Why Selling Service Pacts Makes Sense
Offering service and maintenance agreements to your clientele not only provides new streams of recurring revenue but can also go a long way in helping stem attrition. Find out what the proper cost structure components are and how to convince customers to sign on the dotted line.
Getting the Pricing Right
Another respected industry veteran who has built a solid reputation based upon impeccable service is Wayne Wahrsager, president of Freeport, N.Y.-based New York Merchants Protective Co. The 100-year-old full service security company is operated with a philosophy that has always proven to be very successful. Wahrsager says it is his belief that every client should have a service agreement in place.
“Maintaining service agreements for all clients is a great component to minimizing attrition,” he says. “Look at it as negotiating and setting expectations at the start of your relationship with your clients. It’s a real ugly situation when down the road you are caught having to negotiate a service charge that a client didn’t expect.”
Clients need to understand the real value of their system. “This applies to small residential as well as large commercial,” Wahrsager says.
Wahrsager doesn’t hesitate when asked about his thoughts regarding the profitability of a dealer’s service department. “If you’re running your service department properly, it could be more profitable than monitoring alone.”
Pricing of service is extremely important. A dealer really needs to have a grasp on what they expect to invest in servicing and maintaining a base before calculating the service contract charges. This takes into great consideration the age, condition and well being of the systems you will be committed to service.
It’s not out of the question to offer incentives to clients who upgrade their systems. For example, consider a promotional offer to upgrade the equipment for a client with an antiquated system, especially one that is difficult to find spare parts for or requires a lot of maintenance. It is probably best to offer clients like this two choices: an offer to choose to pay a very high recurring service agreement fee; or a reduced fee should they commit to upgrading their system.
It is evident by the great successes organizations have experienced by operating a well organized service company that service contracts make sense. Actually it more than makes sense; it is something that can usually separate thriving companies from those that just survive.
Don’t be afraid of committing to this philosophy, it is essential to be confident in the ability of yourself and the company. The knowledge you have regarding your clients and your organization will support this strategy. Operating a company that has a large percentage of quality service agreements and RMR in place will provide an owner with greater profits as the business is operated, and a greater return when the business is sold.
Peter Giacalone is President of Giacalone Associates LLC, an independent security consulting firm. He is also a contributing author of SSI‘s “Monitoring Matters” column. Contact him at (201) 394-5536 or firstname.lastname@example.org.
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