Building plumbing maintenance agreement value in nine easy steps

June 6, 2014
Learn the process to sell maintenance agreements: Understand the purpose  Assemble your team Identify tasks Capture value  

Many plumbers have difficulty establishing a maintenance agreement program. Largely, this is because no one in the company believes they offer value to the consumer, including the owner.

It is nearly impossible to sell something you do not believe in. After all, most of sales is transference of belief. So to sell a maintenance agreement, you must build one that offers clear value. Here’s the process.

1. Understand the purpose: A maintenance agreement program is a customer and employee loyalty and retention program. You provide maintenance for customers during periods of weak demand, which means you would either have idle plumbers on the payroll or you would send them home without the maintenance. This helps you retain your skilled labor force, demonstrate value before the customer, and build strong relationships with the customer. Maintenance agreement customers are highly unlikely to call another plumbing company for any demand service work, product upgrades, or remodeling, provided you do remodeling, which you should.

Your plumbers benefit by steadier work. You will get all of the plumbing work from your maintenance agreement customers. Plus, when demand looks light, the CSRs schedule maintenance, keeping plumbers busy instead of sending them home. Finally, the plumbers can earn spiffs for selling maintenance agreements.

Your customers also benefit. Because you are performing the maintenance during periods of slack demand, you can do the work on a marginal revenue/marginal cost basis. This means you only need to worry about the direct costs of the maintenance plus any additional overhead burden generated by the maintenance agreement program. Until your program is large enough to support a dedicated maintenance agreement coordinator, the additional overhead is negligible. Thus, customers enjoy substantial savings on maintenance work that’s performed when it is convenient for the company. They also benefit from any additional discounts and benefits. Finally, their greatest benefit is the value of the maintenance work.

2. Assemble your team: Get your plumbers together for at least 30 minutes without interruption. Have a white board or flip chart available. 

3. Identify tasks: Tell everyone that you are going to design the ultimate plumbing maintenance agreement. Ask, “If you were going to do the ultimate maintenance service for a consumer, without concern over time or cost, what would you do?”

Your plumbers might struggle to come up with some ideas at first. Prompt them. Ask them what you should do for the water heater. Should you flush the water heater? Should you inspect the anode rod? What about the T&P valve?

Ask what should be done for every plumbing part in the home. Should you inspect the angle stops? Should you dye test the toilet? Should you clean out the faucet aerators? Each time your plumbers identify a task, capture it. Write it on the white board or flip chart. Do not be surprised if your plumbers come up with a few tasks you would never consider. However, if they overlook some you consider obvious or important, suggest them. Just remember, this should be their list.

4. Capture value: For each task, ask your plumbers to give it a dollar value to the consumer.  Let them debate back and forth.  If there is a range, pick a middle figure or take the lowest figure.

Some tasks are problem prevention. The problem prevented may cost $10,000, but the odds are slight that it will occur in any house in a given year. Ask what those odds are. Is it one out of 10 homes? One out of a hundred? Use whatever number your plumbers come up with and divide it into the cost of the problem (e.g., $10,000 / 100 = $100) for the average value.

Ask your plumbers to total up the consumer value of all tasks. Remind them that these are their numbers, not yours. Do not be surprised if the total equals several thousand dollars.

5. Estimate time: Ask how long they believe it would take to complete the listed tasks, doing the job right. In all likelihood, the plumbers will end up with 90 minutes of work or less.  Materials for maintenance and inspection work are negligible. If an anode rod needs to be replaced, for example, that’s an extra charge.

6. Add benefits: To give the maintenance agreement more pizzazz, give it added benefits.  Typically, companies give a discount for service work. In truth, pricing for maintenance agreement customers is the price you need to hit your target net profit. Everyone else pays more, which is only right because it costs more to serve them than it does your loyal, repeat maintenance agreement customers.

If you want to offer a 20% discount for maintenance agreement customers, the billing rate for everyone else should be divided by one minus 20%. A $300 pure labor repair to a maintenance agreement customer would cost $375 for everyone else (i.e., 300 / (1 – 20%) = 375).

Other benefits you might consider are no overtime, waiving your trip charge, or offering longer guarantees. Be sure that you have already accounted for the benefits in overhead or that you can cover them in your maintenance agreement pricing.

7. Determine the price: Consider the fully burdened direct costs of providing the maintenance, add a little to cover wear and tear on the vehicle, add money for a sales spiff, and add profit.  Given the overhead in most plumbing service companies, the maintenance work can be performed for substantially less than an equivalent amount of demand service. In fact, the price you determine might be so low that you have room to increase it. Pricing for maintenance agreements is part math and part marketing.

8. Gain agreement: Ask your plumbers if performing all of the tasks identified for the price you determine is a good deal for the customer. Remind them how much they said the tasks were worth. Remind them of the other benefits. Gain agreement from them that it is in every homeowner’s best interest to own one of these maintenance agreements. Next, gain agreement that they would be doing customers a disservice if they failed to let them know about the outstanding value represented by the maintenance agreement program. Finally, gain agreement that getting a monetary spiff for selling one would be a good deal for the plumbers.

9.  Close: Adjourn the meeting by telling everyone that you will be preparing a maintenance agreement with the tasks they wanted at the price everyone agreed to. Remind them how they win (spiffs, steady work), how the customer wins (discounted maintenance, discounts and other benefits), and how the company wins (more loyal customers, better cash flow, lower marketing costs over time). Write “Win Win Win” on the white board.

Prepare the support material to assist your plumbers when selling maintenance agreements.  Templates for maintenance agreements, brochures, sales tools, call scripts, and maintenance agreement pricing calculators are available for download at the Service Roundtable. When you present the material to your team, give one to each plumber, but do not let the plumber do the work on his own house. Ownership is the ultimate demonstration of belief.

For a wealth of practical plumbing advice, business templates, sales tools, and cash back for purchases, join the Service Roundtable.  Call 877.262.3341 and tell a Success Consultant where your business needs help to see what’s available.

About the Author

Matt Michel | Chief Executive Officer

Matt Michel is CEO of the Service Roundtable ( The Service Roundtable is an organization founded to help contractors improve their sales, marketing, operations, and profitability. The Service Nation Alliance is a part of this overall organization.

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