You've given a lot of details that are useful but I'll give a general response so it will be helpful to you and others...

If I understand correctly, a small portion of the support fee (12% in your case) flows to you because customer problems are dealt with by two levels of successively skilled people before you are called.

What you get are the questions that "stump the chumps" (as NPR's Click and Clack would say).

Further, the number of people with whom you deal is limited to the small number of second level support folks. These people are (presumably) technically skilled so they understand what you are talking about when you talk tech as you may be called on to do frequently.

So now the OEM finds that they want out of 2nd level support for some reason. They want you to provide 2nd and 3rd level support.

This means you will be dealing with more incidents, more people and the time-to-resolution is likely to be longer when you get into technical issues. Of course the nature and volume of the calls coming into the 2nd level will depend on the quality of 1st level support...

Here are a couple of ways to think about what to charge.

First, if some small percentage of all support calls get to 3rd level support and you get X% of support money, take a look at how many calls and how long it takes to service them. Now look at similar stats for 2nd level, and look at the effort of 2nd vs. 3rd level and look at the ratio of effort. Apply the ratio to the X%... This is cost-based pricing and I'm a proponent of value-based pricing.

So the second way is to look at the value you deliver and what you should charge based on that -- your costs aside. Try to estimate what value your participation is to the OEM.

I would guess the OEM is buying improved customer sat and cost savings. How much is this worth to the OEM? I would guess this is more than what you would charge them based on your costs.

Furthermore, you need to factor in what will happen to the 1st level of support. These people may do a lousy job, high turnover, etc... which is a reason the OEM wants OUT.

Don't just assume that 1st level folks are reasonably trained, don't turn over too quickly, and staffing levels remain the same.

BTW, I'd even re-visit how much you charge the OEM for support. Customers may be paying in the 20% range for maintenance and support on your $5K product. If this is 20% of list (it could be net...) and you receive 12% of the support fee, you are getting 2.4% of list or $120.

Make sure the numbers work for you on a cost basis to make sure you are not losing money -- which is the only time your costs should be considered when doing pricing (after the fact and as a check on whether you are getting paid for value delivered).

Hope this helps.

Jim Geisman

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