How to Sell Proactive Service Agreements

Moreover, dealers need to have a solid replacement policy, such as a clause that guarantees the integrator will supply a replacement unit if a component is down for more than three days.

Lastly, if a customer opts not to purchase a service agreement, dealers should get the refusal in writing.

"The challenge to selling service agreements is that many customers look at electronics as 'disposable,'" says Randy Stearns, president of Engineered Environments in Alameda, Calif.

"People don't want to pay for a five-year service contract if you will likely replace that component in two years."

As many dealers know, selling service agreements can get murky. Matt Carter of Encore Technology + Design in Columbia, S.C. recalls a job in which the customer installed an AppleTV and DVR years after the original installation.

The addition of the two new pieces of equipment overheated the cabinet and caused two existing components to fail. The customer called wanting the components replaced at no charge.

Carter's solution was to sell the client a fan-cooling system for the cabinet and install it for free, but not replace the overheated components.

How and Why to Sell Service Agreements

Plain and simply, selling a service agreement keeps you in consistent contact with your customers, allowing you to sell them upgrades and maintain their satisfaction.

"It makes them clients for life and helps drive referrals," remarks Kayye. It's much more expensive to generate new customers than it is to keep the old ones.

Also, service agreements are very profitable. According to Kayye, the contracts typically yield 70 percent annual profit.

When in the sales process should service agreements be sold? "Early," advises Kayye. "Don't make it a line item at the end of the proposal and don't try to sell it after the job is done."

He recommends that service be included as a major section in the initial proposal, on par with design and integration. Another way to sell it is to have a separate line item amount for "service" included with every piece of gear.

One key to selling service agreements successfully is incentivizing your sales staff properly.

Kayye recommends offering the same sales commission on a service as you do for the gear, and continue paying that sales commission in perpetuity each year if the customer renews the contract. In the meantime, dealers should think about switching their billing cycle to monthly instead of annually for the contracts.

Richard Millson of Millson MultiMedia Inc. in Vancouver, B.C. is one integrator who has taken his service agreement program a step further.

His staff periodically logs in to clients' systems remotely to perform routine upgrades and monitor system operation.

The clients are subsequently sent a report listing exactly what the technicians discovered and what was done.