The Money Pit - Part II

ISO’s Looking For Equitable And Competitive Rates

By Raymond Cote

Service and maintenance are critical aspects to be considered when trying to sell your services to a prospective customer. If your rates are too high, the customer may not call you again, but on the other hand, if you try to low-ball the competition, you will not even make expenses. One ISO from the New England area told me that he would do the first service call for free (parts and supplies were not included) just to show the client how well he worked with the equipment and how well he did his job. It’s a cute gimmick to get you into the shop and other ISO’s have reported they had similar introductory, first call/ visits as well. In retrospect, I think the customer is always wondering about the capabilities and experience when selecting a new ISO to repair or maintain their equipment.  On the other hand, our customers have to realize that we offer a service that is fairly priced and we do have an overhead as well.  There are three types of service strategies available: The right way, the wrong way and the customer’s way. When you talk to prospective customers, you get the distinct impression that they want it for free or at least a lot less than the manufacturer.   I have discovered that the best way to approach a new customer is to be frank with him and discuss your fees upfront and the terms that you are willing to accept for services and parts. When I first started my business I was so happy that I was able to find an account that I never bothered to talk with the principals involved concerning the service fees until I was finished with the service call.  With the system up and running, the customer doesn’t have to be in a rush to pay you, and they will usually say something like: “Send me an invoice and I will send it through the system for you”. Now you are at their mercy and probably will not pay you until the next time there is a service call. I have an account in Long Island City like that, and they call about once every three months for service. They are self-maintainers and usually do not call me unless they have a serious problem they can’t resolve.  That scenario happened more than once and that bothered me. My partner suggested that we go to our bank and apply for a credit card machine that we can use to charge our customers for services rendered. That worked out quite well until we started to get the bills for the credit card services. It appeared that we had a silent partner scoffing up what small profits we were making and destroyed the intrinsic value of the credit card idea.  So, here we were back to square one with a stupid expression on our faces.  It has been my experience, and many ISO’s as well, that most commercial printers don’t really care what a dynamite job you are doing but rather how soon they can get their machine back on the production line and at the cheapest cost.  No matter what the part costs, there is always doubt in their heads that you are ripping them off with the high cost of the parts and services.

Xerox®, in their infinite wisdom, uses a simple system in marking up parts and some supplies. They use a 10x multiplier for everything they sell. So, if they pay $ 5.00 for a part, they mark it up to $ 50.00 and by law, it’s yours to purchase. If you purchase parts from Xerox to keep the copier running smoothly and you mark up the part by 10% plus shipping, the $ 50.00 part will cost the customer about $ 65.00. And the customer thinks we are ripping him off.  So with that in mind, I developed “Plan A”.

PLAN “A”:  Plan “A” is quite simple, actually it’s brilliant. You arrive at the customer’s location, examine the copier or system printer and supply him / her with a list of parts that are needed to complete the repair and you tell them that you will return when they get the parts in a few days to complete the repair. After supplying them with the list of parts and the toll free telephone number, I have found this way to be the best because it allows you to divorce yourself from the headache of ordering the parts, warehousing them and paying for the shipping, etc.  It’s about three less jobs that you have to do, and the customer knows exactly what the real charges are. If there is a complaint, let them duke it out with Xerox®.  Plan “A” works best with all your time and material customers.  If the customer knows a cheaper outlet, then let them deal with that supplier. It’s all about saving money and when the customer wants cheap parts they have to acknowledge the fact that quality may have to be compromised for cheapness. What is nice about plan “A” is you do not have to guarantee any parts. If anything fails, let them deal directly with the supplier. 

 I was not surprised when I spoke to several independent service technicians (ISO’s) and discovered they started off in the business pretty much like me and carried a complete line of parts in their trunk just like we used to do when we were working for the manufacturer. Our goal was, and still is, to get the customers’ copier up and running as soon as possible with a minimum amount of down time. And we had the inventory in our trunks. Guess what? The customer cares a lot about that, because the sooner they are up and running, they are making money. But for you, the ISO, it’s another story.  Take another guess, do you really think they care that you have gone out of your way to make sure that you have a complete inventory of HSFI parts in your trunk?  It has been my experience that when a customer is separated from the manufacturer, for whatever reason, they are used to waiting for service and parts.  Down time for two or three days is not uncommon.  Question here is should we spoil the customer?  Only you can answer that question. Is the customer always on time with his payments to you for services rendered?  Or do you hear the same old excuses for not sending out the checks in a timely manner?

