Top Three Service Agreement Myths Busted
You may be misjudging a powerful tool
I have the distinct opportunity to work with high-caliber plumbing, HVAC, and electrical companies all across North America, and one thing I find in common with those companies that drive double-digit profitability month in and month out, versus those that don’t, is the success they have in implementing solid service plans for their customers.
You may be saying to yourself, HVAC is where you see the benefits of a service plan (also known as service “agreements,” “partner plans,” “club memberships,” etc.), but in plumbing and electrical there’s not much substance to it at all. I hate to break it to you, but that thinking is completely wrong. Let me dispel the top three myths I hear in this industry regarding service plans and show you how to design and execute a plan that is not only successful, but is also worth every penny you charge.
Myth #1: Service plans are just a discount program.
Fact: If you buy into this myth then you don’t fully understand the benefits of your plan membership. Often, I find that owners or key managers cannot name 10 benefits of their plans, can you? Stop reading this article and name 10 benefits of your plan. Was a discount in one of your top three benefits? If so, you are not alone: Discounts are typically the top response I receive when I run this exercise with owners and managers.
Don’t get me wrong, providing a discount is a true benefit, but it better not be your leading selling point. If you rely on discounts as a closing tool, you will soon find your membership start to stagnate, or even worse, decline. The benefits of the program need to be demonstrated at every interaction a customer has with your company. Discounts are great, but have very limiting effects on the customer relationship.
One way you can tell if you lead with discounts is to measure the success you have with your follow-up call. Will the customer let you return to run the follow up visit? If not, it may not be because the customer does not like you, it may be because they do not see the value in the visit. How can they when a discount on repairs is all they have been exposed to?
Exercise: List all the benefits of your service plan.
Myth #2: I can’t get my staff to buy into the service plan.
Fact: Uninformed employees will start to make biased assumptions about a product or service. If they do not believe in your service plan, they will not bring it up to your customers (unless the discount is great enough).
I have heard all the excuses of why the program will not work, and most of those excuses are self-imposed roadblocks or security blankets to help us justify why we have a broken system. Putting that aside, let’s focus on the reasons why service plans will succeed. Go back and review your list of benefits; next to each benefit identify and write down who is the beneficiary: customer, employee, or company. For example: If you wrote down “10% discount” (as many of you have), now write down “customer,” because they are the beneficiary of that benefit.
Can there be more than one beneficiary for a benefit? Yes! On your first pass, what did you notice? Is the customer the main beneficiary for most of your benefits? When I run this exercise, I typically find the customer dominates the list of benefits—if that is the case, is it any wonder why your techs and staff are not selling your plans?
They want to know what’s in it for them. To have a successful service plan, your staff needs to see how they can benefit from the program for them to truly buy in as well. Would you believe me that your staff can benefit as much or more than your customers?
Exercise: Revisit your list of benefits for your partner plan, dig deeper, and list the benefits for your employees and your company. The goal is to have the list somewhat balanced. Just so you know, I am looking at my list and I have at least 15 line items in each area.
Myth #3: We charge more for the plan than what it is worth.
Fact: This myth is extremely easy to debunk. Look at each of your plan benefits. Now, I want you to write down the value that you feel the benefit brings to the beneficiary.
I will use the 10% benefit as an example. If your average ticket is $700, then the value would be $70. That was an easy example, what about priority service? What is your time worth? Could you say the customer would pay $50 for that benefit? There are no wrong answers here, but what is important is you capture what you feel is the value. You will soon see the dollar value is going to far outweigh what you charge your customers.
Exercise: List the dollar value next to each benefit on your list. When completed, your list should start to look like the table below.
Service plan visits are one of the best opportunities to deliver on your company’s value proposition. But one needs to be able to see the benefits from all angles. When viewed this way, your actions will start to mirror the benefits, amazing results will start to emerge. Now that you have completed the exercises, do you see your service plan through a different lens? You now see it as it truly is, and what a powerful product you have to offer your customers, employees and company.
I often say to the members I coach that the long-term growth and profitability of a company is found in a solid service plan. Take these tips and run this exercise with your team, and I promise you will see great results.
To your success!