Wes McArtor knows what he’s talking about when it comes to service. He’s been in the copier industry since 1981, beginning as a field tech before moving up through the ranks as service manager, district and regional management positions and then as national service marketing manager for Minolta Corporation. Now he’s President of BEI Services, a Cody, Wyoming-based provider of service benchmarking and imaging device assessments.

Founded 15 years ago, BEI Services currently tracks more than 750,000 service calls monthly on 1.33 million machines. The company’s statistics and benchmarks allow dealerships to compare their MIF and technician’s performance. With this information, BEI can help pinpoint where improvements can be made to reduce service costs. Additionally, BEI offers a Pay for Performance program that is setting new standards in the way dealerships compensate service technicians.

Recently, ENX had the opportunity to talk to McArtor about the company and how it has evolved during the past 15 years.

What inspired you to start BEI Services?

McArtor: My partner and I were doing exactly what we are doing now for a major manufacturer. We were trying to prove to Japan that the machines coming from Japan had issues and the only way to do that was to create a statistically accurate model that would tell us what was going on in the field with the equipment. Over a four-year process we got that done, but they basically didn’t want to know the answers.

But the independent dealer community was interested. Most dealers live in their own world. They can go to meetings and talk to their peers, but they really don’t have any way of measuring their technicians’ and their machines’ performance against everybody else. For the first time they could tell if this was a machine-related issue or a technician-related issue— is it the way they were selling it, or were they putting it in the wrong place or the wrong page count? So when the manufacturer decided they no longer wanted to fund the program, we saw an opportunity to take it private.

It wasn’t easy at first, was it?

McArtor: We did have a bit of a chicken-and-egg problem because 100 percent of our data was focused on one manufacturer, and we didn’t have data on any other manufacturers, so when we’d go to prospect and sell our product to dealers who sold other product lines, we were having a really difficult time. During that time I created a model that paid technicians based on their ability to perform the specific tasks that we needed them to do. That’s what really took off. Once I had that model perfected and started marketing that, I was getting dealers to sign up all over the place, and they had product lines beyond the one we started with and that built our database.

Once you had that database, you still had to prove to the industry that it was credible. What was the big challenge?

McArtor: Will people believe the information and can you statistically prove your information is correct? IKON did a six-month due diligence on us before they signed with us because they wanted to make sure that the data we presented was accurate and better than anything they could generate internally. Through that due diligence we were able to prove to a major industry giant that we were able to do what we said we could do and better than they could do it themselves.

Why does a dealer choose BEI Services?

McArtor: There’s no one else that does what we do. But the primary reason they choose us is we give them a reference tool that’s bigger or better than their own. For example, if a dealer were to pick up a product line and sell 100 of a given model, everything they use to base their maintenance contract pricing on and the evaluation of the performance of that product is currently based on what they know about it. With our product, they have thousands of a given model so they can use our data not only as a reference point to set their maintenance contract pricing but to set the expectations as to how that product should really perform for them. It’s all based on profit because if they can service the product for less than what they’re charging the customer, that’s their profit margin. Our typical customer will increase their bottom line in service between 10 and 20 percent.

Is there a typical dealer customer or profile that uses BEI Services?

McArtor: When we started our business, the typical dealer had between five and ten technicians and that’s probably the core of our customer base, but it’s skewed now because we have large customers like the manufacturer direct operations, who have hundreds and hundreds of technicians. However, the typical independent dealer is in that 5-10 tech range.

Is it economically feasible for smaller dealers to work with you?

McArtor: Our pricing model is scaled to the dealer and we have dealers with as few as two technicians.

How do you get your value proposition across to the dealer?

McArtor: They send in the information that we require from their ERP and we process it and present it back to them and build our value proposition from their actual data. We show them exactly how much money they’re going to save, where they’re going to save it, and where their strengths and weaknesses are. For the vast majority of dealers, if we can get them to send their data in, we have a high rate of closure.

What kind of data and benchmarks are you providing?

McArtor: Because everything is based on cost per page, what we bring to them is an accurate measurement of their own cost per page compared to everyone else that services that same product. We can break that down and compare their technician’s performance so we can identify who is strong on a given product and who is weak so they can address those specific concerns. We can break down the yield of all the major components they use so if a part does not produce the number of pages that was expected, that impacts their profit. We can show them how their parts perform compared to everyone else.

What were some of the lessons you learned from being in the industry for 20+ years when you started BEI Services?

