08.04.2008 — In 2007, the CE Pro Extended Service Plan Study gauged the extent of service agreement sales in the custom installation industry.

The numbers were not pretty.

The data shows that more than half (56 percent) of integrators do not even try to sell service agreements, with the remaining 44 percent selling them.

The lack of offerings seems illogical, especially since the closing ratio among integrators who do sell agreements is about 66 percent (meaning that two out of every three clients buy one).

The average price for a service agreement ranges between 6 percent and 15 percent of the total job cost, according to the study. The typical term for a service contract is three years.

Gary Kayye of Kayye Consulting recommends that dealers charge an annual fee of between 2 percent and 3 percent of the product cost.

For example, in a $100,000 job, about $55,000 will be equipment costs. Three percent of $55,000 is $1,650. If the job includes IT/computer networks or a security system, he advises the annual fee to be higher.

		How to Sell Proactive Service Agreements Reducing your installation labor warranties and offering sales commissions on renewals can lead to 70% margins on service contracts. What is Proactive Service? The customer is guaranteed not only quick system repairs, but also regular service intervals. Why Aren’t Integrators Selling Service Agreements? More than half of integrators do not even try to sell service agreements, according to CE Pro research. Who Buys Service Agreements? Gary Kayye of Kayye Consulting breaks down potential buyers into five groups.
Integrators are recognizing that they can build "clients for life" with service agreements rather than continuing to look at customers as one-time sales opportunities.