GROWING SERVICE REVENUES
In an era of depleted margins, a focus on service and services is critical.
By Scott Cullen
It’s a given that office equipment margins aren’t what they used to be. As margins shrink, many dealers are finding that ratcheting up the tried and true—service—is the way to remain profitable in the 21st century.
CDS Office Technologies, a Minolta dealer headquartered in Springfield, IL and locations throughout Illinois, Indiana and Missouri, is one dealership who has seen its service revenues grow steadily during the past seven years. Not coincidentally this growth has come at a time when CDS has been forging a reputation in the markets it serves as a premiere provider of digital technology and networked services.
Similarly, WJS Enterprises, a Canon dealership, with offices in Metairie and Baton Rouge, LA, is also seeing its service revenues rising. “Our [service] revenues are growing but margins are tighter,” says Russ Jacketti, vice-president of sales. “It’s similar to what’s happening with equipment.”
According to CDS’s general manager Dave Raman, service represents 20% of the company’s yearly revenues and an even larger portion of its profits. One of the reasons CDS has been successful in growing its service revenues during the digital age is because it focuses on much more than the traditional break/fix service. In addition to selling and servicing the obvious array of office equipment—digital copier-printers, fax machines, etc.—the company has been a long-time provider of computer hardware and services. As a result, the transition to digital office equipment and networked services was not as painful had the company been forced to learn the ins and outs of networking and network services in a flurry as have many dealers. That said, it’s still been a challenge and CDS has had to work diligently to win the confidence of IT personnel who have traditionally been hesitant to connect non-HP equipment to their networks.
To charge or not to charge?
A big issue for many office equipment dealers has been whether or not to charge for connectivity. While some industry pundits contend this is absolutely essential, some dealers who are charging for this service are finding themselves competing with other dealers who are giving connectivity away. The trade off of not charging to connect the customer’s device to the network is the lure of increased revenues from more clicks because the device will theoretically be performing more functions. Yet some dealers believe this thinking is flawed because some network installations are more complex than others and can be a large drain on a dealer’s service and technical staff’s time and resources. But because of the competitive nature of the office equipment market, it’s difficult for many dealers to make the leap to the head of the curve and start charging for what others are giving away.
That’s one of the reasons that WJS, besides providing an array of services beyond the traditional break/fix, continues to look at new ways of increasing those revenues in ways that are more acceptable to the customer. Jacketti reports that as WJS begins to offer customers more software-based document management products, they’re considering taking a VAR approach when it comes to installing the software on the network for use with the customer’s copiers and printers.
For example, WJS is considering one price for the software and then additional costs for installation. Another option is giving away a few hours of installation time with the cost of the software and then charging customers an hourly rate if additional time is needed for the installation. As Jacketti notes, this approach will compensate for those installations that are relatively quick and easy to take care of and those that are more complex and are a bigger drain on a dealer’s service and technical staff’s time. Charging for this expertise is also a way for dealer’s to protect their bottom line. “If you don’t charge, the customer is going to use your computer specialist carte blanche,” notes Jacketti.
Saving with software
Whether it’s traditional break/fix service or networked services, one of the keys to growing service revenues is the ability to accurately and efficiently track costs. Raman and Terry Bell, CDS’s director of service, emphasize the importance of tracking service costs down to individual technicians as a means for maintaining profitability. “Tracking costs is absolutely critical to making a profit,” says Raman. “Competition is tough and we need to know exactly what our costs are and which technicians are performing better than others. A lot of bids are lost on less than one tenth of a cent per copy, so being able to know what these costs are is critical.”
A variety of programs are available for tracking service costs, including packages from BEI Services and Great Plains Software. Last August CDS made the transition from its previous program for tracking this information to a program from Great Plains Software, which is more efficient for tracking information in digital and networked environments. The more advanced program also offers the added benefit of customization to CDS’s business policies and programs rather than the other way around as with some of the other programs CDS evaluated.
Using this program CDS can track the parts technicians are using in the field and ensure that those parts are in his in-field inventory so service can be completed on the first call. “Having this information at your fingertips is very important,” says Raman. “The key to cost efficiency is allowing technicians to carry the proper stock to complete 85% of call on the first trip,” adds Bell. “A lot of people overlook that cost.” Indeed, when a second call is necessary, labor costs are doubled.
Upping the ante
The advent of digital technology has upped the ante when it comes to service and having knowledge service personnel in place is critical for growing service revenues. In the analog age if a copier went down it was a problem for some segments of the office, but today because it’s on a network and may also be a printer and a fax machine, it could affect productivity for the entire office. As a result, Raman says customer expectations for service have gone way up. One of the ways CDS ensures that customers, particularly IT personnel’s expectations are met, is by hiring personnel who can communicate with this rare breed of individual. “IT is cautious about what goes on their networks and don’t want something that will take the network down,” says Raman. It may cost dealerships such as CDS and WJS more to hire, train and retain qualified service personnel these days, ultimately it has a positive affect on the company’s service revenues and ability to meet this new breed of customer’s great expectations.
Even though digital technology has created an array of opportunities for new service revenues, dealers must continue to remain diligent in pursuing those opportunities and creating new ones. While CDS and WJS are examples of two dealerships who have found that a pro-active approach works best when it comes to finding new opportunities for growing their service revenues in tough times.
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