It wasn’t long ago that a good friend told me when he began his career as a service technician, his favorite service call was one where the customer left the basement trap door unlocked. He could then enter unannounced, service the customer’s boiler and sneak back out, never having to see or talk to anyone.
Imagine the customer’s surprise after receiving a bill for boiler service they never knew happened.
That was 35 years ago. Today, everyone wants more information. In fact, with social media Web sites like Facebook and Twitter, we are now in the minute by minute information age. Most marketing agencies are suggesting social media marketing to target younger customers that spend time ‘tweeting.”
Considering the changing times, it may be time to consider a better way to communicate with customers when providing service.
The two best methods I know to better communicate with service customers is with a well designed flat rate pricing system and a well thought out maintenance agreement program.
Communicating Through Repair Pricing
We all know when a needed repair is diagnosed by a service technician, the very first question from the customer is, ‘How much will that cost?” The old way of time and material pricing doesn’t lend itself well to being able to accurately answer that question. In trying to respond, the technician either guesses at the price or tells the customer to call the office’neither response works well.
However, there is a better way. Today, many oil dealers and HVAC service companies have pricing information at their immediate disposal by using a flat rate pricing system.
When using flat rate pricing, separate labor charges and part fees no longer apply. All repair fees for a multitude of repairs are pre-calculated and printed in a complete repair guide. Repair pricing for each company is customized, based on the service company’s desired labor rates and part mark up multipliers. Those numbers are then applied to the database of repair labor times and parts for each repair. The result is a full set of repairs that makes it very easy for technicians to communicate upfront with customers about needed repairs and associated repair fees.
When repair fees are quoted upfront, customers are much more accepting of the charge, regardless of the price and customer complaints are reduced. Consequently, customer satisfaction improves and fewer repair credits and discounts are issued. That is true, even though most service companies actually charge higher rates when using flat rate pricing. The net result is a more profitable service division.
Maintenance Agreements Improve Communication
Perhaps the most prevalent display of negative communication between fuel dealers and their customers involves confusion over service contract coverage. Many customers purchase service contracts from their fuel dealer believing that any needed repairs will be completed at no charge. While some companies offer contracts that do indeed cover all needed repairs, many service contracts have limited repair coverage. Worse yet, most companies offer a good, better, best variety of contracts that exacerbates the confusion. Company personnel often confuse what is covered and not covered by any given contract and have difficulty or fail to communicate the exclusions to the customer.
When service contract details are not discussed, not understood and not remembered, customer relations break down. This communication deficiency can create an adversarial relationship between fuel dealers and their customers, particularly when the customer demands a repair discount or the complete waiving of repair fees.
Maintenance agreements, on the other hand, have very clear, concise terms. A typical maintenance agreement will simply cover the system tune up and a discount on future repairs. Maintenance agreements do not allow for ‘no charge” repairs. It is this simplicity that allows customers to easily understand agreement terms. Consequently, there are no other expectations and customer relations improve significantly.
I truly believe maintenance agreements are a significant improvement over service contracts and a real solution to communications problems. However, I am not suggesting that you discard your service contracts altogether.
My suggestion would be to simplify your offerings by selling only one type of service contract with complete coverage to those customers that already have a contract and are willing to pay a higher fee for a full coverage contract. As an alternative, a lower priced maintenance agreement should be available to those that do not want to pay the higher price or do not currently have a service contract. Both types of coverage should be carefully thought out and priced appropriately. However, the difference in the fee for the service contract when compared to the maintenance agreement should be far enough apart to make the maintenance agreement a desirable alternative to the higher priced service contract.
Another Important Advantage of Maintenance Agreements
Another advantage of maintenance agreements over service contracts involves the sale of replacement equipment. When a fuel dealer completes repair work for a customer at no charge under a service contract, there is no incentive for a customer to replace old or obsolete equipment. That is because most of the risk and expense is incurred by the fuel dealer.
Worse yet, if the customer’s equipment is in such poor condition that the fuel dealer refuses to write a service contract, once again the dealer and the customer are at odds and the risk of losing the fuel customer increases drastically.
On the other hand, when a maintenance agreement customer is faced with significant repair fees, even though the fees are discounted, they are much more inclined to replace worn out or obsolete equipment.
Combining Flat Rate Pricing and Maintenance Agreements
The best flat rate pricing guides have multiple pricing columns that display repair fees for straight time, overtime and maintenance agreement customers. The repair fees displayed in print allow technicians to easily communicate the appropriate price to the customer from the correct column, by simply pointing to the repair description and price. Some guides actually display the savings a customer can achieve by becoming a maintenance agreement customer. When properly used to communicate the repair fee and the maintenance agreement benefits and discounts available, a technician can easily sell more maintenance agreements on the spot.
Therefore, combining a flat rate pricing system and maintenance agreement program in your fuel business, will likely make the difference between making and losing money in your service division.
The best decision for your company is to implement flat rate pricing and maintenance agreements now. Both can be accomplished during this spring and summer. Both will also contribute significantly to your bottom line with higher dollars charged and lower discounts given. Most importantly, both will improve the communication with your customers for a much higher level of customer satisfaction.
Jim D’Amico is president of Profit Strategies, Inc. Profit Strategies offers Flat Rate Pricing and Maintenance Agreement Management systems to the energy industry. He can be reached at JimD@ProfitStrategies.net or 800-353-4393.
[Addit ARTWORK: Some stock art of a serviceperson handing over a contract to sign or some such?]