth the effort.
Without proper tracking you will have no idea which techs are creating qualified sales leads and which ones are not. You have to inspect what you expect. Let's assume you have four service techs. For examples sake, let's assume each looked at 50 old pieces of equipment during the month. That means each tech should have created 16 qualified sales leads. That means 64 qualified sales leads should have been generated during the month.
Now, since most companies don't track sales in total--much less by tech--they have no idea of the potential LOST sales they have--sales that could have easily been the difference between overall profit and loss for the previous month. Let's see what your company's potential additional gross sales might have been, if the sales leads were generated.
Let's assume all 64 leads were for water heaters. The average selling price is perhaps $500 per water heater and the closing rate for you or your trained sales person is 50 percent. The additional gross sales for the month would have been:
Additional Gross Sales = 64 leads x 50 percent close rate x $500 per sale
Again, 64 leads, 50 percent close rate with an average selling price of $4,000.
Additional Gross Sales = 64 leads x 50 percent x $4,000
Do you think $16,000 to $128,000 in additional gross sales would make a different in your overall company profit?
Did your techs generate 64 leads for the months? How many leads did each tech generate? You won't know until you track the age of the equipment and the sales leads, by tech.
After tracking you might find out 66 total leads on old equipment were generated. At first glance that would think everything is great, since the company goal was 64. Now it's time to look at the results, by tech, keeping in mind each tech looked at 50 old pieces of equipment, therefore each had the same "opportunity" to create sales leads.
Perhaps Joe created 27 leads, Sam 20, Bill had five and William created 14. Looking at the numbers, and drawing conclusions, is not a difficult thing to do when you have tracked the numbers. It is obvious Joe is a selling machine and Sam is doing slightly better than expected. William is OK at 14, so where is the problem? Bill is the problem, he only generated five leads for the month, even tough he had the same "opportunity" the other techs had. It is time for the company to invest some serious sales training dollars in Bill.
Let's assume Bill averages four leads each month, for the year. Let's also assume he looks at 50 old pieces of equipment each month. Now, let's assume we invest some time and money into Bill for sales training. Instead of generating 4 leads a month he is back to the expected 12 leads. That is an additional 96 qualified sales leads for the coming 12 months. If those 96 leads are water heaters, that means Bill will increase gross sales for the company by about $24,000 for the year. If those leads are furnaces at $4,000 each and a 50 percent close rate that's an additional $192,000 for the year! Would that help the company's bottom line profitability? You bet it would!
Tracking performance, by tech, is very important and can result in a significant amount of increased gross profit for the company.
Sales leads aren't the only thing that needs to be tracked. You need to set goals and track the time to perform service agreements, the number of no show calls, percent of money collected, the number of call backs, average travel time and a whole lot more.
The more you track, the higher the profit goes. If you are serious about running a highly profitable service department give some thought to attending Grandy & Associates' "Service Managers University" utilizing the ProfitMaxx software. It WILL increase your service department's profitability. Contact Grandy & Associates for more details.
We talked a lot about "Qualified Sales Leads" this month. What is a Qualified Sales Lead"? That will be the topic of next month's article.