5 New Ways of Looking at Service Agreements

Most contractors and their teams are aware of the value of service agreements. However, there are some valuable aspects of service agreements that tend to go unexplored.

Most contractors and their teams are aware of the value of service agreements. For the contractor, service agreements mean guaranteed work for technicians and a steady revenue stream.

For customers, service agreements mean peace of mind, priority service, and discounts on service, add-ons, and replacement items. Those elements — and the win-win scenario they create for both contractors and customers — are etched into the very souls of successful contracting firms. There are some aspects of service agreements that tend to go unexplored, however. Here are five thoughts for those who would like to delve a little deeper into the wonderful world of service agreements.

  1. Go Green

    Green is hot right now, and likely will be into the future. One of the benefits of service agreements is that regular maintenance keeps customers' HVAC systems operating at peak efficiency and capacity. It's funny, we had always looked at it as “smart,” but in today's market it's “green.” Whatever you call it, it's an opportunity.

    We make sure the coils are clean at every maintenance check. Dirty coils are the antithesis of green: they decrease capacity, increase run time, increase energy bills, and decrease system life. We've begun performing superheat and subcooling checks on every system, to confirm that their refrigerant charge is correct. We're always looking for ways to upgrade what we do on our maintenances to become even more green, to make sure that our customers are truly getting the most out of their systems.

    For about 12 years we've been offering blower door testing and whole-house comfort checks. Blower door testing helps us find the air leaks and identify the rate of duct leakage in customers' homes. A few years ago, we began a program where we show customers how much money they can save on their energy bills without replacing their equipment. We found we could save our customers 20% to 30% on their energy bills simply doing duct and envelope sealing. In addition to the energy savings, their comfort levels increased.

  2. Trust Leads to Replacements

    One of the true values of service agreements is the creation of a long-term relationships based on trust. Customers can feel comfortable that their needs are being taken care of and they don't need to shop around. Contractors knows that in the long run, taking care of the same customers year after year after year gives them something to base their business on. Those kinds of customers become the core of their business. They're customers for life, and such customers are, in essence, the value of the business.

    By properly servicing customers, you have the opportunity to talk to them at every visit to ask them if they've had any changes or upgrades to the home, or if there are any comfort problems. You can then recommend items that can help make their lives more comfortable, and their HVAC system more efficient. If you do a good enough job of discussing products, services and upgrades with your customers, you'll be able to help them plan for replacement of equipment when the time comes. That's obviously the goal of everything: the customer for life.

    Service agreements, and the trust you build through them, help kick up your company's replacement business. Quality service plus quality replacements equals customer referrals, which is the best marketing in the world.

  3. Minimize Your Risk

    There's a risk involved in offering a service agreement, especially one that includes labor coverage. To minimize this risk, make sure that the customer's system is up to industry standards before you put it under a contract.

    When you visit a customer for a first maintenance call — before you have offered a service agreement — check the system with a fine-tooth comb. Discuss and correct potential issues before you offer a service contract that covers labor, or parts and labor.

    In addition to making sure that the coils are clean, make sure there's good filtration and ventilation, and that there are no major issues with the ductwork that will drag a system down and could cause problems. Set a maximum system age beyond which you don't offer an agreement that includes labor coverage.

  4. Bite The Bullet

    Some companies believe they need to make a profit on every single service agreement. They decry their service agreement program if they have to put in a compressor under warranty, and it's going to cost them more to do that than they took in on the agreement.

    Those companies, however, are looking at that one agreement, not necessarily what they're doing in the overall program. In the end you have to look at the overall profitability of offering service agreements. If you manage the program correctly, it's a very profitable part of the business. Even if you lose money on 5% or 10% of the customer base, remember that you've got 90% of your customer base to outweigh that.

    Yes, you have to be wary that there will be some bad deals out there, but that's why you provide great first maintenance, and that's why you perform great maintenance checks every time you go out to the home. You reduce your risk by catching issues upfront. You keep your company free to take on more business during busy times by doing a little bit more work on your service agreement customers' systems during the slow times.

  5. Make Them Special

    You must constantly reinforce the value of the agreement. This takes ongoing training for all your employees; from your technicians in the field to everyone who answers the phone in the office. Every contact that a service agreement customer has with your business, should feel as if you value their business.

Recognize your customers by saying, “I see you're a service agreement customer, and we want to be sure you're really taken care of.” You don't have to break down all the benefits every time you talk to them. You don't have to explain the priority emergency service and all the benefits of having a contract. The important part is recognizing them as being a service agreement customer on every contact. Remind them that they will be getting an extra level of service because of that agreement.

Go above and beyond for these customers at every opportunity.

Remember, you're not in business to sell heating and air conditioning equipment, you're in business to satisfy your customers' needs and make their lives better. The best way to ensure that you're meeting that goal is through service agreements. Set yourself apart in your market by focusing on service agreements. By the time your competitors have figured out what they are missing, you will have become the standard in your area for quality service.

Andrew Oser is the residential sales and service contracts manager for Cropp-Metcalfe Air Conditioning and Heating Co., Fairfax, VA. The company is the ContractingBusiness.com 2008 Residential Contractor of the Year. It has more than 20,000 residential service agreement customers. Oser can be reached at 703/698-4210, or by e-mail at [email protected]. This article is based on “Selling Service Agreements in a Green World,” which Andrew Oser gave at HVAC Comfortech 2008 in Atlanta, GA.

Succeed. Grow. Dominate. HVAC Comfortech 2009 will be held Sept. 23-26 in Nashville, TN. EARLY BIRD RATES are available. Visit www.hvaccomfortech.com for additional information.

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