Insurance sales is a difficult job, because it's difficult to sell an intangible benefit. Selling something that can't be seen or touched requires special selling skills and visuals. In past articles, I've written about the all-important selling tools that myself and other sales professionals swear by. As our industry changes, due to increased competition, and in an economy demanding the lowest price for everything, we must also change.
Competitors tell prospective customers that they can provide all of the necessary preventive maintenance (PM) or service agreement (SA) tasks for a fraction of what you know it would really require. But it’s difficult to prove without the right tools. Remember, prospects want to believe these delusions.
My time study analysis was derived from 111 contractors from my past network of customers. More than 1,100 technicians took part in the study, and the results are very impressive. If a prospect agrees on a comprehensive PM task list, I can simply show how long each task takes. When we add the task times and frequencies, there's little left to negotiate. If the price is "too high", I ask them what tasks they'd like to remove. On some sales calls, I've actually built a maintenance program in the prospect's office, with complete buy-in.
Audit Maintenance Activity
How many times do we see a competitor’s price for a PM contract that’s so low, they don't have time to do anything more than change filters? However, without seeing proof, customers want to believe in the low budget path.
On the first page of my "Maintenance Audit" form, I list the customer's current annual maintenance budget, the number of inspections provided, and the number of units. In the middle of the page, I list the number of filters and changes. I plug in a price for the filter material, and the labor to change the filters (usually allowing a conservative 15 minutes per unit change). On subsequent lines, I bring in the travel time and truck/trip charges.
I then add all of the costs, which represent only the cost for changing filters. The sum total is subtracted from their annual maintenance budget. The difference is divided by the competitor's hourly rate (I usually guesstimate a conservative number), then by the number of units, and finally by the number of inspections. Almost always, I show a ridiculously low number, which means their present program is providing nothing more than filter changes. If that's all they really want, they should go to a filter company and save even more.
Life-cycle-costing involves addressing all costs associated with owning and operating HVAC systems. The largest cost is always the amortized replacement cost of the systems. For all unitary and split systems, I use 15 years (per ASHRAE guidelines) for an expected, useful, system life expectancy. By determining the age of the equipment, we arrive at the remaining useful life.
By implementing a comprehensive maintenance program, years can be added to equipment operating life. The difference is the cost avoidance of early replacement.
Consider Impending Utility Rate Hikes
The next large cost is in energy waste. We can be certain that the power companies are going to increase rates for electricity, and all fossil fuel generated energy, making this segment of the pie even more significant.
Disposables such as belts, filters, and refrigerants make up another portion of every cost of ownership. Generating purchase orders and the handling unnecessary invoices drives up the cost of administration. In some cases, in-house staff can be eliminated with major savings. Even with comprehensive maintenance, some major components will fail sooner or later. When all of these costs are brought to the prospect’s attention, an accurate comparison can be made, eliminating quick decisions based upon low price.
I had a great sales mentor. He said, "If a prospect doesn't buy, they either didn’t understand you or they didn’t believe you". Making use of professional selling tools goes a long way in solving both issues.
Earl King is founder of King Productions International, a commercial HVAC contracting sales consulting firm based in Texas. He speaks to associations and HVAC trade groups, and consults with commercial contractors across the U.S. In addition to writing a monthly column for ContractingBusiness.com. Email Earl with any questions or comments, at [email protected], or call him at 515/321-2426.
THIS PRESENTATION is based on "Making Sales 'Intangibles' More Tangible," which Earl King presented at the ContractingBusiness.com Commercial HVACR Symposium in 2010. The next Commercial HVACR Symposium will be held Sept. 21-22 in Indianapolis, IN. Visit http://contractingbusiness.com/hvacrsymposium/ for additional information.