5 Steps to Service Contract Program Success


Drive consistent service revenue with a flexible service contract program


Perhaps one of the biggest challenges service organizations face during economic recessions is maintaining consistent and profitable streams of revenue. This is often done through service contract programs. It does not take an exorbitant amount of contemplation to realize that having a sufficient number of contracts with clients is a good thing! Even the largest and most financially secure companies survived the last recession only by the strength of their ongoing contracts with clients.

What truly is surprising is how few entities really know how to set up, maintain, and market a program that will reliably provide significant and stable revenue streams. Here are five steps to help you get the most out of your service contracts.


Step One: Commitment

The decision to implement a service contract program must come from the top, always. You get the best chances for success when your management team makes a firm commitment to invest time and resources into implementing a contract or extended warranty program. This is not a project that a single department can govern, let alone a project that can be assigned to your service manager to be handled in his or her spare time. Again, this is a commitment that your entire organization should work on together.


Step Two: Selling

Simply put, you’re not going to make much money from your contracts and extended warranties unless you can sell them. Just offering some kind of contract to a client does not bring in the revenue you may think it will. Your contract program needs to provide value that a client won’t ordinarily get without a contract in place.

Things you should include in your contract are:

  • Discounts for future parts and equipment purchases
  • Priority handling of service calls
  • Early notification of new products and services
  • Shorter turnaround times


Step Three: Customization

As you begin drafting ideas for your service contracts, it is important to remember that each of your clients has different needs. You’ll need to create multiple contracts to suit each customer type. Whether it’s how much they’re willing to pay, the age of the equipment or their perception of how much service they will need, it’s going to be different from one type of client to another.

Here are three ideas to create a valuable service contract program:

Create a premier, high-value service contract. First, create the top-of-the-line contract you think your top clients will benefit from. This could mean providing parts and labor at no charge, fastest turn-around time, and freebies such as a complementary preventive maintenance visit. Remember, you’ll be asking for the highest price you can for your premier program. So give the client more than just what you would have given had they simply called in for service without a contract.

Name your service contract program. Secondly, give this program a distinguishing name. The words premier, total care, gold, and platinum come to mind. Once you’ve established the name for your top-of-the-line offering, create two or three more levels, with each level having fewer benefits for a lower annual price. Within each level, be prepared to offer installment payments for those clients who may not be able or willing to write a single check in advance.

Set up automated renewals. Sell these programs as “evergreen”, meaning renewals will be automatic. Unless your clients require a renewal proposal or purchase order, try to sell them on the fact that they will receive uninterrupted service by simply paying whatever renewal invoice you send. This puts the responsibility of reviewing a renewal or reconsidering the level of program they might want on their shoulders.


Step Four: Selling Assistance

Service contract projects and sales go beyond your service technicians. As mentioned before, developing contracts and extended warranties is not a job suitable for a single person – not even your brilliant service manager. Consider “incentivizing” your field technicians by letting them assist in the sales of the program and giving them a commission on each contract sale and renewal. Make it scalable, so new contract sales yield higher commissions than renewals.

Once your staff is on board, you can try selling a service contract along with the initial sale of equipment. Doing so makes your customers aware of the new program. Some of them might even buy immediately even if the warranty does not come into fruition until the manufacturer’s warranty expires.


Step Five: Contract Administration

Once your contracts have been successfully created and are being sold, it is important that you do not forget to administer, monitor, and analyze the results of those programs. This does not mean a single analysis but an ongoing analysis as contracts, coverages, and installed equipment tend to change over the years. A first year contract may be very profitable but it can be due to the fact that the equipment is relatively new and did not need a lot of attention. Therefore, if you want ongoing service contract revenue, you need ongoing monitoring.



To conclude, you should not begin the contract creation project unless you have management 100% on board. The success or failure of the project is contingent on how responsibility is distributed. Remember, it is a team effort.

Next, make sure that your clients are able to see the value of purchasing a contract or warranty. To do so, your contract must go above and beyond to demonstrate that your customers are valued. Include special perks that other customers don’t receive just by working with you.

Incentivize your workforce to sell more service contracts. Your field workforce can use these contracts to strengthen the relationship between your company and the customer. And to sell even more service contracts, be sure to monitor and analyze your sales data.

If you’re tasked with creating a service contract program and aren’t sure where to start, check out Service Pro, MSI’s service contract management software. Service Pro provides service organizations with an all-in-one management suite for maximizing service revenues and improved customer service. Request a free demo of MSI’s service contract management solution now.


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