Overcoming the Hurdles of MPS Pricing
This guest blog was contributed by Sarah Henderson.
Of the life lessons I learned in athletics, one that still remains with me as an adult was my experience learning to jump hurdles in track and field. My coach knew I had the jumping ability, taught me a proper approach and reminded me before that first race to just count my steps and have faith I could do it. But seeing those wooden planks in front of me at the starting line caused me to freeze up and overthink the race.
I have observed a similar reaction in our industry as the MPS team at West Point Products works with dealers to implement managed print services (MPS). Dealers in multiple channels understand the value proposition, have a business plan, hire and train talented sales staff, identify key industry partners and get excited about booking business, and yet we still see many dealers’ MPS programs stall or not experience the traction desired.
A hurdle to overcome in successfully implementing and growing MPS is finding a consistent and accurate way to calculate pricing. Two of the most common questions we field from dealers are “How do I price these deals?” and “How do I know I am profitable?” These questions come back to a common denominator: understanding the total cost of ownership (TCO) of the fleet of equipment dealers are going to place under contract.
In order to understand TCO, a dealer must take the time to get a clear understanding of the customer’s current print environment costs. This should include equipment (both purchased and leased), consumables such as toner and ink, service costs (both internal and outsourced) and other miscellaneous expenses. In many MPS engagements, the dealer will be taking equipment under contract that they are not experienced in providing service for. This creates a dilemma for dealers new to MPS regarding how to calculate TCO.
As you might expect, some approaches are better than others and will lead to more success. Here is a quick review of just a few options we have seen in practice:
The “Leap of Faith”
For dealers who were early adopters of MPS, there was a time period in which many innovators simply forged forward with contracts on faith. Through trial and error, dealers honed best practices for pricing MPS by gaining a more complete understanding of their own service burdens and their comfort level with the type of equipment they would be willing to put under contract. The results were sometimes deals that had to be reworked midcontract, deals that ended up losing the dealer money, or deals that were not as profitable as originally expected. These mistakes helped dealers better hone their internal pricing practices as a best-case scenario or, in some cases, resulted in dealers determining that MPS wasn’t right for them. The worst-case scenario, of course, was that the deals would prove to be devastating to the dealer. Fortunately, this dealer discomfort also resulted in some companies working to provide more turnkey solutions that established as many predictable pricing components as possible.
The “Spreadsheet Matrix”
Many dealers have an MPS spreadsheet they maintain to help them calculate TCO. Some of these are homegrown or developed by industry trainers and can be helpful as you work to visualize the fleets. The challenge of these spreadsheets is they can require dealers to manually update supply costs from their suppliers of choice. In addition, dealers also need to either manually calculate their service burden based on their own historical service performance or by applying data they obtain from a third-party provider.
For some dealers who use this approach, the result may be that they focus on a limited number of models of printers or equipment choices they prefer to place under contract. The maintenance of these spreadsheets will also result in administrative expense to the program. The manual entry required also adds additional staff time during the assessment phase and can draw out the sales process. For dealers who desire to launch MPS without having to immediately add headcount, this approach may cause frustration with salespeople who prefer to sell rather than enter data into a spreadsheet. It is difficult to blame good salespeople for that.
The “Calculator”
As the pricing challenge continues to dominate MPS discussions, industry partners have stepped forward to offer a variety of pricing tools or calculators to assist dealers. Dealers need to evaluate these tools to determine if they will produce the results they are looking for. A comprehensive TCO tool will offer you time savings by importing your fleet data directly from the remote monitoring software. It should also give you flexibility in adjusting current costs by device type, shifting volumes to new equipment you may wish to add and calculating your desired cost per page within a proposal or sales support documents of your choice. But beyond that, your calculator should offer you the most accurate service costs possible that are specific to the device model/type. Look for calculators that prepopulate consumable pricing from your supplier and also offer flexibility if you need to place something different due to a unique customer requirement. The right TCO tool will eliminate the need to maintain your own pricing spreadsheets and will also reduce your risk in pricing by providing you accurate servicing based on industry standards or your own dealer statistics.
If nothing else, dealers should at least consider what tools are available to them before completely abandoning the MPS business model. Dealers should seek out the right partners to assist them moving forward rather than dismissing the model as being too difficult to execute. Without a doubt, MPS can be an intimidating program to get off the ground, but the right tools and coaching can make the transition much easier. I still have a faint scar on my right knee from that fateful track meet where I failed to clear the first hurdle and met the cinder surface in an ungraceful fall. But I got up and finished the race. Afterward, I sat with my coach bandaging my knee, and the advice he gave me then I’ve found still holds true today – even for those in MPS: “You know you can be successful, so learn new approaches and get back out there.”
Contact Sarah Henderson at shenderson@westpointproducts.com.
Sarah Henderson
Sarah Henderson is director, MPS Operations, for West Point Products. In this role, she develops and manages the implementation of MPS programs in multiple channels in North America through the Axess program. West Point Products recently launched a new TCO tool as part of the Axess MPS program. This pricing tool offered through Axess utilizes BEI WordStats service data to provide the industry’s most accurate TCO. Henderson’s background includes more than five years in the imaging industry, with hands-on experience assisting dealers in implementing MPS and marketing strategies. Prior to joining West Point Products, Henderson was director, Strategic Marketing, for the Office Equipment Group at GreatAmerica Leasing Corporation.
Posted by Sarah Henderson on 10/06/2011