Service Contract Help request

[dbro257 0]

Hello Everyone,

 

We have been providing on demand IP camera service calls for the corporate residential locations for a client. They are now requesting that we provide service for the corporate location as well and they would like me to propose a service contract to compete with their current provider. That's great but I'm racking my brain trying to formulate one. There are 36 cameras total at 4 locations. They all have Axis AVHS service with edge storage. I would like to get them to upgrade to a VMS system at some point.

 

We have been working in the residential and small business sectors for a few years so I'm not familiar with the contracts but transitioning into the commercial market is my goal.

 

Would anyone be willing to share their service/maintenance contract with me as an example?

 

I would greatly appreciate any help with this.

 

Thanks

[varascope 0]

Ah the age old questions on formulating service contracts.

 

Method 1: Value based

 

If you are going to offer replacement of equipment. Estimate the likely hood during the contract period for a camera to go out. For 36 cameras, if warranty is expired I would estimate 3-4 cameras possibly going out during a year. Figure outdoor cameras are more likely to go out. For service assume the 3-4 you will need to truck roll. Average 4hr per call X your rate (discounted from hourly). Figure in truck rolls if 4hours will cover travel and distance to each.

Will you provide bi-annual cleaning and inspection or similar? Figure the time required to perform that for 4 locations. I am guessing at 4 days times X hours.

 

Method 2: System Cost percentage.

This is typically used if you sold and installed the system and you know the quality of installation. Take the total cost of install and come up with a percentage 10%-22% typically of the total system and tier it across the length of the contract.

3 year contract is discounted over just a one year BUT at the 3rd year you are more likely to have service calls

 

Method 3: Customer evaluation

1. Is the customer a whiner?

2. Can the customer program their own alarm clock?

3. Is the customer demanding?

 

These factors need to be considered first. If a problem occurs, are they the type of customer that reboots first, tries a couple of things and then calls or do they call first and say the camera system is not working since the power went out in the neighborhood? Some see service contracts as "Im going to get ever dollars worth" out of you.

Other issues are locations with high turnover. Training 4 managers in one year can be frustrating.

 

Which ever one you decide, make sure you specify what IS include and what IS NOT included. Sometimes it is better to submit multiple proposals as it lets them decide the level of service. List 3 options, what is included and what is not explaining the NEXT package that does. This helps cover you if you are higher than the competition as it lists the Platinum level but yet shows if price is the factor, WHAT the customer is WILLING to live with.

[dbro257 0]

Thank you Varascope! This is a great help.

 

I met with them today and tomorrow I'm going to begin working on the contract. I think I'm going to combine method 1 and 3 because the customer can be a whiner and they will not attempt a reboot. hahaha. I don't blame them though. That is the level of service they want. Do you have any insight on sales compensation for service contracts?

 

Thanks again.

[varascope 0]

If your having a salesman sell the contract for you, it is up to you to determine and build it in.

 

1. % high enough to motivate sales person to do the work.

2. Does the salesman do the calculations or do you. If you do then they get less because of less effort.

3. Build into the contract so everyone benefits.

 

Working out sales contracts with your staff can be tricky.

 

1. Upfront or monthly payout. I prefer monthly as it keeps the salesperson motivated to stay and balances their pay when slow. They have to understand that if they quit they lose their monthly.

2. If you do a 1 time payout make it smaller than if they take it monthly.

 

Good sales people should want to build their book of business and once they have a steady monthly base it will get to a point they would be starting all over if they quit. The hinge to this is you are paying them commission to manage the service contract during that period. Quitting or being terminated prevents them from managing the contract, therefore not entitled to commissions. ALSO if the customer stops paying the monthly, the salesperson should go out to find if there is an issue. I never like the hit and run salespeople. They make the sale and then pass the responsibility on. If they make promises then they should show they stick by it. Nothing worse than a salesperson saying the installers can perform the miracle without charging extra.

 

But, you need to develop a plan that prevents laziness. If their monthly is high, they may not want to sell. Enabling quotas and penalties for non-performance monthly or quarterly.

 

You obviously want to develop your service contracts as this goes toward your companies net evaluation. No contracts and you company is only worth your last sale and average monthly service calls. Eventually if you decide to sell. You contracts will be the bulk of your asking.

 

PM me if you need further help

[ssnapier 0]

I have an older one from a previous job that you can use to get yourself going in the right direction. Email me and I will send it tomorrow when I get to my office.

 

snapier (at) the-psg (dot) com