by Sarah Henderson, West Point Products
I still remember the first conversation I had several years ago with a dealer principal who very confidently stated, “MPS pricing is just the old cost-per-copy bundling with a new name — no big deal!” Fast-forward about six months later, and this same dealer expressed frustrations about having to take printers under contract and summed up MPS pricing as “guessing — and hoping not to get burned.”
Fortunately, the pricing models and tools for MPS have come a long way in recent years. These advances have resulted from an ever-evolving business model that, in many markets, has become more commoditized. This pressure on margins has caused MPS providers to examine their pricing models to ensure that they are accurate, complete, easy to use and profitable over the term of the contract. MPS infrastructure partners are also responding with more comprehensive tools and software innovations that have advanced dealer programs as well.
The original equation
For many early entrants into MPS, the math involved in pricing MPS deals was either overly simple or overly complex. For those who oversimplified the pricing, the approach generally employed the following:
- A standardized service cost imposed across the fleet
- Limited price range for supplies
- The cost of parts being ignored or just included in the price of a maintenance kit
- Set pricing based on an initial price reduction from a non-MPS environment.
Many dealers relied on a multipage spreadsheet that helped them calculate this pricing through the export or manual entry of fleets from a remote monitoring software or assessment key. Dealers who had the knowledge or resources to run this model were often very successful. These spreadsheets were a useful tool for many to understand and calculate a blended “cost-per” rate across copiers and printers. This approach additionally demonstrated the need for a solid assessment process to capture accurate device counts and understand the end-user environment.
The downside of this system was that dealers needed to manually update or add their supplies cost by device type. This was and still is a very time-consuming and frustrating process for administrative and MPS sales teams alike. In addition, the service costs were at best a guess for many, especially when incorporating devices under an MPS deal that they had no service histories for or experience managing. The results varied between contracts that performed well and others that started to go upside down after the first 12 months. Either way, unpredictability in contracts ranging from 36 to 60 months is not a confidence-builder for business owners.
The best practice for MPS providers today is to research the pricing tools or calculators that may be a good fit for their program. These tools should integrate with their remote monitoring software to eliminate the need for manual data entry, import supplies cost and calculate a blended rate with ease.
The law of averages
MPS pricing has historically utilized — and still may utilize — averages and assumptions in order for dealers to present a costing that includes a range of output devices and print volumes. Some averages have served the pricing process well. Others have created areas where dealers continue to experience pressure and frustration. Early entrants to MPS often made the assumption that environments they were inheriting used OEM supplies exclusively and subsequently went on to apply an average cartridge cost (and savings to the customer) based on replacing OEM with remanufactured cartridges. As the market evolves and economic pressures on businesses continue to be felt, however, the odds of finding an all-OEM end-user environment are slim. Most print environments will utilize a mix of supply types and sources, regardless of whether they are under a current “MPS” contract.
A best practice for MPS providers today is to hone the assessment process to collect accurate current costs for the fleet. Assuming all-OEM costs or skipping this step puts a dealer at risk of working from cost assumptions that customers will not buy into. Pricing tools that accelerate accurate data collection by account and across SKU types are real time-savers in this process.
Averages of service costs have performed well for some dealers who possess a solid understanding of their service burden and performance as well as have a sufficiently large sample of machines and related service costs from which to draw. But for many others, service costs that were not accurately predicted have resulted in MPS contracts becoming unprofitable. For traditional copier dealers, the Achilles’ heel can be the task of estimating printer service. For dealers without experience servicing machines, estimating this area is a major barrier to entering MPS. Working with a partner possessing extensive experience servicing machines or offering triage can help guide dealers toward making more profitable decisions about service levels and billing.
Another best practice for MPS providers today is to understand where averages can hurt them and look for more accurate data. There are industry partners who work with service data that is device-specific and sometimes even dealer-specific. This data can help dealers be more confident in applying service factors to their “cost-per” pricing and blend across device types to determine a profitable rate.
The hidden profit factors of TCO
Just like a multiplier in a complex math equation, there are other areas of MPS pricing where dealers should apply some basic math to help them be more profitable. As programs evolve, some best practices relate to essential areas of supplies and hardware. For example, it is important to review the supplies data and use page yields as a major selection factor with respect to consumables. Work with providers who have developed supplies that are specifically created for dealer MPS programs. These cartridges should feature higher page yields while at the same time maintaining the same quality and performance as regular or high-yield cartridges. In addition, dealers should not overlook remanufactured hardware as an option when placing printers. MPS-ready hardware can oftentimes perform at a lower TCO due to the availability of remanufactured supplies and a warranty period.
Additional related costs for dealers to review within their MPS program include shipping fees for supplies and parts. How often do dealers need an overnight delivery versus standard ground shipping the next day? Other areas to review include the related costs of program administration, such as assessment costs, software licensing fees, billing, collections, staff training and hiring.
The best practice for MPS pricing is for dealers to know they have the accurate data, competitive products, effective processes and right partners to be successful. Now is the time to take another look and determine if your program pricing process has evolved with the times. I recommend dealers take a deep dive into their MPS program flow via a process improvement review to identify areas that are manual and determine if related technology, tools or integration can demonstrate ROI for long-term success.
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