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Dipping Your Toe Into The Service Plan Waters

A clever way to begin offering service plans taken from two areas of everyday life.

I know I talk about my friend Mark Feinberg who owns Home Theater Advisors a lot. That’s because I write these blogs based on things I encounter in my day-to-day management of my business. Mark and I talk almost every day, so he is part of my day to day and we often end up discussing things we are seeing in our businesses or in the marketplace. One of us will say, ‘That’s a great blog idea!’ and a blog is born. So, forgive me if I mention him a lot, but he is a source of a lot of ideas in our daily interactions. I don’t want to mislead anyone by letting them think that the ideas he comes up with or things he is trying in his business are mine by co-opting them and making them mine. I give credit where credit is due. Disclaimer over, time to talk about a great idea Mark ran by me the other day.

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He has been struggling with selling service plans. Customers just were not responding to the need for the plan and always chose to go with the per-service-call option and take the risk. He has been eagerly awaiting the full launch of Parasol so he can offer 24/7 support to clients on a service plan, providing something of value that they can not otherwise access (only service plan subscribers would be eligible for 24/7 support, everyone else will receive support during regular business hours). Parasol has not expanded enough yet, and he is still on the waitlist, so he is trying to come up with other offerings to make the service plans more attractive.

One idea he had is a blend of two things from his personal life. Five years ago he remodeled his kitchen and bought new appliances. Since his refrigerator has an icemaker, he got the 10-year extended warranty. The refrigerator is now on its third service call, more than paying for the extended warranty for him. However, he realizes that offering unlimited and free service calls would not be sustainable. So he also took an idea from his health insurance — co-pays. He is exploring the idea of a service plan that provides steeply discounted service calls. He currently charges $200/hour for service calls and is considering a service plan with a “co-pay” of $50, essentially a 75 percent reduction in cost. Just like with insurance, there will be clients who will be profit drains, but there should be enough who will not need much in the way of service and will more than make up for it. There will be other benefits to being on a service plan — included 24/7 support when Parasol rolls out; annual or semi-annual site visits for firmware updates, equipment cleaning, and checkups; possible discounts on labor for future work; and so on.

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Using his extensive experience in marketing and strategy for corporate America, he is taking a deliberate approach to rolling out this offering. He will cull his client list, looking for clients clustered near his office with Control4 and Araknis installed (allowing for robust remote support) and reach out them in groups of five, offering them to be participants in a pilot program. Everyone loves being special and being asked to join a select, limited group. He has an initial goal of getting five to ten clients signed up in the next month or two. This will allow him to explore a trial run and see how sustainable the model is. He can then slowly offer the plan to additional clients, adding to the roles of members in a measured way to ensure the support and service needs do not outstrip the ability to provide the service and support in a profitable, manageable way.

His combination of thinking creatively about the plans and rolling them out slowly to test them is a great way to approach service plans (and any other offerings) with limited risk and incorporating the ability to adjust as necessary. So for those of you who have been hesitant to roll out service plans, take a page from Mark’s playbook and initiate a pilot program for five to ten clients to see how it goes.