The Value of Long-term Maintenance Contracts

By Bryan Christiansen

Across industry, there has been a shift from selling one-time products to selling end-to-end holistic service solutions. Maintenance contracts are yet another example of this trend. These arrangements are becoming more desirable – for example, a recent survey found that buyers of protection plans feel more loyalty to the brand, as well as feel happier with their purchases overall.

Long-term maintenance contracts offer several advantages for both the consumer and the service provider. These include potential cost savings, improved quality control and confidence, and longer lifespan of existing equipment. If your company is a provider of long-term contracts, it is critical that you communicate these benefits to the customer.

Benefits for the Consumer

Cost Benefits

Maintenance contracts can deliver cost savings to the customer by reducing the expense of an unexpected large repair. This benefit is clear but deserves mention. A business may not have the free cash to put into such a repair, and a household may not have the savings on hand. What would the customer do in such a situation?

Or perhaps they do have money set aside for maintenance emergencies. A maintenance contract can free up this cash, which can be used in more beneficial ways, such as capital investments.

A customer can budget for a monthly installment payment with confidence, rather than having to guess at potential maintenance costs. Furthermore, a discount at the outset of the contract can help to sweeten the deal.

There are other potential cost savings through supplementary benefits. A machine that is serviced regularly will run smoother and in a more optimal way. In turn, this can manifest into energy savings, raw material reductions, and labor reductions.

Quality Control

A service contract can also act a form of quality assurance on a process or facility. Maybe your potential customer just invested heavily in a new piece of equipment.  They will want to get a return on that investment – maximize it, even – and that cannot happen if the equipment does not run when needed. Thus, a maintenance contract may be a method to fully leverage that investment.

This concept can be especially true if you are an equipment manufacturer offering a maintenance contract. Theoretically, you should be more confident in your product if this service is available. If the consumer is not sure, then the service contract will cover the gaps in quality.

Lifespan Increase

A maintenance contract will likely ensure that the equipment serviced gets its routine maintenance activities. With someone paying attention to the maintenance schedule, ancillary benefits are provided. In general, the equipment runs better. This leads to better operation, and the life of the equipment is improved.

Confidence

Lastly, a maintenance contract can give the consumer confidence in the operation, a “piece of mind” that repairs are handled effectively. It’s simply one less burden on their shoulders; one less item to check off their to-do list.

If a process has specialized maintenance needs that aren’t easily handled by onsite personnel, it may make sense for them to use a service. As a contract provider, you can get a sense of this by talking to the customer about their assets. Sell them on the fact that they can leave these tasks to you and focus on other areas of their business.

You may also provide added benefits with your maintenance contract package. For example, service priority to contract customers over others, especially in emergencies.

Industry 4.0 advances add to this sense of confidence. With recent developments in technology, service assistance is easier than ever before. Remote assistance has grown rapidly, somewhat necessitated by the current business environment. This includes emerging technologies like augmented reality (AR) and smart glasses. So even if your service team cannot be onsite immediately, you can be available 24/7 to help troubleshoot technical issues.

Benefits for the service provider

The benefits are not solely for the consumer of the maintenance contract. These agreements are a two-way street: both sides should profit from the relationship.

Regular Income

For maintenance providers, some of the benefits are relatively clear. In a rapidly shifting market that can be very competitive, maintenance contracts guarantee billable work. Steady labor can be tough to find at times, and these types of agreements can help to pay the bills.

Some of the aspects of the contract relationship are great for both parties for the same reason. The regular, dependable amount of revenue that can be predicted is one example. This is something that can be very valuable to your business.

Relationship and Brand Building

A maintenance contract allows you to develop a deep relationship with the customer, which can lead to other productive endeavors. Knowing more about the customer’s needs, you can tailor your services specifically for them.

The relationship can lead to brand loyalty, providing value to the provider for years or even decades. A regular face-to-face meeting with the customer helps to build trust by showing that your company cares about their issues.  It can also foster expansion of your service skillset, and awareness of future trends to invest in.

Furthermore, building a strong relationship can lead to one of the best forms of advertising: word of mouth. Satisfied customers can act as your marketing team, leading to further business opportunities.

Conclusion

Long-term maintenance contracts are beneficial to both provider and customer. The customer gets more reliability, piece of mind, and improved performance of its assets. In return, the provider receives a steady income, allowing them to generate a long-lasting relationship while building brand loyalty and reputation.

Bryan Christiansen is the founder and CEO of Limble CMMS. Limble is a modern, easy to use mobile CMMS software that takes the stress and chaos out of maintenance by helping managers organize, automate, and streamline their maintenance operations.