Billing Structure: Determine Your Pricing
Flat rate or hourly pricing? Making that decision wisely helps to ensure you’re charging rates that match the value of the service, and making sure there’s a profit from every job.
SECTION 7 OF 7
What's the Perfect Diagnostic Dispatch Fee?
What's the Perfect Diagnostic Dispatch Fee?
The question is debated by home and commercial services contractors everywhere. How much can a company in the trades charge for a diagnostic, dispatch or emergency service visit without adversely affecting their booking rate?
There hasn’t ever been a great answer. Until now.
ServiceTitan compiled data from businesses that use the cloud-based home and commercial services software built for the trades, looking for the answer.
Show up fee-free, then hope to sell something bigger once you’re in the door? Charge a high fee to weed out people over the phone and prevent the “tire kickers” from wasting your time? Customer satisfaction must be factored in, but what does the data show?
ServiceTitan’s data science team pulled data around diagnostic fees (or any fee charged on almost every visit) from thousands of contractors and service professionals and from more than a million residential service jobs. They looked at everything from AC system service or furnace repair to water heater issues to garage door and electrical repair and electrical system work looking for the answer to the diagnostic fee debate.
They did not include visits for warranty work, or visits without a fee because of service contracts or other reasons.
Diagnostic fees by trade
The team looked at how fees affected closure rates while on-site, booking rate, average ticket and more. They parsed the data by trade, producing an analysis for plumbing, HVAC, electrical, water treatment and garage door companies.
Here's what we learned:
Residential companies form clusters in two groups—those who don’t charge a diagnostic fee and those who charge around $89.
Far fewer commercial HVAC companies than residential ones charge $0 diagnostic fees.
Commercial heating and air conditioning companies are also far more likely than residential companies to charge a diagnostic fee of over $100.
Commercial plumbing companies fall into three major buckets—those without a diagnostic fee, those with a diagnostic fee of $90-$100, and those with a fee around $150. Some companies charge as much as $300 for a diagnostic visit.
A large number of residential plumbing services companies don’t charge service call fees, with a smaller peak between $75 and $100. Plumbers are less likely than HVAC or electrical companies to have a diagnostic fee of $100 or more.
Residential electrical services companies are about equally likely to charge homeowners either no fee, about $90 or about $150. Far fewer commercial electricians charge a diagnostic fee of less than $90, and some charge more than $300.
Residential water treatment companies are by far most likely to either charge zero or $89-99 for diagnostic visits. Commercial water treatment companies, on the other hand, are most likely to charge $150, with some charging more than $300.
Residential garage door diagnostic fees spike at $49, $89, $99 and $119. Commercial garage door companies are most likely to charge around $100.
While there is a disparity of fees across companies that use ServiceTitan and across industries, each trade has an idea of where it should be, and many businesses charge either no fee or about $89.
Diagnostic fee by company size
ServiceTitan’s data scientists broke down diagnostic fees by company size, too, and found some interesting takeaways.
The data were broken down to the fees charged by:
Small companies, with 2 to 5 technicians
Midsize companies, with 6 to 10 techs
Larger companies, with 11 to 30 techs, and
Enterprise companies, with more than 30 technicians
The findings included:
Almost universally on the residential side, across all trades, the number that charge a diagnostic fee above $100 decreases as companies get larger. This suggests larger companies believe it’s better to get in the door more often with a lower fee for the opportunity to do repairs or installs.
HVAC contractors of all sizes are most likely to charge $69.99 to $89.99 as a diagnostic fee. Enterprise companies are the most likely of any company size not to charge a diagnostic fee for HVAC service at all, with nearly 23 percent of them falling into this category.
Among residential plumbing companies, the vast majority of the smallest companies don’t charge a diagnostic fee. The fees are spread more evenly across the spectrum for midsize companies, but most large companies charge a fee of $69.99 to $89.99. As they grow, the majority migrate toward a fee in the $89 range until they reach the enterprise level, when fees again spread across the spectrum, notably falling for enterprise companies.
Residential electrical companies charge higher diagnostic fees than other trades, but those fees also tend to fall at the enterprise level. The majority of small companies and most midsize companies charge $125 to $175. For large and enterprise companies, $69.99-$89.99 becomes the most common fee.
In water treatment, there are wide variations depending on the size of the company. The diagnostic fees at small companies are relatively evenly distributed, with $49.99 to $69.99 the most prevalent range among medium-sized companies, and a majority of large companies don’t charge a diagnostic fee at all. But among enterprise companies, a majority charge $69.99 to $89.99. The reasons for these variations are unclear.
There are also stark differences in the residential garage door industry, with a majority of small companies charging $49.99 or less, the majority of medium-size companies charging $99.99 to $125, and almost all (95%) ServiceTitan customers with 10-30 technicians charging $69.99-$89.99. The number of enterprise companies charging that amount falls but is still the majority.
How diagnostic fee level affects call booking rates
At what point does the diagnostic fee begin to negatively affect call booking rates? That has long been the debate in the trades. Can ServiceTitan data end that debate?
(Note that commercial jobs were not included in the booking rate data, because the inherent differences in commercial and residential would have skewed the data.)
Customers typically first hear about the diagnostic fee while on the phone with a customer service representative. How does the diagnostic fee affect the CSR’s ability to book the call?
The results were surprising.
The booking rate when the diagnostic is free is actually lower than when it is between 1 cent and $49.99. This is true across all company sizes, with the difference being between 3 percentage points lower and 10 percentage points lower.
Booking rates remain steady until they reach $89.99, also regardless of company size.
Above $89.99, booking rates begin to fall. The rate for medium, large and enterprise companies fall by 2, 8 and 3 percentage points, respectively.
At small companies, the booking rate doesn’t fall significantly at any diagnostic fee level. A smaller customer base where clients are well-known and, in some cases, the owner is answering the phone could explain this.
Surprisingly, at medium, large and enterprise companies, the booking rate begins rising again—by 2 to 7 percentage points—when the diagnostic fee is above $125. This could be related to service addresses that require long drives, making the higher fee necessary and customers more willing to pay it.
Among the questions raised by the booking rate data:
Why does the absence of a diagnostic fee not produce higher booking rates than even a small fee? Does the customer not value something as much if it’s free?
Would more CSR training change the results?
The bottom line: What’s the perfect residential service diagnostic fee?
If a home services company is looking for the highest possible fee to charge without adversely affecting the booking rate, ServiceTitan data, which includes more than a million home service visits, suggests that for most companies that fee is about $89.
Further, the data suggest that not charging a diagnostic fee could be a detriment to your business, based on the demonstrated booking rate vs. companies that charge a diagnostic fee.
Your business could have special circumstances (drive length, etc.) that influence your decision, local competition could play a role, and this national data might not accurately reflect every individual situation.
The ServiceTitan dashboard and available key performance indicators (KPIs) can inform the best decision, showing how changes in a company’s diagnostic fee affect booking rates in that location.
So while the debate might not end, ServiceTitan data inform a logical starting point and allow for local experimentation and a data-driven decision on what works best for your company.
Table of Contents
2. Building a Company for Success
3. Setting Your Company Up for Success
4. Driving a Company Culture
5. Setting a Path to Maximum Profitability
6. Billing Structure: Determine Your Pricing
7. Marketing Practices
8. Call Center Practices
9. Call Center + Field Practices
10. Best Practices in the Field
11. Field + Office Best Practices
12. Keys to Success in the Office
13. Management and Office Best Practices
14. Human Resources
15. Preparing Your Company For Sale