Total Cost of Ownership (TCO)

When a customer buys a Ricoh device, the Total Cost of Ownership (TCO) includes the purchase price and the running costs over the lifetime of the product.

The TCO is calculated in steps, using these costs and quantities:

• Cost of supplies and consumables
• Expected yield of supplies and consumables
• Document volumes
• Expected lifespan of the device
• Purchase price.

Many different software tools are available, via the internet and from your sales manager, to help you calculate TCO.

Four steps to calculate TCO

There are basically four steps to calculate the TCO:

Step 1: Calculate Cost Per Page (CPP)
Step 2: Calculate average monthly running cost
Step 3: Calculate lifetime running cost
Step 4: Calculate TCO.

You can use these steps to calculate the TCO of a Ricoh device and a competitor's device. The difference in TCO between different devices is an important part of the sales approach, when TCO is an advantage. This column contains the business overview.

Step 1: Calculate Cost Per Page (CPP)

To calculate the cost per page you must determine the cost of each consumable and divide each one by its published yield.

cost / yield = CPP

The published yield is how many pages the manufacturer expects to print from the consumable. This includes an estimate of page coverage, which should match the page coverage of your customer's typical documents.

If you have several consumables, you should calculate CPP for each one and then add up the total. This could include toner, drum, transfer belt, waste toner bottle, or fuser kits, depending on the model.

Separate calculations are required for CPP for black and white and colour consumables.

Step 2: Calculate average monthly running cost

To calculate the average monthly running cost, you must know the customer's average monthly document volume. Again, you should have separate volumes for black and white and colour.

When you multiply the CPP by the average monthly volume, you will have the average monthly running cost of the device.

CPP x AMV = monthly running cost

Step 3: Calculate lifetime running cost

A lifetime running cost depends on the number of years that your customer expects to use the device. To obtain the annual running cost, simply multiply the average monthly running cost by 12.

monthly running cost x 12 = annual running cost

To obtain the lifetime running cost, simply multiply the annual running cost by the number of years that the device will be used.

annual running cost x number of years = lifetime cost

Step 4: Calculate TCO

The TCO is simply the lifetime running cost added to the purchase price of the device.

lifetime cost + purchase price = TCO

TCO comparisons

TCO comparisons between different Ricoh devices and competitor devices should be examined carefully.

The final TCO depends on the values that have been used in the calculation and different manufacturers may select different values.

This checklist may help you to decide if a TCO comparison is valid:

• Are all types of consumables included?
• Are the estimated quantities of consumables that will be used accurate?
• Is the published yield of the consumable realistic?
• Does the estimate of page coverage match your customer's documents?
• Is the average monthly document volume typical of the customers who would use the device?
• Are other hidden costs included, for example, maintenance visits?
• Does the purchase price include or exclude tax?
• Are all steps in the TCO calculation visible?