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The All-inclusive CPC Agreement: Forget About It!

7 Feb, 2006 By: Ronelle Ingram imageSource

The All-inclusive CPC Agreement: Forget About It!

all-inclusive service agreement—can you profit from it?

As sales reps keep lowering prices to be competitive, service managers are
watching their margins erode. Every time the sales department upgrades an analog
or older digital copier, the service department loses revenue. In addition,
service has to do the site survey and install the machines to the network only
to receive .007 less per copy on the new service agreement.

Owners, in the meantime, are being pulled by both the service and sales
departments. Each is trying to figure out how to receive their fair share of the
decreasing revenue flow. To be profitable, everyone must be willing to change
their thinking and actions.

This can begin with the realization that cost per copy (CPC) agreements do not
have to be all-inclusive. Also, stop calling it a service agreement and use
maintenance agreement. At under a penny a copy, the client is merely paying for
maintaining the equipment. True service cannot be profitably provided for .0075
per copy.

Your maintenance agreement should be written in such a way that your dealership
only covers standard repairs and supplies for walk-up functionality of

Think about this…

• In the past, gasoline was around $1.49 per gallon.

• The copier did not fax, scan or print.

• There were no high-priced hard drives and laser units to be replaced.

• There were no networks to install.

At one time, customers paid .015-.02 cents per copy, but service managers could
afford to be generous and service everything under the terms of the service
agreement at no additional charge. Times have changed and your company must make
adjustments to survive.

Consider this…

• In some states, gasoline was over $3 per gallon just a few months ago.

• Costly hard drives and laser units are failing on a regular basis.

• Network administration responsibility is a constant source of friction between
clients, sales reps and service.

• The street rate for all inclusive service agreements is now .0055 to .0099.

Your company should make a business choice to only provide service for what a
customer has purchased. This starts with the initial call for service. Decisions
must be made before the tech is dispatched. What is the actual problem? Does
your maintenance agreement cover toner spills, network administration, color
calibration, broken exit tray, missing surge protector, or water damage?

It will not save your company money to send a tech out to a customer’s office to
inform the client that adding new software to several workstations is not
covered under their maintenance agreement. All too often techs are faced with
customers that claim the sales rep assured everything was included in the
service agreement.

What is the tech to do? Argue with the customer over what coverage they have? Do
the work for free? Before a tech is ever sent out, the scope of your maintenance
agreement must be addressed.

The agreement and what it should look

It is your responsibility to be very specific in your maintenance agreement
verbiage. For example, a walk-up copier functionality maintenance agreement
should include costs for travel, labor, appropriate parts, and consumable and
supplies in an amount consistent with the manufacturer’s published yields and
servicing intervals

The terms of your agreement should be for one year or the designated number of
clicks, and the annual billing option may expire by meter clicks before the end
of the year. This agreement would automatically renew for each year thereafter
at the then prevailing rates or as otherwise stated unless it is canceled by
either party in writing at least 30 days prior to the expiration date.

The agreement should not cover service caused by the malfunction of non-original
manufacturer equipment parts, supplies, attachments, or supplies not authorized
by your company. It also should not include repairs or cleaning due to improper
installation of toner, developer or foreign agents.

Additionally, repairs or replacements on external items such as doors, covers,
hinges, the operation panel, stands, wheels or exit trays should not be
included, nor should repairs on circuit board failures unless an approved surge
protection device was installed with the listed equipment.

The customer should agree to:

• Provide suitable electrical service and maintain proper environmental

• Pay for the special servicing that may be required to move, prepare the
equipment for movement or to reinstall and adjust after a movement.

• Provide your company with meter readings as needed and to accept estimated
meter readings based on service history for billing purposes. Pay additional
.0025 cents per scan when scans exceed agreement minimum or actual print usage.

• Pre-order needed supplies. Allow 5-7 business days for order processing and

Your company should not be responsible for delays of service due to
manufacturers’ non-availability of parts or supplies necessary to complete

Creating a maintenance agreement with similar guidelines can make or save your
company thousands of dollars.

It takes time

Increasing your service revenue can be a timely process. Think of it as
solutions servicing. Just as solutions sales takes more time, knowledge and
energy, solutions servicing requires the same.

Also, personnel must buy into the total process. Sales, service and accounts
receivable personnel must understand what is being sold.

Be aware of the usage life of the equipment you represent. Don’t agree to make
something work longer than its natural life and don’t trust the manufacturer’s
marketing literature. Very often the service and sales side of the manufacturer
do not agree.

When manufacturers calculate cost it seems their calculations are based on last
column pricing—not freight cost, overhead, inventory, customer, tech or sales
rep error. On your own, calculate your real costs.

Another suggestion, always sell clicks, not copies. Make sure you set the
default counter to double click for 11X17 and two-sided prints. Be aware of how
your color equipment measures each color and black printed page.

Knowledge is the key. If your staff is not informed and committed to charging
for non-included items, and your agreement is not well thought out, the
appropriate profits margins of 40-50 percent will not be achieved.


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