The Service Mix – It’s a Part of Your Product

A new car dealership is an interesting business venture. Most consumers actually think the dealer makes big money selling those bright and shiny new machines. In reality it just ain’t so. The company lives or dies depending on their service department. As a wholesaler, especially if you’re dealing in capital equipment or machinery of some type, you might find yourself in a very similar situation.

A successful automobile dealership will likely pull half or better of its revenue from the service department. All of the profit may well come from that half. The sales portion of the business might even be running at a loss and be kept afloat by service department profits. Without a successful service business the entire firm will go under.

Every product is made up partially of a good and partially of a service. As service becomes a more important aspect of products, managers often find themselves in a quandary as to how to compete with other service providers. They may under-price other dealers on product, not making the money they need in the process, only to lose the connected service contracts to someone else. Why does it happen? How can firms differentiate themselves from others in the often times nebulous arena of services?

An important question to ask yourself; are the customer services you are currently providing the only services you should be concerned with? Or does service start well before the sale takes place? If the answers are respectively “no” then “yes” it means we have a “service mix.” So how should you differentiate each of the services in this mix so your customers will both appreciate the entire package and continue to be willing to pay for it?

To help you assess your own enterprise it’s necessary first to define the different service functions your firm might supply. There are some services that are nearly universal; most every firm must worry about them. There are others that are specific to certain types of firms.

Let’s review the universal services beginning with the one we call “Contact and Ordering Ease,” which may also be referred to as “Transaction Ease.” This service function is supplied to some degree by just about every firm that exists. Often times the success of the firm has to do with how well they handle this first basic function.

To test your “Transaction Ease” ask yourself some questions about your own firm. Can customers find your contact information (phone number, web address, fax number) easily? Can they call you at convenient hours and does someone pick up the phone within a few rings? Do they get connected immediately to a salesperson or wait, on hold, for a couple of minutes or even tens of minutes? Can they order online on your web site? Can they reach the order section of your site easily or do they have to wade through half a dozen pages of ads before they get there?

Now how about the transaction itself? Do they have open accounts that are quickly accessed and approved? Can they use purchase orders, credit cards, COD, or other means of payment and how easy do you make it for them to give you their money? Do your order takers help them through the rough spots with a smile and some patience?

Believe it or not, this first service function, “Contact and Ordering Ease” is sometimes not thought of as a service at all. It’s an easy step to overlook in differentiating yourself through the provision of services, but it’s a far too important one to do so.

The next service function in the universal category is “Delivery.” This is an extremely vital service from the customer’s viewpoint. Particularly in the parts supply industry, delivery might be the one thing the firm does that places them above, or below, the competition. Is your delivery dependable? Accurate? Timely? Safe? Have you developed a reputation for reliability?

There are firms that have carved their market niches simply by supplying this one service and supplying it well. They don’t have to under-price the competition or advertise hot deals. They retain their customers because reliable delivery is the foremost service the customer wants to buy.

Sometimes equipment dealers also offer to install their products. This brings us to “Installation” as a service. It might actually be thought of as the final stage of “Delivery” as the product may be in place physically, but is not really “there” until it is up and running. It’s good to remember that the customer will not feel they have been delivered to until the installation is complete.

Do your installers start work when the equipment reaches the site? Do they work within the customer’s schedule? Do they work efficiently and get the job done? Do they clean up the job site when they are finished? Do they look professional? Is their attitude business like, yet pleasant and positive?

Do your installers teach the customer anything about the new product? If so, this leads us logically to the next service function, which is “Training.” Reliable delivery and installation, followed by hands-on training, can be the decisive factor in a buyer choosing your firm over a competitor who sells the same equipment for a lower price.

You might have follow-up training as time goes on, or give seminars or workshops, and you may have an expert go to the customer’s place of business on a regular basis and make certain employees are actually using the equipment effectively. This type of customer care service can be used to help your firm really stand out from the crowd.

To extend the training concept, you might offer the service of “Consulting.” Instead of just training employees on use and maintenance, your experts are made available to make certain the equipment is used effectively within the overall context of the business. Do their business processes coordinate well with the equipment they are using? Can you suggest additions or changes that will make things work more smoothly? Many suppliers are making such service available these days. It results in increased good will and greater sales in the long run.

Lastly we have the service of “Maintenance and Repair.” Remember the new car dealership? It’s in maintenance and repair that such a business puts forth its greatest effort. It’s an area where business-to-business sellers are putting more and more effort into as well. As margins on sales become tighter because of increased competition, firms need to make up the difference in service, and this function is the most visible.

Once we realize we have a mix of services, however, we know that after-market maintenance and repair is not the only area of service we need to be concerned with. In fact, without solid service skills in the remainder of the service mix, we may not reach the point of making the equipment sale that will enable us to sell the maintenance contract.

So take a good look at the services your firm provides the customer. Do they all work? Do they all work together as part of a total customer care package? It’s by weighing all the services you make available that the customer judges your firm. Be sure the decision is in your favor by making certain your services are up to snuff. That will make it easy for your customer to make the decision to buy.

To Service or Not To Service: A Puzzling Question For the Self Servicing Appliance Dealer

There has been a lot of discussion lately on the USA (United Servicers Association) forum on the merits of being a Self Servicing Appliance Dealer whereby you provide warranty service for a manufacturer only on the products you sell versus being an All Servicing Appliance Dealer and Servicers whereby you service any and all request for warranty service from a manufacturer regardless of who sold it.

There have been a lot of good responses, most of them in favor of being an All Servicing Dealer and I completely agree with that side of the equation. However, I thought I would break it down here and get to the real root of the problem, the mindset of the Appliance Dealer and Business owner.

