Learning Objectives for this Section:
- Identify and quantify the typical costs of providing after-sales service.
- Identify and quantify the typical benefits of providing after-sales service.
- Calculate the Net Benefit and/or Benefit-Cost Ratio for an after-sales service initiative.
- Make a data-driven decision about after-sales service for your business.
Key Touch Points:
- Direct Costs: Salaries, tools, transport.
- Indirect Costs: Training time, overhead.
- Direct Benefits: Increased sales, reduced returns.
- Intangible Benefits: Reputation, referrals.
How To: Identify and Quantify Costs
This involves listing all expenses you anticipate for your after-sales service initiative. Think about both one-time setup costs and ongoing operational costs.
Step 1: Brainstorm All Potential Costs.
- Personnel Costs:
- Salaries/wages for service technicians/staff.
- Training costs for service staff.
- Equipment & Tools:
- Specialized repair tools.
- Diagnostic equipment.
- Transportation (e.g., motorcycle for mobile repairs).
- Inventory Costs:
- Stocking spare parts.
- Operational Costs:
- Rent/utilities for a service center (if applicable).
- Fuel for transport.
- Communication costs (phone, internet for customer support).
- Marketing for the new service (if applicable).
- Administrative Costs:
- Software for tracking service requests.
- Time spent managing the service.
Step 2: Estimate a Monetary Value for Each Cost.
- Be as specific as possible. Look at market prices, salary benchmarks, and your own historical spending.
- Example for Yohannes (adding mobile repair service for solar cookers, per month):
- Salary for 1 dedicated technician: ETB 8,000
- Fuel for technician’s motorcycle: ETB 1,500
- Cost of common spare parts stocked: ETB 2,000
- Phone credit for customer calls: ETB 300
- (One-time cost: Repair tool kit: ETB 5,000, Motorcycle: ETB 30,000. You’d spread these over their useful life or consider them capital expenditures for the first year.)
- Estimated Monthly Costs: 8,000+1,500+2,000+300=ETB 11,800 (excluding initial capital cost which would be amortized or depreciated)