By definition, a successful product or service generates more revenue than the cost to produce, sell and service it. In our industry, we’d like to think that a standard service contract, typically offered in the range of $200 to $300 (depending on the coverage specifics), qualifies for this designation. Across a broad spectrum of BRITE subscribers, our data has shown that a fully loaded service call will cost ~$140 (do you know what your cost is?), which means the revenue received for the contract will cover approximately two calls per year. We also know that one of those calls will be the preventive maintenance call included in the contract and performed proactively. Therefore, the threshold for breakeven on a service contract will occur after just one unscheduled call from the customer. The hedge that we call a service contract will work well for approximately 80% of customers who, on average, will experience two or fewer service calls per year. However, it’s the remaining 20% that should be a focus for your service department.
If not yet on one of your customized dashboards, visit the Widget Library, scroll down to “Service” and add the “Excess Call” widget; once placed on your chosen dashboard, you will see the number of service locations qualified as in excess on the report for the period in question as well as the number of calls for the highest service location on the Dashboard View. With a single click to the Expand View, you will be provided visibility into customers and equipment, in any date rage desired, in reverse order by # of service calls. Focus on the top of the list as they are draining your resources without contributing to your success. You need to be proactive in taking steps to deal with these drains on your business and profit, when you have the time (now, during the spring and summer months); determine whether equipment should be replaced, modify the price/coverage of the contract, decide not to renew it altogether or other solutions that protect your profit. In addition, your customer will get the service that they expect and it will go a long way in minimizing your risk and increasing predictability within your service department.Trend Alert: We are observing that many companies, in an attempt to mitigate some of this risk, are offering a “Share-the-Risk” type of contract, which provide customer with somewhat limited protection, a discount on parts and labor only. You can present this to your customer in a few different ways:
- This is the service contract we offer…
- A probationary contract for the first year, until we learn more about your equipment
- For those you choose not to renew a full service contract for due to excess calls, this alternative still provides ‘stickiness’ between your company and the customer In summary, we have confidence in the profitability of most of ourcustomers.
The challenge lies with the outliers, those ~20% of customers that for one reason or another, drain our resources (and emotions) on a daily basis. Identifying them, and “fixing” them has been the challenge. BRITE’s Excess Calls view is the solution, segmenting for you exactly who they are. Now all you have to do is execute!