Step one for
having a profitable MPS program is to have established a history
of managing a successful CPC program.
Many dealers have not perfected their CPC program. If this sounds
like I’m going over the basics, you are correct. Too many
dealerships are not maximizing the profitability of their CPC
offerings. If you do not know how to properly price, sell,
service, provide supplies, manage periodic price increases,
collect meter clicks, and bill the leasing company of your
customer properly, attempting to sell, service and provide
supplies for MPS can put you out of business.
At the end of a MPS Webinar I attended recently, an unnamed
listener emailed a question asking, “How can you control the
amount of supplies being sent out under a CPC?” I too have been
asked this question while teaching BTA’s FIX Service Management
Seminar. This is a very scary business reality. Many dealers are
selling their CPC product without the ability to control the
amount of supplies that are being sent out.
Let’s talk about the realities of appropriately making money on
CPC and MPS. Hopefully, your company’s goal is to make a fair and
equitable profit by providing a service to your clients. Usually,
the sales rep and sales manager’s goal is to make the highest
commission possible. These are completely different goals. When
establishing the written guidelines for your CPC/MPS, be cautious
with letting your sales department make the rules or be the
umpire.
Every dealership should have a written Maintenance Agreement, Cost
Per Click, Managed Printer Services and Network Administration
agreement. Each offers a different level of service and supplies.
One written signed agreement is not appropriate to fit all
circumstances. No matter what type of maintenance agreement you
are offering, you MUST have a minimum amount billed (monthly,
quarterly, yearly). There is no way to profitably support
equipment that is offered full coverage for a few dollars a year.
Service and Maintenance are two different words with two different
meanings. Sell Maintenance Agreements. Use the word Click not
Copy or Print. A copy can be an 11X17 two sided color document.
When the counting default is set properly, this same one copy is 4
clicks. There is a large difference in the amount of supplies
needed to run a one sided 8.5 X11 document and a two sided 11X17
image. A properly written CPC will pay the dealer 4 times as much
for the same piece of paper that exits the equipment when using
the word Click.
In order to take control of the amount of toner being sent,
establish in writing exactly what is being offered. In your
written document you can include: Appropriate amount of supplies
will be provided in accordance to the OEM’s stated yields. If you
want to be generous, you may state a higher percentage of the
yield such as: Supplies will be provided up to 125% of the OEMs
stated yield. I am always amazed why some independent dealers
feel it is their responsibility to offer more than the OEM is
willing to provide.
Have a clause on your CPC/MPS agreement that states: Supplies
require 3-5 days for delivery. This provides you with time to
acquire products that you do not currently have in stock. This is
especially helpful as expanded makes and models of equipment are
covered under MPS. If a customer insists on next day delivery,
ask for their FedEx number. Use it to pay for shipping of the
overnight delivery.
For in-house use, have pre-documented the OEM yield on every
supply item that is offered as part of any of your agreements.
Track supply requests to OEM yields and current click counts. This
tracking can be accomplished by your operating system, software
program, Excel spreadsheet, or by hash marks on a 3 X 5 file card.
Do not blame a lack of technology for failure to monitor the
amount of supplies being shipped.
If the click count is not in line with yield, do not automatically
send additional free toner. If the customer is past due on paying
their open invoices, do not automatically send additional free
toner. If the lease is going to expire in 15 days, do not
automatically send free toner. Each of these situations requires
human intervention. Do not allow no charge supplies being sent
without educated control.
When CPC first started in the 1980’s, the wholesale cost on most
containers of toner was in the $5 to $20 range. A high-end copier
made 10,000 copies per month. Times and costs have changed.
Sending out a set of requested color copier/print supplies can
cost a dealer over $800. The customer receiving these supplies
often has no preset minimum upfront payment on their CPC
agreement.
The days of conscious sales reps encouraging their clients to
“keep a couple extra toners on the shelf to make sure they never
run out” are gone. I have seen clerks send $800 of color supplies
to a customer who makes less than 100 color copies per month at 6¢
per click. That means the customer will pay less than $62 per
year for the original color supplies in the machine, plus the set
on the shelf. The dealer has just spent $1600 for two sets of
color supplies. At 100 color copies per month, it will take over
25 years of usage to recover the original cost of the supplies.
Even if a machine is sold on a CPC, the original cost of the
required set up supplies should be included in the cost of the
sale. Do not be fooled by those salespeople or inter-territorial
dealers who want the cost of the supplies to be covered under the
CPC. Unless you receive full CPC payment in advance, for enough
clicks to cover the full supply portion of the CPC, your
dealership is not being appropriately reimbursed for the cost of
the supplies.
Other items to consider:
Many dealers offering CPC on (enabled) color machines are selling
their CPCs without including color supplies. Only black toner is
covered. Color and Black clicks are counted and added together for
CPC billing. Color supplies must be purchased by the end-user.
Dealers are requiring users to pay shipping and handling fees for
all ordered supplies. This can be accomplished by actually billing
for these costs on a separate invoice. Or a pre-determined
specific amount, listed as freight/handling charges, is added to
each periodic CPC/MPC invoice.
Automatic (yearly) increases can be accomplished by adding:
Agreement will be renewed automatically at the then prevailing
rate. Traditionally CPC agreements list a specific yearly percent
of increase. This limits the dealer’s options. Plus many savvy
customers quickly scan the small print of the CPC until they find
a number followed by a % sign. Then the arguing starts about
reducing or eliminating the future increases. Then prevailing
rates blends in with all the other words.
The ability to control the amount of supplies being sent to
CPC/MPS customers is the dealer’s responsibility. Misplaced
supplies, ‘borrowed’ supplies, supplies sold on eBay, supplies
used in non-CPC equipment, or just too much of your inventory on
the customer’s shelves can take all the profit out of your CPC
program. Step one of setting up a profitable CPC/MPS is to
proactively set up guidelines, procedures and supervision to gain
control of your supply distribution.
Ronelle Ingram, author of Service With A Smile, also teaches
service seminars. She can be reached at
ronellei@msn.com
