Instrumentation Service Contracts: Opportunities for Differentation

Abstract

With many service models to choose from - in-house, original equipment manufacturer (OEM), multi-vendor, etc. - service providers must innovate to find new ways to demonstrate customer value. To competitively position maintenance and service contracts, life science suppliers need to understand how scientists use their instruments and the contribution such equipment makes toward sustaining laboratory operations. Just as instrument technology is evolving to meet the changing needs of labs everywhere, so too are the dynamics of instrument service as labs search for a better way to balance risk, quality, and costs.

This report was designed to help companies evaluate and optimize their maintenance and/or service contract offerings to better respond to the needs of today' s life science labs. It demonstrates that a single maintenance and/or service contract may not be a good fit for every customer. In support of this critical finding, the report provides an in-depth market overview and competitive analysis of the most common types of contracts offered in today' s life science market.

Data in this report suggest that, in addition to dependability and responsiveness, customers prefer personalized service that offers maximum flexibility. While almost one-half of maintenance and/or service contracts are with the OEM, other models, especially in-house and multi-vendor, are viewed as attractive alternatives. While customer satisfaction with and preferences for service contracts are presented collectively, profiles for five major OEMs: Agilent Technologies, Applied Biosystems, Beckman Coulter, Bio-Rad Laboratories, and GE Healthcare are included. Significant differences by market segment are also highlighted in the report.

In order to maintain a competitive edge, life science suppliers should proactively manage their customers over the entire duration of the contract. Knowing how best to structure one' s maintenance and/or service contracts will help to not only serve customers better and increase customer satisfaction, but also enable suppliers to manage such contracts more profitably. Specifying the fine print in a maintenance and/or service contract can prove challenging, but with proper management, contracts can be a major source of revenue for suppliers. Among the Key Findings Contained in

• Real-time PCR and HPLC instruments most frequently have service and/or maintenance contracts
• 49% of maintenance and/or service contracts are for a single-year duration
• One-third of service contracts are around 10% of an instrument' s purchase price
• 36% of scientists who are disappointed with service would give contract providers a second chance and request a contract extension
• Senior lab personnel typically procure maintenance and/or service contracts
• 41% of respondents are interested in consolidating maintenance and/or service contracts with a single OEM

• Identify the companies whose instruments are most likely to be covered under some type of maintenance and/or service contract and scientists' level of knowledge about these contracts
• Discover the types of instruments that most commonly have maintenance and/or service contracts and specify the percentage of “new” versus “used” instruments typically covered by such agreements
• Detail the types of services typically included in maintenance and/or service contracts and indicate whether these services are “standard” or require an “upgrade”
• Specify the entity (e.g., OEM, on-site service engineers, etc.) that manages maintenance and/or service contracts for instrument (s) and the major advantage each type of entity offers its customers
• Determine the level of customer satisfaction with the performance of maintenance and/or service contract providers with respect to timeliness of service, range of services offered, service dependability, and cost
• Quantify various parameters of the customer-contractor interface including:
  • a) Time spent on activities related to average service calls,
  • b) Various costs associated with maintenance and/or service contracts,
  • c) Duration of maintenance and/or service contracts,
  • d) Ease by which custom maintenance and/or service contracts are negotiated,
  • e) People involved in the decision to procure maintenance and/or service contracts
• Assess the overall value of maintenance and/or service contracts
• Identify the most important and least important features of maintenance and/or service contracts
• Evaluate scientists' preferences for key maintenance and/or service contract provisions including type of uptime guarantee, frequency of maintenance visits, and response time
• Specify the type of compensation preferred by scientists if maintenance and/or service contract terms are not met
• Identify reasonable exclusions for maintenance and/or service contracts
• List the OEMs that currently offer the “best value” maintenance and/or service contracts
• Explore the level of interest on behalf of labs in consolidating multiple maintenance and/or service contracts
• Reveal the reasons why scientists would not be interested in participating in multi- vendor service contracts

Methodology

Instrumentation Service Contracts: Opportunities for Differentiation iis based on responses to a 27-question online survey conducted by BioInformatics, LLC (Arlington, Virginia, USA). 528 scientists who regularly use a piece of instrumentation for which their laboratory has a maintenance and/or service contract participated in this survey between April 29 and May 9, 2008.

The electronic questionnaire was fielded to registered members of The Science Advisory Board. BioInformatics sponsors The Science Advisory Board, an online community of more than 37,000 scientists, physicians and healthcare professionals from around the world. The Science Advisory Board is divided into two panels Research and Clinical) and “convenes” regularly via the World Wide Web to voice their opinions on a wide variety of issues relating to biomedical research and clinical technologies. These experts - representing all aspects of the life sciences and medicine - have agreed to make themselves available to participate in our online research activities. The Science Advisory Board members who participated in this study were drawn from the Board' s Research Panel.