Money Report #4 by Jay Abraham Copyright 1996 by Venture Marketing Society, L.C. All rights reserved. Reproduction or onpying of this report isnot permitted without written consent of the publisher. “This repon is intended to outline a business concept that the Society believes 1s potentially profitable and, ‘worth further investigation, but its profitability cannot be guaranteed. Readers are hereby cautionod that ay busincss, especially a small or new business, involves a significant risk of failure, This is not a business plan. It is the opinion of the publisher that che information contained herein is not sufficient to start a business and it will be necessary for the reader to do further research on the opportunity described. ‘Venture Marketing Society, L.C. is an information provider only. It dacs not provide any training, back- ‘up or personal consultation on the implementation or execution ofthis or any other idca, ‘The information provided is believed to be accurate, but its accuarey cannot be guaranteed, In some instances the Society ‘may have relied on information provided by third partis and the Society may not have tested the concept in practice, Finally, while the teport may speak of investing capital, the concepts described are not passive investments. ‘They require active management, Name of Concept Irresistible tune-up of your heating or air conditioning system. Type of Concept High-appeal, non-threatening, high-value offer to homeowners or commercial building owners to have their heating or air conditioning systems tuned up and checked by a reputable company for such a modest fee that they are almost sure to say yes. Overview of Concept Even if you are not in the heating or air conditioning business, you may be able to tum a substantial profit by vastly increasing the business of those who are. A number of my seminar attendees ard past clients have been in the air conditioning and heating business. One of the first techniques I get them to try when | take them on or I get a chance to interact with them at live seminars is to offer their existing customers first, and then to qualified outside target markets, a low-priced tune-up and check-up. ‘What this entails is the following:1. They offer at two key times a year (right before fall and right before summer) to tune up and check up the air conditioning or heating systems and perform a 19-21 point service, including oil lube, adjust balance, clean, ete. “The charge is normally a modest $19.95 or $29.95 or $49.95 or $99.95, depending, on whether it’s a residential or a commercial application — $19.95 to $29.95 is the normal residential price point. This price rarely even covers the real cost the heating and air conditioning company incurs to just dispatch their technician to do the work. Why do they do it then? Because I’ve had reports of return on this marketing investment in the range of 6 to 10 times their money from a number of different people I have shared the concept with. ‘Why? Because out of the businesses or homeowners who agree to have their systems checked, a very high number have a genuine malfunction or problem requiring additional repair or service action. What this means is that even though the $19.95 or $29.95 fully entitles the consumer to have the filters changed, the system adjusted, the belts tightened, there are often real and severe problems existing with heat pumps, fans, electrical systems, duct work, etc, that need to be repaired, Even though I am dealing with highly reputable companies, they can still render the needed repair services at a high profit. I can’t tell if it’s 60-80%, but I do know I’ve heard reports that 50% or more of the homes/businesses that agree to the cheap tune-up have a critical problem that needs to. be repaired or taken care of above and beyond the basic tune-up service. What's your opportunity here? It’s to fund the marketing and subsidize the out-of-pocket cost for a quality, ethical heating and air conditioning company to extend a low-price tune-up and check-up offer not only to their own customers but also to qualified outside prospect lists This means you would fund either letters, phone calls or postcards that the company would send to their own customers and you would fund letters, postcards, display ads, radio, television or cable television (see your Confidential Member's Manual) to generate new, first-time customers to call in to have the tune-up performed on their residential or commercial heating or air conditioning systems. ‘You would also subsidize the “hard” and “abrect” costs the air conditioning, and ‘heating firm incur above and beyond the $19,95 or $29.95 they charge to pay for the technician, What this means is simple. Ifit takes, on average, two hours of a technician'stime to perform the tune-up and the technician is paid $15 an hour, and the gas to get there is $3, and that means $33 is expended, but only $19.95 is brought in, there is a loss of approximately $14 in providing a tune-up. You would, besides funding the marketing, activity by phone call, letter or advertisement, also fund the shortfall or subsidize the loss of $14, ‘What you get in return is the following: 100% of your direct costs recouped off the top, meaning if you spent $3,000 for letters, you would get first monies back out of the $19.95, meaning if they got 100 people to respond, you would get $1,995, then for customers in excess of 100 you would get your choice and negotiated option of either (a) half of the profit on those customers on the first sale, (b) 100% of the profit on those customers on the first sale, on the assumption that the company would get all future business; (c) a percentage of the gross revenue of those customers on every sale resulting for the life of the customer (if it’s a new customer, not an existing customer of the heating and air conditioning company), or (d) some combination thereof Head/Trial Strategy How do you test this to make sure it’s viable before you spend a lot of money? Easy. First you take a sampling of their existing residential and/or commercial customers. “Then you pay for telephone calls to be conducted for you by a skilled telemarketer (see Confidential Member's Manual). You direct this person to call 100 of the AC/heating, ‘company's best customers or their average customers or their randomly scleoted ‘customers in both residential and commercial categories. Your telemarketer extends to them the essence of the offer and you track how many say yes. Then you have the ‘company send their technicians out and see how many people actually do need additional repair or maintenance work and how much you make on average from the process. As I always say in all these Money Reports (also in the Confidential Member's Manual), always tie up your deal long term before you do the test, Do not do the test and then try to tie up the deal. Why? Because once you prove the concept’s worth, very few people will honor their commitment in the future, You must first tie up the deal or the asset or the financial opportunity and then retain and reserve the right to test it and validate it before you have to go forward. Inthe worst case, all you have to do is pay the cost of the test. Once you know the results of the 100-person test, then roll out first and foremost to existing customers. Again, see your manual for guidelines. Once you've tested the company’s own customer list, use a portion of the profits ‘you made internally to fund a test to the outside market. My strong recommendation, but ‘you have to do what’s right for you, is to make a long-term perpetual profit deal with the air conditioning and heating company for a share of the revenue or profits from all brand new customers you bring to them, as opposed to their existing customers that you activate from this, There are two separate income streams: Taking an existing customer that they don’t aggressively or proactively go after is probably worth less to them, at leastpsychologically, than if you bring them a customer they never would have had. Both have value. Consult your manual for the psychology of the strategy, but try both and do them quietly and do them securely.