The February issue of SECURITY SALES & INTEGRATION includes the feature article “Service With a Recurring Revenue Smile,” which addresses how to successfully incorporate service and maintenance agreements into an installing company’s portfolio. One of the sources cited in the piece was Matthew Ladd, president of Exton, Pa.-based The Protection Bureau.
Ladd is widely viewed as one of the industry’s most savvy CEOs and has much to offer on this valuable topic. Following is the first of a two-part Under Surveillance interview (see Part 2 here) on effective service and maintenance practices. Here, Ladd discusses how to sell it, controlling costs and measuring success.
What’s been the trend for The Protection Bureau insofar as selling service & maintenance agreements are concerned? Given the economy, is it becoming easier or harder to sell?
Matthew Ladd: I think recently it has dropped a little bit with everybody in the tough economic times looking for ways to save money. However, we also have found that many clients may do away with it one year, and then bring it back again the next year. It has dropped somewhat, but not significantly, because we have been doing this as a standard for almost 20 years. It’s always been standard; in all proposals we offer the maintenance plan as part of the system. We actually do it at the time when the systems are proposed as well, rather than waiting a year after the warranty period to go back to the clients again. We also have been recently pushing for those clients who had opted not to take the services originally — our older clients from our existing base — and showing them the value of going in this manner. Even by doing things like showing them that last year they spent X amount of money on service calls and the service plan would save by Y. Many times we’ve shown them a savings, specifically when you add in the fact that with all of our service plans, it’s a full service plan that covers parts, labor and also includes inspection on all types of systems.
Is it a tougher sale on the residential side?
I think nowadays it’s a little tougher, but again, the way we do it is we provide it not really as an option, but as a basis. For the most part, the client almost has to say, ‘No, I don’t want it.’ We found many years ago that we were offering a choice of whether to have a service plan or go on a time and material basis. Most of the clients picked the time and material because it seemed like a simpler decision and they could always change it later. When we took the option out, we actually found that the amount of customers taking the service plans increased dramatically.
When you’re fulfilling these service and maintenance contracts, how do you keep your costs in control? How do you track that?
We track it through our business management system. Every call is costed out so we know what the cost value is on that. We found the clients that have the service plans and the annual inspections and the maintenance that we do actually cut down in the number of calls we have to make for repairs. Oftentimes some things are caught during the time of the inspection. Maybe it’s a minor thing, so before it becomes a major issue we might be able to do some minor fixes to keep the system working properly.
What do you do when you encounter problematic accounts, for example, clients who are particularly demanding and start draining your tech resources?
At that point, you might propose some different options, and upgrades are huge. You can also sometimes do what we call an experienced modification, to say that the cost of the system has been expensive so by the time the contract needs to be renewed we might increase it. Most of the time, we find it the other way. One of things we’ve done that has been very successful is providing an experienced modification to clients to come back with them and say, ‘Over the last three years, we’ve been servicing your system and we noticed that our costs have actually been lower than we estimated.’ And we give them a one-time experienced modification credit against them for the next year’s billing. That we have found has been a tremendous, positive thing for our clients to see — especially some of our larger clients. So instead of them saying, ‘Well, we’ll just cut time and material,’ they keep the service plan moving. That has been something that has been extremely successful for us.
Do you do survey customers that receive service to make sure everything met their expectations?
We do a couple of things. No. 1 is if we see any irregularities in the system or some changes that maybe the client has made to their facility that would justify the need for additional changes in detection, it is followed up on. We also have a program through our customer care department that after every service call, an inspection is performed. We have one of our client care people call the client and make sure everything went well with the call, and then at that time point out any irregularities or anything that might need to be adjusted in the system as well. The majority of the time, it’s proactive. If we see something, we fix it at the time or address it to the client at the time.