After-sales services are an increasingly important source of revenue for product companies, but in some cases managers don't track services as closely as they follow the more familiar manufacturing routines. Prices for service plans, to give one example, often reflect little more than intuition and tend to fall all over the map. The exhibit shows the wide variety of prices for service contracts at an industrial-equipment company after discounts and premiums are taken into account. Most of the deals fell way below their price targets, and 8 percent of them didn't even cover the cost to serve.
To avoid this kind of slippage, managers should take a more careful, fact-based approach to designing and pricing services and closely monitor the performance of pricing plans. For more details, read "How to make after-sales services pay off." (Premium)
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