Call-backs are not only expensive, but they can be the difference in making an acceptable net profit or not in your Service Dept. Let’s run some conservative numbers to get us started.
The first thing we must do is determine what we expect the technician to collect for each hour of work he or she performs. Let’s start by using your Straight Forward Pricing Guide rate. For our example, I will be using $250 per hour worked with an average parts cost of $45. Also, the mark-up on those parts will be 100%. That makes our expected revenue collected as $250 + $45(2) = $340.
Secondly let’s talk about the key performance indicator, or KPI for call-backs. The Airtime KPI is 2% or less. That means if a technician runs 100 service calls per month he or she should have no more than two call-backs during the month.
Impact on the Bottom Line
Call-back’s are very expensive in three ways:
- Lost Profit – In most cases the customer does not pay for the call-back. Assuming the total time for the call is only an hour long (usually longer) which includes driving to the home, completing the job that was not done properly to begin with, and then driving the next call. That is an hour of time at $340 per hour the tech worked, but the customer did not pay for. Cost to the company = $340
- Lost Income – The hour we lost doing the call-back could have been used to make another call. The lost income was an additional $340.
- Total Loss – That means the one call-back has a net effect cost to the company of $680 dollars.
Overall Impact
If a tech has three call-backs per month, at a cost of $680/each, the cost to the company over a period of a year is $24,480 ($680/call x 3 call-backs a month x 12 months). The $24,480 ASSUMES the tech hits the industry KPI of 2% call-backs. If the tech has an average of 6 call-backs a month, the loss doubles to $48,960/year! Ouch! Call-back’s can truly be the difference in the company making an acceptable net profit in service……or not! Remember the loss of $24,480 was for ONE service tech. If you have two service techs the number doubles and three techs will triple the number!
Customer Dissatisfaction
The final impact is customer dissatisfaction. Returning for a call-back is not a very pleasant experience for our customers as they have to be inconvenienced by having a tech come out a second time while, at the same time, are not comfortable since the equipment is not working. Sometimes, customers go to the competition the next time they need service. That equates to a lost customer. Also, we must remember the schedule had to be adjusted back at the office to run the call-back. Now, the customer that was to be serviced must be called and rescheduled for the repair. Again, we have irritated our VALUABLE customer base.
Are call-backs expensive? You bet they are! Make sure you are tracking the individual productivity and profitability of each and every service technician in your company.
If there is a positive from call-backs, they do help you fill your training calendar.