If you’re a brand owner or manufacturer, how do you determine how much good service is worth to you, what’s worth spending, and where?
Over the years I’ve spoken with a number of clients about this kind of thing and there is not a one-size-fits-all answer to these issues but there are some general trends that you can look to.
Paying More Gets Better Service
Mostly, yes, but not always.
Value is relative and by that I mean that some contracts, even though they pay a bit less are more valuable as they are more profitable and easier to maintain or, there’s kudos in holding an agency or even the allure of other work of the back of a contract.
To the first point, if you get a contract, say, that delivers ten calls a week, but it’s a wide diversification of products, limited support, and oddball parts you don’t stock, it leads to a high second or third call rate. This means that unless the remuneration is high, and in some cases very high, it’s not worth doing.
It may well prove, to a repairer, that a contract with three calls a week paying a bit less but easier, less diversification, common parts used and so on is far more profitable that the higher volume one.
Sadly, in recent times, the value of having an official service agency for most brands has been diluted. Not many care about that sort of thing now, largely because there’s no point because of the next thing I’m about to highlight.
It used to be that if you got a service contract for warranty work you’d do a rough split of 40/30/30 or 40/40/20 for most of them.
That is, 40% warranty at a low rate, 30% extended warranty at a higher rate and 30% direct charge work to owners at your own set rates.
In the past couple of decades that has all changed and now extended warranty rates are often no better than warranty and charge work has declined hugely as applainces have gotten cheaper and, after a few years, people chuck them out. So you maybe get 10% charge work at best.
That means that for most contract work, you have to assume that all the work you do is at the warranty rate and that you’ll get nothing else. If you do, it’s a nice bonus, but it’s best not to expect it.
Of course, there are exceptions to this rule, but not a lot.
Hence there isn’t a one-size-fits-all answer to what should be paid to service partners as it varies wildly depending on the brand, products and so forth.
What amazes me with this is that, other than a few of the “old timers” that saw this unfold in real time, resisted it and essentially ditched work unless it paid enough overall, as many repairers didn’t and grabbed up all they could at surprisingly low rates.
And this is one reason I think that rates today are so artificially low and that the service industry has fallen into the trap of thinking they won’t get paid more.
Likewise, it’s in a lot of clients’ heads that a call cost £X when that’s just a number that they have had for a while and what they expect to pay based on what others do, it’s not the true value of service. Or indeed often representative of what the repairers are being asked to do.
Turning Up Their Noses
It’s this sort of thing that leads to commercial clients being bamboozled by repairers “turning up their noses at work.” What they often can’t wrap their heads around is that not all work is worth having. In fact, some of it is detrimental to the repairer.
Then you consider that if you take on work for a new client and it ends up eating time, how does that affect your existing work and customers?
This is why repairers can often approach most new work with a fair dollup of trepidation. (Also see Grumpy Engineers here)
A lot of clients think that repairers will just take on whatever work they can get and do it to a universal standard and sadly that is not the case, mileage will vary and often dramatically even from one repairer to the next.
This is one reason why you can end up with wildly variable service levels and struggle to get agents in certain areas without considering any other factors that might be in play.
Fixing It
There are solutions to these problems of course but there isn’t a quick fix and the industry has changed quite dramatically over the decades, largely driven by the requirements to cut costs.
In the late nineties and into the noughties we saw the rise of call handling services, essentially a “man-in-the-middle” service between brand owners etc (that were also on tne rise at the time) and the repairers. All these services really do is what the brand owners and smaller manufacturers should be doing for themselves, distributing calls etc.
Now, this is contentious but in my view a lot of that was driven by sheer laziness. It is easy for a “service manager” to go along to one of these agencies and hand over the work, dumping the all the problems of it onto them and saving them the costs of staff to deal with service issues. So they look great saving all the money, have less to worry about but, service suffers.
It’s hard to draw any other conclusion as this way is more expensive, means you have less control and often doesn’t deliver a very good service.
This is a whole topic unto itself for another article, but for the repairers, it hasn’t ended well, and ironically, it hasn’t for many brands, either. In my view, it has suppressed rates for repairers.
These agencies, without a doubt, suck up cash and very often do not give brands the best representation.
Moving away from that model is one way to fix a lot of issues for any number of brands and clients.
That isn’t the only way to sort a number of problems; there are others, but it’s a start as although the repairers do not say it as they can’t afford to step on any toes, I have no such restraint, and I can tell you, a lot of them despise these agencies. They do not like what they are, what they do or even working for them, they only do so as they’ve no option and that’s not a good place to start.
A better place to start is, how do we deliver the level of service that our customers want?
When more often the approach appears to have been, how can we do just what we must as cheaply as we can?