We recently concluded a service contract design engagement with an established equipment manufacturer who did not yet offer service contracts to their customers. We followed the following process and arrived at a recommendation for a series of focused agreements to satisfy the needs of a broad range of customers. This same process will be used if you want to expand or update an existing set of service contracts.
The Service Contract Design Process
This picture shows the 30,000-foot view of the process:
Step 1 – Assess the Company’s Ability to Serve
- What services do you currently offer?
- What services do you think you can offer?
- How satisfied are your customers?
- What do the customers think is the value received for their current support?
Step 2 – Identify Customer’s Needs and Wants
- Segment customers, e.g., industry, academic, government or hospital, physician’s office, central lab.
- Identify representative customers in each segment
- Create interview script
- Interview customers
- Analyze results and report
An example of the type of information gathered:
We identified customers who said that “uptime was extremely important” and then asked, “If we created a service contract that included those features you identified as very important, and if the price was reasonable, would you consider purchasing the contract?” Here are the results:
Over 75% of the interviewees who indicated that uptime was extremely important would definitely or possibly consider purchasing the contract, while less than 25% would not consider buying the agreement. This is probably as much support for moving ahead as we could reasonably expect without demonstrating the list of features and offering a specific price.
Step 3 – Create Multiple Contracts
- Group customers with similar requirements
- Create a support plan satisfying each group
- What is the value proposition for each?
- Add the features that matter to each plan
- Estimate a selling price for each agreement
- Do follow-up research to confirm your plan content, and associated price, is viable with the customers in each segment.
- Go to market
Key Takeaway
When beginning a service contract design effort, skipping interviewing your customers will reduce the chances of you specifying the correct elements of a service contract. Your opinions are interesting, but you are not spending money on a service contract for your company’s products. The only voice that matters in this process is that of your customer. This doesn’t mean that the opinions of knowledgeable people are not considered; it does mean that most of the valuable specific information will come from your customer.
To read about competitors to your service contract selling effort, click here.
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization design service contracts that improve customers’ desired outcomes, please contact us or check out some of our free articles and white papers here.