5 Steps to building service agreements

Few residential plumbers offer service agreements. This is a mistake. Here are five easy steps for building a custom program in your company.

A service or maintenance agreement ties a customer to you. It represents a non-binding contract that the homeowner will use your company for her plumbing work in return for certain discounts and preferential treatment. Beyond this, it helps cash flow and keeps your plumbers working when call volume slows. Moreover, a base of service agreement customers who keep renewing transforms your business into more of a subscription model, which is valued higher if you ever want to sell.

Who wouldn’t want the benefits a service agreement program brings? Wanting it and building it are two different things. Here are the steps you need to build a program that adds value to your customers and that your plumbers will feel good about offering.

1. Identify maintenance tasks: Assemble your service personnel and tell them that you want to create the ultimate maintenance program for consumers. Ask them what would be involved. If they have trouble coming up with tasks make a few suggestions. Ask, “Would you dye test a toilet?”

Assemble your service personnel and tell them that you want to create the ultimate maintenance program for consumers.

Whenever a suggestion is made, write it on a whiteboard or poster board. Keep going until the ideas taper off. Here are a few to get you started (you may or may not want to perform many of the items on this list).

● Check household water pressure
● Dye test toilets
● Rebuild kitchen faucet
● Clean faucet aerators
● Tighten lose faucet handles
● Check hose bibs for leaks
● Inspect visible pipes for leaks and corrosion
● Tag and test emergency shut off valves
● Inspect washing machine hoses
● Test water heater T&P valve
● Inspect water heater anode rods
● Flush water heater tanks
● Soap test gas water heater lines
● Inspect gas water heater exhaust flues
● Test water alarms
● Snaking tub or shower drains

2. Estimate the value of each task: Once the tasks are identified, ask your service team to assign a monetary value to each. In some cases, it might be what you would charge to perform the task on a service call. In others, it might be the monetary consequences to the homeowner of the worst thing happening (e.g., a household flood) multiplied by the odds that it will happen.  

It is very important that your service personnel come up with the value of each task. You want them to take ownership. As soon as you have a consensus on each value, write it by the task.

3. Total the value of the maintenance agreement: Add up the task values. Inevitably, the sum total is substantial. Look at the number, circle it, and ask if it would be a good deal for the homeowner if you offered a service agreement where they could perform all of these task for some dollar figure that is less than the total of the task values.

Ask what they would think about enhancing the value by offering priority service and a 15% repair discount. Write each on the white board as you say them.

Please note that you do not discount your targeted service rate for service agreement customers. You increase it for everyone else by dividing by one to 15 percent or 0.85. This becomes the rate non-service agreement customers pay, reflecting the fact that it costs more to serve them than your repeat, service agreement customers.

When they agree that this is a great value, ask, “Knowing that this is such an exceptional value, don’t you feel morally obligated to let every customer know about it?”  

This is the point of buy-in you’re seeking. If your service force believes in the service agreement and feels obligated to let people know about it, they will transfer their belief to the customer and sell a lot of service agreements.

If your service force believes in the service agreement and feels obligated to let people know about it, they will transfer their belief to the customer.

4. Show how everyone wins: Ask when they think it would be a good time to perform the maintenance work.. The answer is when it is slow. Use maintenance work to fill in slow times and keep everyone working. Plus, whenever they sell a maintenance agreement, they get a spiff or commission. Write down, “You win.”

Note that the company doesn’t make much money on the maintenance work, but they help the company with cash flow and tie up the customer for future work. Write down, “Company wins.”

Recap the savings and benefits to the homeowners. Write down, “Customers win.”

5. Prepare your supporting collateral material: Once you have built your task list, prepare a maintenance checklist, a service or maintenance agreement form, a brochure expounding upon the benefits, and an invoice that shows a column for regular pricing, a column for discounted pricing, and the savings. Train your call takers to ask prospects over the phone if they are eligible for your discounted service agreement pricing. When the prospect asks what it is, the call taker explains and gives the prospect an opportunity to enroll over the phone. If not, the prospect is prompted for the plumber to enroll her at the time of service.

Matt Michel is CEO of the Service Roundtable. For more information about service agreements, including a library of supporting forms, agreements, and literature, visit www.ServiceRoundtable.com or call the Service Roundtable Success Team at 877.262.3341.