PLAN “B”: Plan “B” is a little more complicated. In this plan you will train one (or maybe two) of their employees to do some simple maintenance on their copier. Xerox® had a “customer maintenance plan” that actually taught the customer how to change heat rollers and replace the photoreceptor belts and things like that.  With the customer doing some maintenance and ordering their own parts, it gives you the flexibility to move on to customers that want full service and are not afraid to pay for the high quality service they are receiving.  The self-maintainers training can be as little as three days (on-site) and can be billed for about $ 250.00 per day for the instruction. Some on-site trainers charge about $ 4,000.00 for this service and stretch it out for five days. So at $ 250.00 per day, this is a bargain. The training is centered on the HSFI screen and the replacement of all HSFI’s.  Xerox® has determined that if you replace all HSFI items when they are due, that will eliminate about 75 to 80 percent of all your problems.  And replacement of the Photoreceptor belt will resolve an additional 10 % of copy quality problems.  The other 10% of problems you can deal with as a field engineer.  As you can see, Plan “B” has merit and customer affiliation. 

In the later part of my Independent Service (ISO) career I have pushed the Plan “B” option quite a bit and to my surprise it has worked quite well with the commercial printers that wanted “rock bottom cheap”. 

“The Flat Rate Service Call”

 Over the years I have been in business, I have tossed around several types of service agreements and plans but one plan that has always impressed me is the “FLAT RATE” Plan.  And to tell the truth, it has impressed my customers as well. Here is how that works:  First decide what your time is worth.  Actually what I’m trying to get at is what would you charge for a “normal” service call? Most service calls last about (on average) one and a half to two hours.  With the Xerox® Docutech, the average service call is about 90 minutes.  At my rate of $ 150.00 per hour  (time and material call), it would bill out at $ 225.00 plus parts.  Ok, you have a starting point here, so lets say that you will do a service call on a Xerox® Docutech for $ 225.00 (plus parts). And we know that the average service call usually lasts between 1.5 to two hours on the Docutech, so you should have the problem resolved by then or at least be on the right track. So, my hypothesis is: if after one and a half hours you resolve a customer’s problem, you have made your money.  Ok, some electrical problems could add more time to your call, but on average the calls are about 1.5 hours in length, and that’s what the customer wants to hear. Hey it’s a number, and when the customer has an approximate number, they can deal with that.  Trust me on that one.  In my experience, I was introduced to this product in 1985, and truthfully I still discover things that I never saw in the field as a Field engineer working for the Manufacturer.  And the reason is quite simple: the family of copiers and printers was never expected to last for 20 years. And here we are almost 2008.  So, it’s conceivable that things will “pop up” in areas we never expected.

The “Flat Rate” service call charge can be almost any number that you find comfortable working with. I have used the $ 225.00 number as a guideline. If the service call has to be broken for parts or supplies then the continuation service call would be an additional $ 225.00. Customers are always concerned about continuation calls for parts or supplies that have to be installed by the ISO.  I would treat it as a regular service call at your posted rates.  Your actual rates could be a lot more or a lot less; It’s your bottom line that counts.  And sometimes you have to experiment with some numbers to see what your market will accept and / or reject. One of the things that made me think about pricing was the local Ford dealership close to my office. His labor, as it turned out charged $ 95.00 per hour plus parts. So if you have to travel to your customer and service his copier / printer, then it is conceivable that $ 95.00 per hour is not excessive (in the NYC tri-state area). What does your local new car dealer charge for hourly service? 

The “Flat Rate” per service call has been somewhat of a success for me in the sense that customers know what the service call will be before they actually call me. What they don’t know is what parts might be needed to complete the repair.   It’s something they can live with when they project expenses for repair.  I think that the most important aspect of dealing with vendors (in the customers eye) is trying to determine what the service call will be.  I think that might be on the mind of the decision maker most of the time when dealing with any vendor that offers service to any equipment that they have on premises. 

The last plan “C” is something that was introduced to me about three years ago by a fellow (ISO) in the west and it had to do with timeshares.  At first I did not pay any attention to it because it did not fit neatly into my plan, but gradually I looked at it from a different perspective and saw things that caught my attention. 

