One of the common industry practices in the postage machine rental business is the early renewal of agreements. Similar to our recent blog post on rolling your copier lease many businesses can find themselves over paying for their postage meter due to the way that some companies handle renewals.
Most postage machines are actually sold as a rental contract. The contract combines the price of the actual physical unit with the rental fee for the meter head, the part which is regulated by the postal authority. Canada Post in our area. The meter head can only be rented even if you buy or lease the physical machine. Since one company is the dominant player in the industry they have essentially forced most customers to rent their equipment.
It is the next step in the process that gets dangerous for you as a customer. Most postage machine contracts are for 60 or 66 months. The equipment is quite robust and can easily be maintained for this term and unless the business need changes substantially a properly chosen device will give decent service for the term.
However, it is common practice for customers to be approached as much as 18 months before their contract is up with an offer for renewal. Many times the "new" machine is very similar or exactly the same as the one they have but they are told it is time to renew....with no mention of the additional months in their current contract. Why is this done? One reason is it freezes out the ability for the client to go to other suppliers looking for competitive pricing. Also, it permits the sales rep to get a new deal and receive their bonus on that deal. In fact it is the practice of one the major companies in this field to change their reps territory on a very short basis (every two years or less) so that they are hungry to do upgrades and so they do not build an affinity to their customers.
Why is this not good for a customer? The simple answer is that they end up paying for the balance of the first agreement as part of the second one and over time they end up paying more for their machine than they need to.
How bad is this? Let me tell you a quick story we received from one of our contacts. They had an existing agreement with the biggest player in the field. There was a persistent problem with the postage machine and the supplier offered to replace it with another machine. Great thought the client. When the replacement was delivered (a smaller unit than the one being replaced and at a higher price) the receptionist was asked to sign a document for the replacement, which she did. The client subsequently found out this document was a new rental agreement with a new term. He is now trying to get it canceled....but how unscrupulous can a supplier be?
The moral of the story is insist on checking the term and actual renewal date on any postage machine agreement. The chances are very good that someone is trying to sell you early. If the device is working ok then why should you double pay for a unit?
Don't get me wrong. There are many responsible dealers of postage equipment who will look out for your interests and assist you honestly with your acquisition. You just need to check out the details so you understand your options fully. For an explanation of the components of an agreement you can refer to our postage pricing blog post on this topic.
How have you faired with your postage machine agreements?