Generally, maintenance agreements are beneficial for service providers and homeowners alike. For HVAC contractors, service agreements provide guaranteed work during shoulder seasons and an opportunity to build rapport with customers. For homeowners, these contracts ensure their comfort systems are performing optimally and typically offer priority service, among other perks, if and when a sudden breakdown occurs.
A recent survey of 400 homeowners, conducted by Clear Seas Research, shows that homeowners are generally supportive of HVAC maintenance agreements. Seventy-five percent of respondents deemed service agreements important (digging deeper, 18% rated maintenance agreements as extremely important; 26%, very important; and 31% important).
HIGH IMPORTANCE: Responses to the question: How important to you is it for an HVAC company/contractor to offer a service agreement in which a technician would come out twice a year to check your equipment?
On the flip side, only 25% of respondents charted service agreements as not very important or unimportant.
Contractor Perspective
Of the 100 responding HVAC contractors, 72% said they offer maintenance agreements. For those who do, they’re often recognized as a critical part of the company’s success.
PROACTIVE APPROACH: Of the 100 responding HVAC contractors, 72% said they offer maintenance agreements.
“Service agreements are the lifeblood of a residential or commercial contracting company,” said James R. Leichter, founding faculty member at EGIA’s Contractor University. “They do far more than simply fill in the slow times with tune-ups; they dramatically increase the value of your business by creating recurring revenue.”
Per the survey, 87% of homeowners are willing to pay either $100 or $200 annually for a service agreement.
This varies a bit from what contractors charge, as 8% of responding contractors charge $100 per year; 44%, $200; 29%, $300; and 19%, $400 or more.
Billy Stevens, CEO of Sera Systems Inc., a field service software company, said his company charges $99 per home.
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“Our goal is to accumulate as many addresses as we can,” he said. “At $99 per home, the perception may be that I’m not trying to make a lot of money on service agreements, but I disagree with that assessment 100%. The more memberships I sell in the summer, the more opportunities I have in the winter. This approach allows us to scale our business and grow 20%-30% every year.”
Butch Welsch, owner, Welsch Heating and Cooling Co., St. Louis, said his company has offered service agreements for the last 33 years. He currently charges $250 annually per system and, to keep up with inflation, tends to increase that price by approximately 5%-10% every other year.
“We offer two payment options,” he said. “We accept payment in advance for the two visits per year and offer a monthly automatic billing on the customer’s credit card. We just recently started the second option, so we are not sure how popular it will be.”
Drew Poskon, COO for Southern Home Services, a regional consolidator and operator of home service companies, including HVAC, plumbing, and electrical, said he charges customers $199 to join the company’s One Home Comfort Club, which includes two HVAC tune-ups and one plumbing and electrical inspection annually.
“A service agreement not only covers the cost of four annual service trips but also gives steep discounts to members, providing much more than $300 in value,” he said. “Additionally, small problems are often caught early via the regularly scheduled check-ups, so members are able to proactively save on potential major system disasters.”
KITCHEN TALK: Per the survey, 87% of homeowners are willing to pay either $100 or $200 annually for an HVAC service agreement. (Courtesy of Southern Home Services)
What’s Included?
At the bare minimum, homeowners expect maintenance agreements to include two service visits per year. Eighty percent of customers also prefer for these contracts to include discounts on parts, 78% seek discounts on labor, and 77% are looking for priority service.
Most contractors oblige, baking these and other perks into their service offerings.
Welsch Heating and Cooling’s air conditioning service visits check numerous boxes, including cleaning the condenser coil, checking electrical connections, measuring refrigerant levels, and more. On the heating side, an agreement ensures techs are performing tasks such as checking voltage and amperage draws, cleaning burners, and adjusting combustion for optimum fuel efficiency. Additionally, service agreement customers receive priority service in the event of a breakdown, a 10% discount on parts and labor, and a $25 rebate annually.
“This summer, we had several days in a row when temperatures climbed above 100°F,” said Welsch. “Our service agreement customers received priority service during this heat wave, which they greatly appreciated.”
Members of Southern Home Services’ Home Comfort Club receive discounts on repair fees, waived service and after-hour fees, and member-exclusive pricing.
Stevens said Sera Systems sells memberships rather than maintenance agreements. While the service provided may be very similar to other contractors’ offerings, he said using the word “membership” opens a variety of opportunities.
“Through a membership, our customers feel as though they join our organization,” said Stevens. “Once they join, they receive discounts, quicker service, and emails informing them about our sales, etc. Notice how we’re not leading with the tuneup. When you build your service agreements around tuneups, customers expect tuneups and nothing else, leaving us with a number of zero sales tickets. Additionally, they expect tuneups to be all that will be needed to keep their systems running.
“Through our membership program, our primary promise is that we’re going to take care of you, as a customer,” continued Stevens. “If you have a problem, Sera Systems is going to be out as quickly as we possibly can to fix it.”
Billy Stevens explains how important HVAC maintenance agreements are and what homeowners are expecting.
Visits Equal Business
Maintenance agreements are open invites for technicians to enter customers’ homes, creating opportunities for upsells and service upgrades.
“In 1990, we had three service technicians who mainly ran warranty calls and zero maintenance agreements,” said Welsch. “We hired a replacement salesman, and his first recommendation was to establish a maintenance agreement program. Since then, we’ve grown to 22 service technicians and 5,000 maintenance agreements. Besides offering the benefits to the customer as shown, this program also helps ensure nearly full-time work for our service technicians.”
Southern Home Services maintains 54,000 agreements and continues to grow that number by 8% annually, which has been a catalyst
“Our CMO, Lilah Wiatr, likes to say, ‘The only real customer is a club member,’” said Poskon. “The club membership is the building block of a home services business and creates trust and connection with our customers. Whether a new client initially comes to us as an HVAC, plumbing, or electrical customer, if we can deliver a 5-star-review-worthy experience, educate, and solve their problems, they will continue to utilize our services not only for that service but will be highly likely to seek out the same ‘wow’ experience in the other services we provide.”
