What I’m talking about are Maintenance Agreements, Privilege Programs, Preferred or Platinum Care Packages, etc. etc. Call them whatever you like, but if you want to get paid now for what you might have to pay for later you need to start these at your business. First let’s talk about the benefits so you’re fully convinced you need to do this right away.
- Immediate Cash – That’s right, increase your average dollar sale immediately and put more cash in the bank with virtually no expense (you will have to do some marketing, training, and have agreements to sign).
- Recurring Income – Depending on how you set it up, you can bill your customer for the whole package all at once or every month, quarter, semi-annually, or annually. Whatever works into your game plan. (More on this below)
- Your customer wants it! – When the economy is down, consumers rethink their purchases. One thing that they hate when they aren’t sure where their next check is coming from is large surprise repair bills. Whether that bill is for a refrigerator, computer, or pickup truck. There’s nothing worse than getting hit with an unexpected bill when your income is slow. Most will much prefer to trade a small monthly payment and the security that no other bills will come up, for the possibility of that “surprise bill” down the road.
- It’s simple – I’m in the middle of this project right now and though I’m consulting dozens of colleagues, the vast majority have never done this so I’m figuring out a lot as I go and so far there isn’t a whole lot to it.
Do you really need any more reasons then that? If you were going to implement any new program can you think of 4 better reasons than those? Me neither…
So what are the pieces to a good Maintenance Program. First let’s consider some common versions of these and who’s using them… Best Buy, Circuit City, and just about every electronics company offers them now and you pay for them all right up front and for a terms from 1-3 years. Dell computer does the same thing with various time frames and various levels of coverage. When you go to buy a couch you can even get an extended warranty plan that covers rips, tears, stains, etc. etc. etc. All of these require an upfront payment for the full amount. So asking for that payment up front isn’t too uncommon and is actually the norm. Car companies do the same thing except they wrap that additional “investment” into your monthly payment. The pitch goes, “for an extra $24 per month if your $4000 transmission fails it’s all completely covered and we give you a rental car while it’s in the shop.” Now can I see a show of hands from the people who believe that all of these major organizations are implementing these programs and losing money in the process. My point is that if your business isn’t doing this you’re missing out on additional revenue and more importantly additional profit.
So what do I recommend?
- Keep it simple! Dell and the car companies have a complicated assortment of options from their basic to most advanced plan and they have dozens of people dedicated to creating, marketing, and tracking just those things. At your local car dealership they have a “business manager” who’s sole job is to sell you these add-ons. That’s a lot of complication. To start off simplify. This doesn’t mean that later on you can’t add more options to make sure you get every dollar, but keep in mind the more options, the more paperwork, the more training, the more tracking etc. etc. etc. To get started, keep it simple!
- Make it a “no-brainer” My marketing even says just that. That it’s a “no-brainer” that shouldn’t be passed up. Why? Because I priced my Privilege Program to cost LESS than the cost if they just paid for service/maintenance as needed. Why? Because some times people forget when it’s time for service and when we remind them they could put it off for weeks or months. When people have already paid for something they tend to not forget to get it. 🙂 Also, my costs for tracking people down for regular service and scheduling them become much less because now they are expecting (and wanting) to hear from us.
- Have an easy way to track it. Without the ability to simply manage, the progam can cost way more than it can make. Is your billing software setup for monthly, quarterly, or annual billing? (Quickbooks honestly is not very good at this) Do your work orders have a way to let your service tech’s know it’s a Privilege Customer? Can your customer service people tell they’re a Privilege Customer? Can your business manager easily track progress, related Profit and Loss, implement price changes, and even track the reasons why someone is canceling? If not, look into software for your industry that can or consider hiring a programmer to write you a custom database.
- Try for an up-front payment but have other options available. If you determine your Maintenance Agreement for your computer store, plumbing business, or bicycle repair shop is going to be $120 per year then allow them to pay $12/month (with a minimum term if necessary) or $35/quarter. Note that the further ahead they pay, the more discount the receive. Obviously only offer these options if your computer system can handle that kind of billing. After all, $12/month is better than $0/month. 🙂
- Incentivize for your team. I’m a big fan of employee incentives so throw in an extra few bucks for each one they sign up. At the very least, tie their job description and performance to signing up X agreements per day or week.
- Train your team (over and over again). One lesson I’ve learned from running a business is that your team members don’t quite retain everything or take it real seriously the first time around. You have to bring it up again, and again, and again. That’s OK. That is your job after all. Granted if you have an incentive program tied to each employee signing up these agreements you might not have to repeat it so many times. 😉
There’s your maintenance program outline. Get started today and start making more money tomorrow while making your customer’s happier than ever.
To your “increased profits during a recession” success, Bryan