The real answer to this comes from your own business strategy and whether or not you are wanting to grow your own service department, and potentially your own sales volume as a result of that service. If you, as a business owner are truly wanting to grow your service department, then turning down “Free” referrals (and I use that term very loosely because they are really not free) could be detrimental to the growth of your business. Let me elaborate on this. The key here is how you handle the warranty call and what you do with the information after you make the call.

While the thought of only servicing what you sell and refusing to service what a competitor sells is, in my opinion, justifiable in one respect and that is that it seems to be very helpful to your competition, possibly even giving them kudos for getting it fixed quickly and efficiently while under warranty and does very little for you and this is probably the last thing you want to do, RIGHT? Well, I know what you’re probably thinking, “Are You Nuts, You Must Be Crazy, I’m Not Giving My Competition Any Help At All. Why Should I Do His Warranty Work, After All, I didn’t Make A Dime On The Sell and Now, I’m Servicing It For Him!” Alright, so just sit back and think about it for a minute. If it is your intent to build your service department and make it profitable, then this may not be such a bad deal after all. However, there are at least five (5) real areas of concern that need to be addressed and closely looked at before you offer that service to your competition and they are as follows:

1. Your Service Department Must Be Set Up And Operated As A SEPARATE “For Profit” Department.

If your service department is going to be successful, then this “MUST” be done, no questions, arguments, Just Do It! Do not let your service department become a burden of your sales department. If your service department runs a call for the sales department out of warranty or even a warranty call that you know cannot be billed, then bill the sales department. It may not be at your full rate, but it needs to be at some number greater than your cost of doing business.

2. Know Your Cost of Doing Business (CODB).

This is probably the most critical component in the success of your service department. Once you know this number, then and only then should you negotiate with any manufacturer or even your sales department on what you will accept as a hourly or flat rate amount for service.

3. Warranty Work Is Typically Not A Large Profit Maker.

When it comes right down to it, most manufacturers will try to squeeze every dime out of you they can out of you when it comes to negotiating your warranty rate. If you know what your “Cost Of Doing Business” is, the it becomes a no brainer. You simply decide what kind of profit you want to make, if any, on warranty service and negotiate from there. NEVER, NEVER, NEVER take anything less than your CODB. I know, you’re saying, “I’ll make it up in volume”. No you won’t, don’t kid yourself. Just say,” Thank You For the Opportunity, But I Can Not Be Successful At That Number and Let Them Walk!”

4. Warranty Referrals Are “NOT” Free.

I know, most of these manufacturer’s service rep’s are going to tell you, “We are going to send you all these service calls and it won’t cost you a dime.” Because of this, they will tell you that you can save on advertising because you won’t have to advertise as much and since you won’t have to advertise as much, you can perform their work at a lower rate! I’m here to tell you that it is not entirely true. Yes it is true you will not have to advertise for “THEIR” business but you will certainly have to advertise for other business. So in reality, what you are doing is swapping advertising dollars. The difference in their reduced rate & your normal or street rate is what it cost you to acquire “Their” customer. I know this may be a little stretch for you but it is true.

5. Keep Marketing To That Warranty Call Customer.

Once you have made a service call, the worst thing you could do is to do a great job for them and never contact them after that. You must “TRAIN” you service technicians to talk with the customer while in their home. Let them know without a shadow of a doubt that you are not the company that they bought the appliance from but that “YOUR COMPANY” is the one that is providing the warranty service for that product and making sure it works the way it is suppose to and not only that appliance but that you provide service repair for any appliances in their home and when one of those products break down, you will be more than happy to repair those products as well. At Dependable Services in Atlanta, Ga. we also provide services for heating and air conditioning equipment, water heating equipment as well as appliances so we want our technicians to remind the customers of that. We understand that a customer probably has 8 to 10 other pieces of equipment that we have the opportunity to service throughout the year so we don’t take that lightly. Even if you are just repairing appliances, that customer probably has at least 4 to 5 other products you can service. So that customer is a potential gold mine to you. DO NOT ignore that potential. And if you sell appliances, let them know that. Let them know you are competitive and that you offer something the other dealer doesn’t, “SERVICE”. That get’s your foot in the door for the next purchase, but only if you let them know and market that fact to them.

So What Is The Answer?

Being in the service business is a golden opportunity to make some very good profits, but only if you treating it as a profitable venture and look at it and run it that way. If an Appliance or Electronics Dealer is focused only on product sales, then the service department is probably viewed as a necessary evil and that dealer probably has a philosophy that the service department is dead weight and not profitable and never will be. They have no intention of making it profitable or either don’t know how.. Maybe they’ve tried to hire someone but for whatever reason they just haven’t been able to attract or find the right person. Quite often, they will take a technician and try to make him a manager and set him up for failure. The service department has to be run just like any other business to be profitable. Don’t make it the scapegoat for the sales side. Develop it, build it, dedicate resources to it and you will be glad you did. If you are sales focused and you don’t dedicate the time and resources to grow the service department, but yet you want to provide service, you’re probably on a sinking ship, a ship that will probably take the sales department with it. The real key to being successful in the service industry, as it is in any business, is to track and monitor what’s working and what’s not on a daily or weekly basis and to know what your true costs are within. If you do this, your failures will turn into successes and you will be well on your way to a successful business and career.

Donald Harris is owner of Dependable Services in Atlanta, Ga. Donald has owned this business for the past 41 years and as a result has a gained a tremendous amount of knowledge and experience on how to run a Profitable Service Business. Dependable Services provides services for heating and air conditioning, residential appliances, restaurant equipment, commercial refrigeration and water heaters. Dependable Services currently operates 18 service vehicles and 28 employees covering metro Atlanta.