Question:
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Ken
We are looking into service contracts and wonder if you could send out in your letter what other company’s are doing as far as coverage and pricing. I have purchased your service contract so that part is in place. I just don’t know where to go from here.
Any companies out that would share information would be most helpful. We do not sell or do give away systems.
We are also looking into leasing cctv and was wondering if there is a formula to come up with a price on this. Any help will appreciated and yes you can include this information in your newsletters.
Thank you,
Richard K
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Answer:
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The best answer is, of course, "as much as you can get". That probably doesn't help you though. Pricing is going to be affected by your competition, so different cities will have different price scales. One concept to keep in mind is that you don't want to lose money, you want to make money. How you price your contracts will determine your bottom line financially.
Service contracts are particularly difficult to price, especially if you don't have experience with a subscriber or the type of system you are agreeing to service. When you are including labor and material you want to be careful that you will end up very close to where you'd be if you were charging on a per call basis over the term of the service contract. If you decide to limit your service contract to just labor, or just material, or material at cost, or labor at a specific discounted price, you can better control your potential performance expenses.
The Standard Service Contract is designed for two options, either "per call" or labor and material included for the monthly charge, the recurring revenue option. The all inclusive service obligation may seem risky, but what is really included? Ordinary wear and tear. A service call necessitated by negligence or neglect, affirmative damage, remodeling damage, pet damage, electrical and lightening damage, -- all not included. Dead batteries - not included. In fact, I'm not technical enough to point out an example of what would be included.
If you anticipate that two services calls per year would be required then you should price the Service Contract that way. Equipment will be warranted for at least part of the Service Contract term, so you will be able to get some credit or repair from the manufacturer if necessary.
Let's hear from some of the more successful and experienced business people out there on this issue.
And, so we don't get bogged down with lots of legal BS, this is not price fixing and it's not illegal to discuss.
Tomorrow I am going to address commercial lease pricing.