Pricing full-service maintenance contracts: a data analytics approach
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Abstract
A full-service maintenance contract covers all future
costs of both preventive and corrective maintenance
over a predetermined time horizon in exchange for
a fixed upfront price. Due to the stochastic nature
of the maintenance costs the determination of the
correct break-even price of such a contract is a key
challenge. We set out a data-driven methodology
to provide insight in the future maintenance costs
within a full-service contract. This methodology in-
volves building predictive models for the frequency
of failure and the associated costs taking into account
machine and customer characteristics. Not only will
our approach lead to a break-even price driven by
the analysis of relevant historical data, it also leads
to a classification of the customer base. This classi-
fication may in turn enable price discrimination of
future service contracts.
How to Cite
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service contracts, price differentiation, risk classification, maintenance, contract pricing
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