Why Selling Service Pacts Makes Sense
Offering service and maintenance agreements to your clientele not only provides new streams of recurring revenue but can also go a long way in helping stem attrition. Find out what the proper cost structure components are and how to convince customers to sign on the dotted line.
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It is always the same pitch, not to mention the salespeople making it are often well compensated by a hefty commission. In many cases the offering has great value; in other cases, not so much. When it comes to security and life-safety maintenance, immediate service is essential. For this reason, the client needs peace of mind in knowing that when a service call is placed, they are a priority.
Security dealers have so many beneficial elements to offer that can be leveraged when pitching a client to commit to an extended service or maintenance agreement. The dealer needs to wholeheartedly understand and believe in their worth to the customer before they will be successful with making the offer.
Remain realistic that you won’t have a 100-percent closing ratio; some clients will have to be approached subsequent to the sale. Therefore it is essential that a “tickler” file is maintained so personnel will be reminded to make the pitch whenever interacting with the client, especially in the event they should call for service.
Inside the Numbers
Joe Nuccio, president and CEO of Beltville, Md.-based ASG Security, has built one of the fastest growing and respected full service security companies in the nation. In fact, the firm was recently named SSI‘s Installer of the Year. Nuccio has a strong opinion on how service and maintenance agreements should be executed based on his decades of experience.
“Your primary goal should be to sell a service agreement at the time of the original sale,” he says. “For outright sales, the RMR for responsive maintenance service is customarily expressed as a factor of the total sales price to the customer. The industry average is about 10 percent.”
Nuccio illustrates the significance of responsive maintenance service: “A $50,000 direct sale of a system would carry a maintenance value of $5,000. Dividing that number by 12 would produce RMR of $416. In this example, responsive maintenance service would include the security company’s response to the customer’s request for repair for problems that would cause the system not to operate properly due to equipment failure from normal wear and tear.”
For the customers who won’t commit to a service agreement during the original sale, Nuccio says a dealer needs to follow up with them before the expiration of the one-year warranty period. This is an effective trigger date to carry out a second attempt, using the same formula as before.
Nuccio also advises in the event that the second attempt doesn’t bear fruit, the dealer must monitor the service history on the account very closely. Wait until the customer experiences the unplanned pain of an expensive time-and-materials service call. Then, show them the math again and demonstrate the benefit of a predictable monthly service fee they can budget around versus the unpredictability of a time-and-material
service relationship.
It is a fact that larger, more sophisticated systems will require maintenance; a fixed recurring service plan is the best option for the customer. The dealer is the expert and the customer needs for the dealer to show them the way.
Nuccio hammers home a very important detail that should never be forgotten. “Also knowing when not to provide a maintenance contract is key. The customer may have antiquated equipment and may need to upgrade prior to obtaining a maintenance agreement.”
Also important is to make sure the service department has the proper inventory on the vehicles to maintain same-day service, unless it is an expensive part that may require a second call. Performing quarterly usage reports will ensure the vehicles have the right amount of stock for their given territories and mix of customers. Setting the proper expectation and efficient routing is essential to maintain productive and profitable service departments.
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About the Author
Peter Giacalone
Peter Giacalone is President of Giacalone Associates, an independent security consulting firm.
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