Sales & Marketing

Is Your Contract Price Right? Consider These 4 Factors

Pricing maintenance contracts is an important (and tricky) task for field service leaders, but most have access to crucial information that can eliminate the guesswork: customer and equipment data stashed within a field service management system.

These systems gather and store data about customer and equipment history, average fix time, parts inventory, travel time and expenses. This reporting intel is key to service leaders’ ability to effectively price maintenance contracts. Here are four crucial data points service leaders should analyze to determine whether the contract price is right.

Equipment Service Costs

Field service leaders can aggregate all of their service information to determine the typical service cost for each piece of equipment. Take, for example, an air conditioning unit that frequently breaks. A field service management system will show that not only does that model generate more service requests than normal, but also the time, parts and labor costs involved to handle those requests. By analyzing those costs, service leaders can set reasonable maintenance contract prices to cover the service — and to turn a profit.

Environmental Conditions

Another way to segment the data is by geography. Consider the same A/C unit, which is typically located outside a customer’s home. Depending on geographic factors, including climate, service leaders can adjust the price of the maintenance agreement based on environmental conditions. For example, if a customer lives in a moderate climate with few risk factors, such as dust or hail, the service cost may be lower than for a customer who lives in the desert.

Seasonal Fluctuations

Seasonal facts, such as average temperature, humidity and weather patterns, should also affect service costs. If you have customers who live in cooler, mountainous areas and customers in warmer, flatter areas, you may expect one customer to use an air conditioning unit more than the other. A customer who uses the unit more often may need maintenance more frequently — and should be charged more per maintenance contract.

Usage Factors

How often a customer uses a piece of equipment should effect their maintenance contract price. For example, if a hospital uses an MRI machine 24/7, the service organization should price the maintenance contract to accommodate multi-shift service occurring outside of normal business hours. In contrast, if a piece of equipment is used less frequently, and only during regular business hours, a multi-shift service response likely isn’t needed. Using usage data to up-price maintenance contracts to guarantee round-the-clock service for critical equipment will help balance future service-related costs.

Service organizations should utilize analytics. The benefits mean optimally priced maintenance contacts with viable evidence to support the pricing. Analyzing the service histories of your customers and their equipment can help service leaders sell maintenance contracts that meet customers’ needs — without sacrificing profit.

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