Enforcing Cancellation Policies

When a customer cancels a service call on short or no notice, how do you effectively charge a cancellation fee? April 21, 2011

We do a lot of service repair work. Customers call us and we schedule appointments. We have the following policy:

- More than 24 hours notice - no charge.

- Fewer than 24 hours notice - 50% of the service price will be charged.

- Cancelation the day of service - 100% of the service price will be charged.

When a customer schedules a job we tell them the cancellation policy on the phone and we tell them to review it on our website at a specific address as well. Over the past five years we've only had a few cancellations and people have happily complied.

However, the past week we’ve had the bad luck of having five cancellations. Two of the cancellations were before our 24 hour period but the last three were during it. One of the three we rescheduled, but the last second has given us a very hard time when we restate the policy and request either full payment or the 50% payment. By the way each states that they did try calling but no one picked up the phone. I find this to be false because our phones route to a call center for scheduling if someone in the office does not pick up after the third ring. Plus after reviewing call logs on all of our phone numbers, there is no indication of their call.

I decided to not stick to our guns and our policy and just forgive the balance owed us as a gesture of good will and to diffuse the anger spewing from these folks. We aren't desperate for money but I feel like I'm setting a bad precedent. I don't want to continue to forgive balances so my question is this: How does one enforce a cancellation policy? Our services are small ticket items but five lost jobs quickly add up to 2k or more.

Forum Responses
(Business and Management Forum)
From contributor J:
How do you even know what the service price would have been? Is the price for the service agreed upon when the customer calls to schedule the appointment, before any of your technicians have even seen the problem firsthand? If that price wasn't clearly defined then your policy is illegitimate because you're essentially demanding a blank check.

I also think you might be overreaching by demanding a cancellation fee of hundreds of dollars ($2k/5=$400) for work you haven't done. Unless you are doing very specialized work and have no local competitors, it's hard to imagine you have that sort of market power; you'd just end up driving your customers to the competition. Instead, you might consider a much more modest policy such as a fixed $50 cancellation fee - enough to dissuade customers from canceling in most situations.

From the original questioner:
We have a fixed price. Cancellation policy was put in because we still have to pay our subs (we use subs for onsite work) an agreed upon price. I've debated this with myself for a while how we'd actually enforce this.

From contributor I:
Bill the full amount at scheduling, if they cancel, refund according to your policy. It seems fair enough. Try booking a motel without a credit card and you'll get told to put an adult, with one, on the phone. Sounds easy enough - 25 hours notice, no charge. 24 horus - 50%. Day of schedule - 100%. That's why it's called a schedule.

From contributor J:
Regardless of what's fair, you won't be able to enforce policies that are significantly harsher than your competitors'. Since you're using subs, I assume that you do have local competitors. What are their policies? I suspect that a milder policy will easier to enforce, less likely to alienate customers, and make these cancellations much less frequent. Eliminating your exposure entirely is probably impossible.

From contributor T:
How much do you promise to pay your would-be customers if you cancel an appointment? How about if you are merely late? I see this policy posted at my dentist's office and think it is ridiculous and clearly unenforceable, without a signed agreement. I have plenty of time to contemplate the policy while I wait ten, twenty, even thirty minutes after my appointment time. If it happens so infrequently you need to find a way to absorb the hit without so much fuss.

From the original questioner:
Actually we have a policy of discounting a service call if we are late or have to reschedule.

From contributor D:
You either have a policy or you don't. We added a service call charge of $75 that is written into the agreement. The reason we charge this is that for some reason people think that their large dog sliding across the floor breaking the center panel on a door should be covered under warranty - go figure. You told them upfront when scheduling the appointment your cancellation policy and tell them to review it online at your website. They had every opportunity not to schedule the appointment at that point.