“TIME SHARES”

 The prospect of timeshares has been around for some time and we hear most about timeshare with vacation homes in remote parts of the United States or its possessions. In the aviation industry, there are companies that sell timeshares for their aircraft and are doing quite well with the plan.  Well in this situation, Time Shares has nothing to do with vacations.  Actually the heading should be “Block time”. Let me explain; let’s say you determine that your time (screwdriver time) is worth $ 125.00 per hour and you want a service contract or some type of commitment from a customer that is not willing to make a commitment with you for fear of the unknown. In a conversation with the customer, you mention that your rates are $ 125.00 per hour for service (parts are extra), and you also mention to the customer that your services can be purchased as a block for 10 hours for (lets say) $ 1,000.00. In all actuality, your rates are now $ 100.00 per hour at the discounted rate, but you have a commitment for 10 hours. This may be an inducement for the customer to purchase the “time” as a unit and then they will know what the next 10 hours will be billed at.  The customer will realize a savings of $ 125.00 for the 10 hours. And you (the ISO) will be prepaid for the next 10 hours.  When you study this plan, and do the math, your options are unlimited. With this “Time Block” plan, the customer will get (about) 5 service calls for a fixed price. The only unknown is the parts issue, and quite frankly, that issue is in their lap. Let them call their supplier for parts and supplies.

Plan “C”: We know what the cost is to service a Docutech printer and we know what a printer costs to support in the field (on average) is. If we take “Averages” into consideration and expand it out over a wide range of customers and volumes, we might come up with an “average service call,” which, by the way, is not easy if we are to include parts (on a well-working machine) * Notice I said a well-working machine. The Plan “C” for full service could be (let’s say) $ 250.00 per service call (parts included) Flat Rate.  Before you get involved with a strange customer or a strange machine, first become familiar with its service history and make sure the copier / printer is up to date with all maintenance. In all fairness, the machine should be brought up to excellent operating condition first, then you could start plan “C”.   And as you have guessed, parts will have to be harvested from other used copiers and printers to make sure that the “flat rate Plan C” works. 

At first, when Plan “C” is considered, it looks like it would be impossible because of what parts cost. Quite frankly, it scared me to death as well. Case in point is the price of a low voltage power supply from the manufacturer. In order to make Plan C work you would have to (actually) fix the power supply for about $ 25.00 or less.  Or in the case of a broken developer housing, we would actually have to fix the device and not replace it.  How about a failed PWB? Send it out to be repaired. Some rebuilders charge about $ 125.00 per PWB to repair them.  As an alternative, you can always eliminate all electronic PWB’s from the flat rate (per) call charge. But you have to make this point clear in the beginning that no electronic parts will be covered.

Plan “D” was suggested by several ISO’s and it works for them.  Let’s say you land an account that has multiple machines. Let’s say, for argument sake, that there are 4 large copiers in the shop. With Plan “D” you provide service, and the customer supplies the parts and materials. Question here is what do you charge them? Do you become an employee? Most ISO’s wanted to remain independent so they will be able to respond to other service calls. Plan “D” is a lot like the timeshare but with a little difference.  One ISO reported that he starts his day off at his main account every Monday, Wednesday and Friday at 8:00 AM and does his magic until he feels that everything is under control.  Then in the afternoon, he is available for service calls.  The average time spent at his “main account” is about 12 hours a week for which he bills his customer for $ 1,200.00.  That works out to $ 100.00 per hour. The down side is if the customer has a problem on say, Tuesday. The ISO will do the call without charging the client. This very rarely happens but the customer is assured that when an emergency comes up, it will be taken care of in a timely manner. 

Wait, here is the unexpected curveball in the service business: “FREE SERVICE CALL”. I touched on this topic a little earlier.  When one ISO suggested to me that I should offer my (new) customers a free service call, I thought he was nuts.  After talking with him at great lengths, I finally understood what he was trying to say.  It’s not really free; it’s really an investment.    When you meet with a new prospective client you offer him a free service call to show him how you work and to get your foot into the front door.  When you really stop and think about it, that’s what happens when you meet a prospective client. I think what’s on the top of their mind is whether you are eminently qualified to resolve their problem or not.  Ok, so after the service call, they think you are qualified to service their Docutech 135 printer / copier and now they have to rethink the fees and the charges that you will charge for your services.  Are the charges normal and customary, they might wonder. That’s the million-dollar question.  In a way, it’s all about perception and what the customer sees. When you enter his shop, are you neatly and professionally dressed in casual attire or are you in jeans and a torn sweatshirt? Even if you are a super whiz with copiers and printers, but you look like a guy that will be looking for dinner in the trash compactor at the local supermarket, then you will not be a believable person.  Dress professionally and the customer will respect your expertise.

It was a lot of fun doing this article because I was able to interview many ISO’s along the way. Some would talk forever and some were a little more conservative and did not volunteer information.  Thanks to everyone! Please continue submitting repair tips and any other information you may find helpful to other ISO’s. I can be contacted at: VillageCopierNY@AOL.COM.