Have you ever been presented with a multi-year contract and thought, in a worst case scenario, what are the implications of signing this?
Ian McKellar Managing Director of Kudos Technology
My wife and I have both changed our cars in the last year and it was fascinating to observe the sales process and compare the client journey with the experience that customers would have in my own industry, which is supplying office equipment.
On the face of it, there are a lot of similarities between acquiring a car and an MPS (Photocopier/Printer) contract, in that you either purchase or lease the item itself, then you have additional ongoing costs to service, maintain and run it.
However, what I witnessed with the car dealership was a very different approach. Once the sales executive had agreed the contract in principal with us, he introduced us to the finance man. Who proceeded to take us through the finance agreement and he explicitly explained the Terms and Conditions and what the obligations and potential consequences of the agreement were to us.
This is very different to my industry, where the sales executive will typically write a proposal on a one or two page document that covers the purchase or lease and the maintenance charges. There may be a conversation about Terms and Conditions, but it is very rare for anything to be provided in writing at this stage.
Most customers will get two or three quotes to benchmark the pricing, these proposals will usually be very similar in layout, which in theory makes it easy for customers to decide which supplier the contract is to be awarded to. The successful supplier then usually visits the customer with an agreement that is pre-populated with the agreed figures and present it to the client for authorisation. It is surprisingly common for the actual Terms and Conditions not to be discussed in any great detail during this process, with everything being taken at face value.
So why is this customer experience so different? Well, unlike the car industry, the financing of office equipment is not regulated.
However, whilst the finance contract can be a worry, there has been a much more concerning trend in recent years in relation to the maintenance contracts, which are quite often authorised at a lower level in organisations. Some of these now have hidden terms which mean that the actual costs that the customer will pay for the service bear no resemblance to the figures quoted in the sales proposal.
Quite often these terms will not be imposed until some time after the contract has been in force for some time, which can make it difficult for organisations to spot them on the invoices. If they are picked up and challenged there will usually be a robust response from the supplier along the lines of “It’s in the terms and conditions, which you have signed”.
We are also seeing really punitive termination clauses, whereby a company could find themselves paying very large settlement fees for a service that hasn’t been and never will be provided. This is pure profit for the supplier. Caveat Emptor!
Ian McKellar is a long-standing IoD member and a regular participant at all of our events, including our Leicester Mastermind Group. He is the Managing Director of Kudos Technology, an HP Premier Partner based in the East Midlands. For more information, see www.kudos.ltd.
Kudos have a wealth of knowledge and experience in these matters and have put together some simple tips that can help you to avoid these expensive clauses. If you would like a copy of this then please email firstname.lastname@example.org who will be happy to provide you with them