5 Service Plan Offerings You Should Avoid
This Post Originally Appeared on Residential Systems on January 25, 2017
Exploring the Virtues of Keeping Your Service Plans Simple
Paralysis by analysis is one of your biggest enemies if you’re just getting started with service plans. Hoping to make these plans as valuable as possible, you may be tempted to over-complicate your offerings with all sorts of bells and whistles.
This is a lesson that I learned the hard way. Prior to shifting OneVision to its current B2B model, we were focused primarily on selling service contracts to homeowners in the Boston area. It took me many years, but eventually I found that creating very simple service plans was the key to happy clients and profitable service.
Here are some of the offerings you might be considering and why you should avoid them…
1) Software / Firmware Updates
You might want to pitch your clients on guaranteed software/firmware updates to make sure their system stays up to date and secure. It turns out, however, that issuing every minor update creates an immense workload, not to mention the overhead associated with tracking all of the necessary information.
I know this because I struggled to deliver on this promise in the past. Interestingly, I found that only one of the 25 families I had sold this service to at the time ever inquired about it, illustrating that there wasn’t as much perceived value as I originally thought. If you’re going to offer this service, a better option is to specify that only critical updates, such as those related to security, are included in the plan.
2) Varying/Discounted Hourly Rates
You’d be correct to believe that that offering discounted hourly rates as part of your plans will entice clients to sign up because discounts drive demand. But this practice should be avoided because it directly impacts profitability. Tech is fragile, and clients will always need your service, so a discount is not helping to drive additional demand. Instead, all the discount is doing is causing you to lose money that you would have otherwise collected on every hour of labor you provide.
You may also be tempted to offer one rate for installation and another for regular service. The problem with this approach is that your clients will perceive it as a bait-and-switch. Beyond that, the administrative overhead involved in keeping these variations straight across your client base is yet another unnecessary resource drain.
3) Bundled/Prepaid Hours
Speaking of labor hours, you might be considering the inclusion of bundled services into your plan (preventative maintenance visits, packaged hours, etc.) This is a bad idea. These bundled services hurt your cash flow and profitability. Similar to the discounted rates, keep in mind the administrative overhead in tracking the use of these bundled services. This offering will only make managing your plans more complicated, while providing no upside. You are much better off keeping things simple.
4) Regular System Reports
Looking for something tangible to illustrate the value of your service plans, you may be tempted to offer monthly or annual technology reports showing the uptime of the home’s tech. This can include various metrics like uptime or ISP performance. One of the issues is that while some clients might request this, it’s not actually what they need or want. Based on our experience, what’s more beneficial for them to see is a list of all their service requests that you presumably have addressed efficiently and comprehensively. This captures the value of your service in a more tangible way.
Additionally, unless you can find a way to automate the entire process, the time spent tracking and entering this data will be one more drain on your resources. Some monitoring systems do produce these reports, but the output is usually very technical, and therefore useless to most clients. If you want to provide some sort of report to your clients the way to do it is with “service reports” rather than “technology reports”.
5) Service Level Agreements/Tiered Response Times
Lastly, you might consider offering service level agreements (SLAs) to your clients. These agreements dictate service terms; for example, you could state that out-of-plan clients are only promised on-site support within three business days. For the most part, these agreements should be avoided as they are very hard to track and nearly impossible to enforce.
Consider an out-of-plan client who experiences a critical system failure one hour before a big Friday evening dinner party. Your whole team is busy on other projects. Showing this client their SLA and telling him you’ll be there on Monday would seriously jeopardize your relationship. A better approach is to provide an excellent experience for all of your clients (think instant 24/7 remote support), and then priority advanced support for those clients who opt-in to paid membership plans.
Keep it Simple
There is a lot of value in a simple, properly structured service plan. By avoiding complication, you can make your offerings easy to understand, which helps clients make a buying decision. Keeping your offering simple also reduces overhead and increases the profitability of your plans. I believe the formula is simple, consisting only of three parts: 24/7 instant phone/email support (what we call “Instant Triage”) plus priority advanced support, plus proactive monitoring. All of that equals a service plan worth paying for.
Are you a business owner or service manager? Did you find this article helpful? If so, check out this post as well – Service Plans: Billing Monthly vs Billing Annually.
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