Service Sales and Profits Take Center Stage in 2016 By Mike Hatch President ServicEdge With a warmer than average winter, robust sales in your HVAC business will be more important than ever. Here are four considerations for marketers to examine that can have an immediate influence on sales and profitability. These four areas are low risk in terms of investment, but will provide very high returns if applicable to your business. 1 Service Plan Structure is Key Service plan structure and pricing has always been the reason plans are either profitable or a liability. In focus groups conducted with oil heat consumers, we tested the preference between the two dominant plan structures: a tune up with free labor and certain parts and a tune up with a discount on labor and parts. The results were consistent across markets. Participants were provided with examples of each structure along with a complete explanation of their benefits. Preference varied from group to group based on a same-price basis. However, preference vanished when tested for price elasticity between plans. In other words, those with a preference for one plan over the other would default to the other option if their first choice was more expensive. A significant effect on price elasticity was a lack of understanding regarding the worth of parts. The discount option was easier to understand in terms of value proposition. For marketers that continue to offer labor and parts as an inclusive benefit, consider switching to the discount model. Assuming a 50% discount means a pass-through of labor and parts cost, then the price of the plan becomes the price for the tune up. Your customers will be indifferent and profitability on a unit sale basis is a certainty. As an added benefit, with some skin in the game, needless after-hours calls will be reduced, which will be welcomed by your on-call technicians. “Sales are contingent upon the attitude of the salesman— not the attitude of the prospect.” -W. Clement Stone, Renowned Businessman and Entrepreneur 2 Productive Customer Interactions Employee-customer interaction can be a competitive advantage if it’s performed well and consistently by all employees. For technicians, it is also the first step to being willing and comfortable identifying and warming sales opportunities. For many marketers, achieving this goal means breaking an old industry paradigm. Technicians fix stuff, they don’t sell. If that paradigm is an issue for you, the effort to change will be well worth the investment. This opportunity can be readily monetized, as over 40% of oil heated homes in the Northeast have HVAC sales opportunities beyond the annual servicing of heating equipment. The first step for management is defining what technicianselling actually means. It’s not necessarily sales, it’s identifying leads and discussing that opportunity briefly with the customer. When a technician is comfortable with that brief interaction and can articulate the value proposition in his own words, he has become a passive-salesman not a salesman. This distinction may be important to some technicians. The crux of the opportunity is getting technicians beyond having trepidation with customer interaction and the initiation of the sales process. The reason this opportunity is ready for capitalization is that the other necessary pieces are already in place. Technicians have a very high level of trust and the opportunities are harbored with existing customers. If this is an area for improvement, consider breaking the old paradigm. The result will be more billable hours when you need them and better year-round utilization of capacity. 3 Maximize Capacity Utilization Product diversification can support existing capacity utilization and be a low-risk way to grow after a lowdegree day season. To find the low-hanging fruit, look to your current core competencies—areas where little additional capital investment or expense is necessary. For marketers that offer air conditioning (A/C) service and installation, be sure you have developed a service plan for both central systems and mini splits. Always give the plan away to customers getting an installation: free for the first year. The risk is almost non-existent and when it’s free nobody pushes back. Your stick-rate for billing in year two will be about 50% in most markets. A/C plans structured the right way can be very profitable and price-attractive to the consumer. If you offer A/C plans but have not gotten the traction you’d like, focus on the future annuity in terms of your marketing strategy. In addition to offering free to new customers, consider going back a year and provide some good will to last year’s installation customers. The risk is low, the goodwill will be appreciated and it is all about the annuity 10 ICM/May/June 2016
ICM May-June 2016
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