Service Contracts: A Great Idea for the Provider…
Somewhere in history a very wise businessperson came up with the concept of sign this service contract and for the next year we will deliver you the services entailed.
Caveat: Even if we don’t deliver to the expectation we set, for the next year we will continue to send you a bill every month until the contract is up.
Second Caveat: Around 9 or 10 months into the contract we will show up and ask you to renew your contract. If you don’t our service levels will further diminish because we will need to turn our attention to clients who are still under contract.
Oh the irony.
So you sign up for a contract to receive a guaranteed level of service for a period of time, however, even if you don’t get service that meets your expectation you are stuck in the agreement?
Whoever came up with this idea was definitely smart, but the question I have is, were they customer experience focused?
Shifting Contracts From Commitment to Pay to Commitment to Perform.
I know that some service providers will argue that the service contract they deliver have service level agreements or at least specific performance spelled out.
Before you go on assuming those are worth the paper they are written on, note 2 things.
- Who set the service agreements?
- Who wrote the contracts?
The contracts are almost always pro provider and they are written in a way where the provider’s expectations are far lower than the goal of service should be (often)
The real question becomes, are we in a marketplace where contracts are required?
In large industries like Mobile Telecom and Cloud Services there is already a tangible shift moving contracts from long-term to month-to-month.
Sure there may be a small price to pay for clients to get out of their contracts and dealing with change itself is often an immovable force, but why do you think this shift is happening?
Performance Based Service Agreements Will Rule The Future
When I started my business as a content and digital marketing service provider, I decided not to require long-term contracts.
Everything is based on 30-day agreements. Considering it takes months sometimes to see ideal results I recognized the need for short-term agreements.
My number one priority has to be client satisfaction. This needs to be the number one priority for any business.
Rather than focusing on how you can lock a customer in and hold them captive, reinvest that energy into ways to make them happy each and every day.
This is the future of service delivery. Customer experience.
With so many organizations catching onto the idea of earning the opportunity to serve and then providing the service, the old-school service “contract” may have a short shelf life ahead.
The good news is satisfied clients almost always stay. So if your business truly is about continuously creating great customer experiences then you really don’t have much to worry about.
And sure, I get the concerns with moving away from Service Contracts; with a shift like this a certain level of discomfort will be created.
Remember, in the end, if you deliver AND the customer has a need for the service you provide you should be in great shape. Most of the time when they leave it isn’t because they don’t need your service; most often it is because your service let the customer down.
Nonetheless, whether the idea of the “No-Term” contract sounds brilliant or asinine, it is the way of the future in a “Show-Me” economy.