Bright Ideas: A New Approach to Maintenance Contracts
If you ask an end user whether they use maintenance contracts the response is usually 50-50: Half want them to help stabilize their monthly expenses; the other half prefer to simply “pay for repairs when something happens.” When asked about the value of maintenance contracts, most customers respond, “I’m not sure.”
Asking about the value of maintenance contracts can also solicit a 50-50 response from security providers. A customer with few service issues that has a maintenance contract can be highly profitable, while one with excessive service calls can prove unprofitable.
Protection 1 decided to take a new approach to maintenance with its national account clients by introducing a program called Maintenance Rewards. “Service issues are a headache no matter what role you play, customer or provider,” says P1 CEO Tim Whall. “Customers don’t want them because they are disruptive to their business and providers don’t want them because they are an expense that reduces profitability. We believe in aligning our goals with our customers so that together we drive down service issues, and in exchange the customer can ‘earn’ some of the maintenance costs back.”
The key to P1’s approach is the transparency provided to the end users. All of a customer’s sites must be included in the Maintenance Reward contract, with traditional methodology for maintenance pricing applied. However, the company tracks the “actual” time and material (T&M) for the customer.
P1 uses a quarterly 1REPORT to identify customer sites that have a total number of service calls above the benchmark and thusly creates a plan to reduce activity. That plan may include upgrading equipment, determining if there is a quality of service issue or a customer issue with employee training or process. At the end of the year, total T&M costs are subtracted from total maintenance fees and 50% of the difference is credited back to the customer.
“The Maintenance Rewards program is a true win-win for both us and our customers,” says Whall.
Jennifer Diamond is a Communications Specialist for Protection 1. She can be reached at (800) 367-6811, ext. 4704
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