McArtor: Everything is a commodity now. There’s not much differentiation in the customer’s mind between the major manufacturers because they all have the same bells and whistles and features. And we’re back to making money in the aftermarket which is primarily service. Seventy plus percent of a dealer’s gross profit is going to come from service. We’ve now gotten to the point where the service operation is key to the success of the dealership yet a vast majority of service managers are technicians who never actually had any education or experience being managers. Surprisingly enough, they have done a phenomenally good job of managing a complex business.

What we bring to the table are a lot of tools to manage that business better and dealers are starting to recognize more so now than ever that they have to educate and support the management team they have running service because that’s where their profit is. For the vast majority of copier dealers today, the owner is an ex-salesman so he relates specifically to what sales has to do to accomplish their task and then rely almost solely on the person they appoint as service manager to run that portion of the business. They’ve done very well, but they have no idea how much better it can be. Their reference points are: do our customers complain, is our response time good enough to make sales happy, and are we making the profit that the industry model says we should or close to it? If they’re hitting all three of those, they look at us and say, why would we need you?

And what is your response?

McArtor: Would 20 percent more profit on the bottom line be of any interest?

Does that work?

McArtor: Every time.

How big is your database?

McArtor: The database itself is a little over two million discrete serial numbers.

Tell us about the Pay for Performance Program.

McArtor: We have two of them, one for the technicians and one for sales. Most dealers pay their technicians based on calls per day and response-time targets—in some cases they’ll do parts budgets. What we wanted to do was tell the technician, every time you touch the device we want you to service it so that you get the maximum number of pages out of that device afterwards.

So what we did was create a per-page-based commission scheme because the dealer’s revenue comes from cost per page. All of our measurements are cost per page. We took that model and said we’ll pay you for every page that machine produces from the time you touch it forward. So the better job you do, the more pages it will produce without incurring additional service calls. That’s the number one component. If a technician can get a machine to run longer because of what he does, he makes more money. If he does four of those calls compared to someone who does three a day, he’ll get paid better. If he starts working at 8 and works to 5, he’ll make more money than someone who starts at 9 and quits at four because he’ll physically touch more devices that produce more page volume.

The key is saying to the technician, ‘When you manage pages that’s revenue to me.’ If the technician manages a million pages, I can calculate that and see how much revenue that represents. So our commission structure is tailored around the idea that if you pay a technician to service better, then he will.

You also have a component focused on parts usage?

McAartor: We know that not using the correct parts impacts machine performance. If you’re using a lot of parts and it’s not impacting machine performance, you can reduce the amount of parts you use and it won’t change anything. We can tell them what parts they need to be using that they’re not to improve the machine’s performance, so the bonus program measures their use of parts against our benchmark. Now a dealer can say if you save me money in parts I can give you a piece of that savings. If you overuse parts, I’m going to take that away from you. It gets them to pay attention to the parts they use and how that impacts the way a machine runs.

You’ve also introduced some other interesting programs?

McArtor: We created a program called Executive CSI (Critical Service Indicators). It is basically a dashboard for a C-level executive to monitor the performance of their service department. It has a variety of pages that give him insight to his service space as it compares to our national statistics. We can show what percentage of the serial numbers he has installed has a cost per page higher than the average. We have six indicators and have four more planned between now and March that will continue to add value to that particular component. Then in the background we’ve got a page-based sales compensation program that we’re getting ready to push out to market.

As we see trends we create tools. For example, managed print—we’re creating total cost of ownership calculators to make managed print work better. We’re going to be creating tools like a churn report that measures the net change in your install base. Things like net new installations, how many machines replaced ones you already owned and the net change in page count.

What else are you working on?

McArtor: We’re working with companies whose products talk directly to the device. That’s great information, but it doesn’t have a repository at the moment. Things like how many times does a machine jam before the customer places a service call, how many pages are 11 x 17 vs. 8 ½ x 11 or A3 vs. A4—all that data typically resides in the device and even though it’s accessible no one is really tying that back to its impact on service. We want to track the data from those devices and marry that with the service calls that get created so you can draw a line between how a customer uses a device and how it impacts service. We are also working on an image density based maintenance contract. That will be a big one.
With the independent dealer channel contracting, how much can you realistically grow going forward?

McArtor: Until last year we’ve never done anything from a marketing perspective except word of mouth. This year we hired and constructed a formal marketing effort to go out and get that other 80 percent of the market that we don’t have. In 2010 I expect to see substantial paybacks from that effort. Even though the market is contracting, there’s still opportunity. We just completed an expansion into Australia and I expect a lot of growth because their economy isn’t struggling like ours. And we’re in the discussion stages with opportunities in Europe. Overall, I expect modest growth, but not double digits.


Scott Cullen has been writing about the office equipment industry since 1986.