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.