Surviving on Service
Service plans increase revenue and customer satisfaction
Between 2001 and 2005 new home sales increased an average of 7%. For control valves, 2005 was a peak year, with approximately 1.1 million units shipped. Since then, new home sales have decreased an average of 33% each year and control valve shipments have decreased an average of 6% each year. The industry has lost roughly one-third of control valve shipments since 2005.
These numbers do not paint a pretty picture, but there have been a few bright spots for the industry. So how have today’s powerhouse dealers kept their heads above water or even grown their businesses? The answer is service.
The dealers interviewed for this article average 30% of their total sales from service. “Most of the customers are not mechanically inclined anymore. Either they don’t know how to take care of a problem with their equipment or they don’t have the time to figure it out and they say, ‘Forget it’ and call us,” said one Kinetico dealer.
“We are in a very unique industry and the successful dealers have built a culture of trust with the customer,” said Michael McFarland, southwest regional manager of Culligan. “How many guys coming into your home to service your furnace do it while you’re not home? How many pesticide companies do you give the garage code to? The customers allow their trusted dealers in their homes all the time when they aren’t there because they live in their community, they know them and have established a relationship.”
“Service provides ongoing revenue. People are hanging on to their equipment longer, which requires more service,” said Jeff Knedler of Hempy Water Conditioning Inc., based in Forest, Ohio. According to Knedler, the business has not been affected by the recession because the dealership relies on service as a revenue driver.
“Fundamentally we are set up today the same as we were in 1952 when Paul and Ruth Staley started Hempy Water,” Knedler said. “They taught us to adhere to those nearly forgotten, almost quaint, old-fashioned 1950s values of quality, integrity and commitment. It seems to work because we continue to grow.”
Service plans should be established at the close of any equipment sale and should be a part of every rental program. Services from sanitization to salt delivery are ways to increase positive interaction with customers and add residual income to the bottom line.
If a salesperson was only able to establish a salt delivery service with the customer, the service technician should be taught to upsell the customer on resin cleaning and sanitization programs. These little things secure the relationship with the customer. It will not only make life easier for them and protect their investment, but also bring in revenue and enable your company to establish more contact with each client.
In order to accomplish this, service technicians should double as salespeople. For example, one Kinetico dealer said that the dealership relies on service to generate sales and service technicians act as the sales force. According to him, homeowners know that service technicians are there to fix a problem, so they tend to be more open to sales upgrades and recommendations.
Service technicians should be more customer centered and need to develop professional customer service skills, McFarland said.
“If they think the job is just replacing parts, they will be missing a critical step in what a service technician is all about,” he said. “They need to be able to smile, greet the customer, be empathetic and communicate.” McFarland believes that presentation is everything, from service team uniforms to company vehicles. These are invaluable skills that have an impact on the experience customers have with your business.
Competing Against Retail
As the bottom fell out of the economy, homeowners began to look for lower-cost alternatives. With limitless options ranging from the local hardware store to virtually every big-box store carrying water conditioning units, the availability of low-price retail units continues to erode the water treatment dealer’s business.
The good news is that retail outlets are usually not known for providing exceptional customer service. This provides an area for dealers to exceed customers’ expectations.
McFarland likes to differentiate his team from the competition. “We try to create PODs: points of differentiation,” he said. “That means doing the little things that mean the most to the customer. We wear shoe covers in their homes [and] latex gloves when changing filters. We call the customers before we get to their house. It is exceeding their expectations. We will have an itemized bill that lists all charges and put ‘no charge’ at the bottom because it is all included in the service plan.”
Do not narrow your service program to just the equipment you sell. Servicing all makes and models allows you to secure a short-term service program and potential sale on a customer’s next unit.
All the dealers interviewed for this article said they service any make and model. They look at themselves as teachers and talk to the customer about installation and service of the equipment after it is sold. They teach customers about the water they have and what equipment they need. They then explain the advantages of their products over big-box stores offerings.
Knedler counts on his old-school business style to set himself apart from the big box stores. “Our long-term relationships and our quality set us apart,” he said. “The big-box products are disposable. Ours are repairable. We install them, maintain them and warrantee them.”
According to Knedler, most big-box stores have an outside contractor requiring customers to contact a call center when problems or questions arise.
“If you have an issue with something we sold you, when you call you will talk to the same guy that sold it to you,” he said. “Our customer is an established homeowner that wants a long-term fix to problem water.”
Not only are service programs necessary to continue quality interactions with your customers and set your business apart from big box stores, they are also revenue generators. Even businesses that already do salt runs or filter replacements have room to expand their service programs.
One dealership in Texas adds a 4-oz packet of resin cleaner to every bag of salt it sells or delivers. It prices the packet around $4 and the cost is about $1, netting $3 per pack. This dealership sold roughly 8,000 packets in 2011 for a total increase of $24,000 in straight-to-the-bottom-line profit.
Several dealerships already are sanitizing water softeners and reverse osmosis units but are not charging for it. Dealers should charge for this service and make the customer aware that the unit is being sanitized. This is a point of differentiation from the competition that gives customers the feeling that you are looking out for their well-being. This is also an area of large profit potential.
With the increase in retail competition and decrease in new home sales, it is imperative for dealers to set themselves apart. Service programs have become the backbone of many of today’s successful dealerships. With the ability to build quality relationships with current customers as well as competitors’ customers, service programs are the new lead generation tools. With their ability to greatly increase profits, service programs should be a mainstay in your dealership’s offerings.