Service Contracts

[Nameless1]

I have recently joined a company as a service manager(not yet official) for one of our divisions that manufactures a certain machine. Now my responsibilities amongst others is making sure that the machines are wired right, tested, and commissioned on site. But now one of the challenges I face is providing customers with service contracts to ensure that we can regularly service the machines while providing discounted labour and travel rates.

This would normally be easy enough, but a newly formed company has recently entered our industry and they are offering service contracts at ridiculous rates AND they are offering to service all machines regardless of Manufacturer. (*@&#(@&*#)!!!

I'm not sure if it is fair to put a clause in a contract stating that this machine can only be repaired and/or serviced by authorised technicians. I wouldn't mind 3rd party companies doing this, but how does it benefit my after sales profitability?

Anyone has any suggestions as to the best way for me to approach this? I'm trying to think outside the box with how to charge the customer, a different approach as to how to approach the whole service contract thing...without shooting myself in the foot by operating at a loss.
Normally its: Number of hours worked x rate per hour
Kilometres travelled x rate per kilometre
this excludes toll fees and such. But is there a different way out there to handle a service contract? A different method of invoicing the client?

 

[tvtech]

Hi Nameless 1.

I am also from SA. Any chance your "competition" is a BEE company? Just interested to know.

Cheers

 

[canadaelk]

Each industry has its own standard modus operandi, so, not knowing anything of the product:
First off, you answered your own question: "A newly formed...", Are they proven? Will they be here after they take the money? Will they get parts, and how fast and at what discount? Check the really fine print and make your own contract transperant!
To put a clause into the contract is totally fair, as long as your laws allow it! But still, you need to play this carefully, it could put some people off.
Also, you could try and convince your employer (and all the other suppliers/competitors) to extend the warranty out to 2, 3x existing warranty periods, starve them out
Good luck, E

 

[phalanx]

While not a total solution, how about increasing customer incentives if they have a service plan. One way might be to offer discounts on replacement parts that wouldn't be available to outside contractors.

 

[Nameless1]

I am also from SA. Any chance your "competition" is a BEE company? Just interested to know.

Haha no, Tvtech; but they are from the industry with a fairly good reputation.

I like the idea on the discounted parts option from Phalanx, although that won't apply to my electronics (we are using a Beckhoff PLC and HMI) but certainly on the pneumatics and mechanical bits