Customer Service Agreements
About Customer Service
A Customer Service Agreement defines the understanding between a supplier and its customer. It describes the service which the supplier will provide for the customer and also the customer’s responsibilities for receiving these services. The necessary purpose of the agreement is to protect the supplier’s investment, and also the right of the customer.
There Is No Return On Investment
For The First 24 Months
A customer paying $200 per week for our service typically requires a $6,000 upfront outlay for that account’s merchandise.
This merchandise investment typically consumes all the customer revenue for almost the first 7 months. When recurring costs are added, the account is being operated at a loss for the first 24 months of the account.
Topper thus makes a major financial investment to a new customer even before the first delivery, simply on the promise of the customer to continue with Topper and pay for the service.
This demonstrates a major commitment by Topper for the customer, even before the customer’s first payment.
Most businesses make some profit on the first sale. But for Topper, a new account requires a financial investment in merchandise inventory because Topper purchases upfront the initial merchandise inventory, not the customer.
This amount alone equals 100% of the customer revenue for the first 30 weeks. It contributes nothing to the recurring expenses which begin with the first delivery, for example.
- Production & laundering
- Water treatment
- Delivery, fleet & service expenses
- Ongoing merchandise investment for stains, losses, etc.
- Receivables & bad debt
- Sales & marketing costs
Service Agreements Are
Collateral For A Business’s Banks
Almost every business works with banks for cash management and credit. Banks require collateral to safeguard their investment. A written Service Agreement is such collateral for Topper, indicating the customer’s ability to pay its good faith commitment to Topper.
Should Be Protected
Topper must fulfill its obligations as described in the agreement. If the customer reports any problem with the service and Topper does not correct the situation, the customer may terminate the service without penalty.
Some Business Categories Are Riskier Than Others
For example, new businesses generally are riskier than established businesses, and average a shorter business life.
In these cases, the initial losses for such customers are seldom recovered.
So Why Would A Supplier Not
Require A Written Agreement?
What’s The Catch?
The supplier no longer is constrained by any obligations to the customer.
If the customer objects, the supplier may offer to modify or rescind its actions if the customer now signs a written agreement.
The Supplier can change the service, product, rate, or terms at will. With or without customer knowledge and consent.
If the customer opts to leave, there will be hassles and unnecessary distractions in changing to another supplier, along with financial outlays to settle with the supplier.