Quality Management Systems: Those Who Abandoned You May Come Home

April 01, 2013

Month after month, you review your maintenance agreement numbers and find that they are dwindling each time you look at them. The last few years may have been tough in a lot of different areas of your company, but in many cases, your service department got hit twice. First, when all those customers who renewed their maintenance agreement year after year decided not to renew their agreement last year. Then, even though you ended up paying them more service calls because their systems were not properly maintained, you got hit again because some of the parts were under extended manufacturers’ warranties. You could not charge for the parts or realize a profit on them.

Bill Kinnard

We May Be Part of the Problem

Did you ever think that the way you look at maintenance agreements might be part of the problem? As contractors, we tend to focus mostly on the HVAC tune-up. That’s the wrong approach. It doesn’t matter what trade you specialize in—the house is a home performance system. As such, it is made up of many different components, including the HVAC system, insulation, windows, doors, wiring, plumbing, and so on. These are all subsystems of the home. You know that when the entire system is properly maintained, it will cost less to operate. Your clients will use less water, have fewer drafts, draw less electricity, heat the house for less—and the list goes on and on. That needs to be a major part of your message.

They May Not Really Be Gone

The past few years were rough for most people. Your customers were all reconsidering where they spent their money. For many, that meant that they did not renew their maintenance agreement with your company, even though they recognized the value that it (and your company) provides. It was all about calculated risks for your customers. They were gambling that their system could go one year without a checkup. Once their financial picture improves, they will probably be back—if you give them a bit of encouragement.

Now is the time to reconnect with your customers.

Now Is the Time to Be Talking!

Now is the time to reconnect with these customers who opted to drop out of your maintenance agreement program. We are fast approaching the new heating season, and a reminder will bring some of these lost customers back into the fold. Send them a letter letting them know that you want them back. Offer a "returning customer” discount. Remind them of the benefits of owning a maintenance agreement; remind them that a properly maintained system works better. Keep in mind that many of your customers who did not renew their agreements over the last couple of years may even be embarrassed that they dropped the program. They may simply need an invitation to come back.

Improve Your Payment Options … and Your Work Flow

This is a great time to change your payment options. Offering monthly payments can ease the hit on your customers’ cash flow. It’s much easier to handle $22 per month than it is to cough up $266. You’re always looking for ways to level out your cash flow. Why wouldn't your customers want to do the same thing?

Offering monthly payment terms for your maintenance agreements has other benefits. Let’s look at a few of them.

Better cash flow. If you allow your customers to pay monthly, you’ll have a steady stream of revenue coming in every month. Level out some of those cash flow peaks and valleys.

Fewer cancellations. State in your agreement that after the first year, the monthly payment program will remain in effect until the customer decides to opt out. You will find that most customers will keep the program in place indefinitely. All you have to do is continue to call and schedule their checkups.

More-effective scheduling. Your maintenance agreement program is limited by your ability to schedule checkups on a regular basis. You know how it goes—you called every customer at least three times to schedule a checkup and you never got a call back. You owe them the checkup because they paid for it; you struggle with the fact that you collected the money but can’t provide the service. At best, it is not uncommon to get a response from, and schedule a checkup for, only about 70% of customers who pay annually. But for customers who pay monthly, the response rate goes up to 93%. Do the math. How much does it cost to have your staff call your customers over and over only to leave another message?

Automate the Process

Talk to your credit card processor and sign up for automated recurring billing (ARB). Most processors provide this service. If yours doesn’t, consider finding one who does. With ARB, you simply log into your account on the processor’s web site and set up a subscription for your customer. For example, you tell the system that you want to charge your customer $22 on the first of every month for the next 12 months, or until you manually cancel the subscription. Once this is done, the system will automatically charge the customer on the assigned day and send you an e-mail with the confirmation number. I recommend that you set all of your charges to the same one or two days each month. That way, you have to post payments to account on just one or two days, as opposed to doing a few each day.

The economy is slowly healing, and step-by-step, our industry is moving ahead. It’s time to bring back those customers who were forced to drop out of your maintenance agreement program during the recession. Welcome them by extending the invitation and making it easy to return.

Bill Kinnard is vice president for the North Region of Grandy & Associates. He has 26 years of experience in HVAC sales, service management, sales management, and customer service.

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