Finding Opportunity with an Aging Account Base14 Apr, 2003 By: J.J. Morrison imageSource
Finding Opportunity with an Aging Account Base
Many companies are
in the position to lose 40 to 60 percent of their present, active account base.
They are going backwards and don't even know it. Your company could very well be
in that position too. Yes, your company! Sound scary? It should.
Here is the test. Go
to your dispatcher or service manager and ask one question, "What percent
of our current active account base is over three and one-half to four years
old?" If the answer is 40 to 60 percent (or maybe even more), these are the
accounts that you are in imminent danger of losing.
national average for machine replacement is between 3.2 years and 4.2 years.
Translation: every competitive salesperson in your area is looking for those old
accounts and trying to upgrade them. You know; your sales department is doing
the same thing. Everyone is looking for their competitors' accounts that are
dissatisfied, "over-volume", need connectivity, or have a machine that
is just plain worn out. You may have all those types of accounts in large
numbers. Just ask your technicians, they will tell you.
Following Red Flags
Most companies do not keep track of the number of accounts that cancel or do not
renew maintenance agreements each month. When a company starts to see these
numbers going up, it is the old account base waving a huge red flag. Accounts
are less likely to keep maintenance agreements on older equipment. If a company
does not monitor this data, they will be blind to the signs right in front of
Another indicator of
an old account base can occur when you notice an increase in the number of
callbacks. You begin to hear more complaints like, "why can't your tech fix
this right the first time?" or "the service rep was just here last
month, do I have to pay for this call too?" These statements hurt your
service staff's motivation, your company's reputation, and the reputation of the
brand(s) that you represent. Callbacks are all too often blamed on inexperienced
or careless technicians, while the real truth may be that the equipment is just
old and has been "patched" one too many times already. What you are
hearing may just be only the tip of the iceberg since customers under
maintenance agreements are not as quick to complain as chargeable customers.
How many of your
service calls are on accessories like feeders and sorters? How many of those
aging accessories are going to need some major work soon? If your maintenance
agreement includes accessories, the work on this old equipment will be done at
your expense. That old account base just sits there, waving another big red
Concerned yet? Look
at the number of new machine sales made last month. Unless the number of sales
was greater than the number of accounts that are over three and one-half years
old, you are going backwards, losing more accounts out the back door than are
coming in the front door. Oh, it gets worse. It's not just the number of
accounts that you are losing each month, it's the number you are getting ready
to lose. You cannot fight off all of those competitors hitting on your accounts
every month. At some point you will feel the real pain.
Defying Old Age
Short of stopping the passage of time, what can be done to solve the problem of
"old age"? First, recognize that the old equipment is there. Second,
set up a system to identify the customers that are "ready to leave the
fold." Third, consider approaching the customer for an upgrade. I know you
are saying to yourself, "We do that all the time", or "we have
done upgrade sales before and know it works."
Here is where the
philosophy should change and it's easier than you think. If the proper program
is put in place, 50 percent of the approached accounts will upgrade within three
days, with no competition in on the deal. The remaining 50 percent should be
offered an option that your competitors are failing to offer -- an overhaul!
Even at $4,000, an overhaul is cheaper that a new machine. This can be easily
sold to a customer if presented correctly. The overhauled machine can even carry
a new machine warrantee period. It is amazing how well plastic surgery can
reverse the signs of aging.
economically stressed times, many businesses that cannot or will not spend the
money on an upgrade will light up at the offer of an overhaul for fading
equipment. Many dealerships are really dropping the ball by not offering this
option. Most importantly, whether you upgrade or overhaul the customer, you
re-tie them to your company, thereby stabilizing that old account base.
One more thing for
you to consider: about 50 percent of all of the service calls that are taken in
every day can have a proactive upgrade or overhaul program applied. A good
upgrade-overhaul program is profitable; it ties customers back into your
dealership, reduces service costs, and it makes a lot of machine sales. All with
no outside competition! It's your choice…upgrade or overhaul your old accounts
for profit and keep what is already yours or ignore customers and, at your
expense, your competition will be happy to take those accounts off of your