How to Increase RMR by Selling More Service Agreements
One critical area in the RMR realm to master is service agreements. Learn insights to selling, maintaining and extending maintenance contracts.
Selling, servicing, maintaining and extending maintenance and service contracts represents a critical source of recurring revenue for security dealers and integrators — and an ongoing challenge.
From coverage agreements and pricing to execution, management, ensuring profitability and leveraging for add-on sales and upgrades, companies need to step up to that challenge by communicating benefits clearly and keeping pace with both technology and client expectations.
Read on to learn keen insights from four respected systems integration veterans who elaborate on the particulars of running a successful maintenance and service business. A sidebar delves into how dealers are using connectivity advances to be much more efficient in doing remote diagnostics, and in many cases remediation, as opposed to rolling a truck.
Customer Testimonials Can Be Key
“The key to selling maintenance and service contracts is to sell them at the time of the original installation,” says John Nemerofsky, president of CGL Technologies, a leading independent security systems integrator in New England. “It is creating programs to refresh technology over the time of the agreement [and] making sure that your client understands that the maintenance program is in place to drive efficiencies and lower costs.”
Optimal utilization of personnel is another key. Indeed, the most common mistake that security dealers and systems integrators make in these areas “is to have highest certified personnel, which are also usually your highest paid field personnel, working on tasks that do not require these levels of education,” adds Nemerofsky. “This results in turnover of personnel and lower margins.”
Bill Fitzhenry, senior vice president, commercial sales, for Securitas Electronic Security (SES) of Uniontown, Ohio, explains it is important for dealers and integrators to first learn as much as they can about the customer’s business, needs and risks.
“Doing so allows you to develop services that address the unique needs of the customer, making you a trusted partner and advisor,” he notes.
Installing security contractors should also provide real-life examples and customer testimonials of how their security solutions and services can support the collective business, Fitzhenry adds. For example, measurable return on investment (ROI) via operational efficiencies, productivity output improvements and cost reductions.
Fitzhenry also recommends leading with services the organization offers. “This is where integrators truly differentiate,” he says “Customers need to know how your company can deliver, project manage implementation, and support the solution.”
In addition, executives should position their maintenance and service agreements as providing peace of mind that systems are protected. “Having a fixed budget for service and repairs versus having to set funds aside for unknown service needs can greatly assist in reducing costs that are not forecasted,” says Fitzhenry, “and at times return valuable capital-operating expenses back to the businesses balance sheet.”
Sharp Focus on Implementation
Systems integration veteran Jim Henry, an SSI Industry Hall of Fame inductee, references a familiar mantra from the real estate industry — “location, location, location” — to relate a crucial market driver for the security industry.
“In the systems integration business, when it comes to selling, maintaining and extending maintenance contracts, the driver for interest and value is execution, execution, execution,” says Henry who served as executive vice president of Kratos Defense & Security Solutions’ Public Safety & Security Solutions (PSSS) division prior to its acquisition by SES earlier this year.
A current commitment to, and track record of, high performance are both critical to maintaining an existing customer, Henry says. “Low cost alone is not enough if a company cannot come through on the performance end.”
In Henry’s view if lesson No. 1 is a hyper focus on execution, then lesson No. 2 had better be communicate, communicate, communicate.
“Following lessons one and two is 90% of the battle to winning, maintaining and extending support relationships in spite of changes and their associated challenges,” he says. “And there is no greater tailwind to profitable additional business than a customer that values your service.”
An installing security contractor aiming to sell a new customer will need to have a solid reputation for performance in the vertical market in which the prospect operates, Henry notes. “If not, your chances of winning the business are slim.”
A close second to service performance meeting or exceeding expectations is making sure the service response and activities are clearly communicated. “When a tree falls in the woods and no one hears it, was there a sound? Service can be like that,” Henry suggests. “If you do a great job, but the customer is totally unaware of what you do and how responsive you are, there is a great risk of losing the business as there is no perceived ROI for the money they spend on maintenance.”
Among the pieces that must be firmly in place, consider the following factors and source insights:
Coverage agreements — “Dig deeply into the customer’s business processes [back office],” Fitzhenry suggests. “Place a value on the internal costs for the customer to manage the service of the systems deployed and take that in account when determining the ROI.”
Back office administration costs in approving, paying invoices and managing the same can easily be reduced when subscribing to an extended coverage agreement. In addition, extended coverage agreements may allow integrators to more efficiently resolve service issues without waiting for additional approvals (basic repairs are typically covered with the pre-set monthly fee). This, Fitzhenry adds, could assist greatly in reducing downtime and decrease liability.
Nemerofsky recommended selling master service agreements that include technology refresh programs with a 3- to 5-year term.
Pricing — Defining the true value being provided, beyond just price, is more critical than ever in winning and retaining new business, Fitzhenry notes. “From being a trusted advisor helping the customer see how technology combined with key services can truly add value to the bottom line, to asking why and challenging the customer to consider an alternative solution that is competitive in both price and value, you can help the customer greatly to see the real value in the services they choose.”
Execution — Nemerofsky suggests measuring costs for both labor and materials over the cost of the agreement on a monthly basis. “Having the right inventory on your vehicles is critical for a first-call completion.”
Having a co-authored agreement will gain a greater collaborative partnership, where the customer will help in ensuring a successful relationship. Additionally, the integrator should consider introducing the delivery team to the customer.
“Make the time to document the scope of services clearly, and solicit the customer’s feedback,” says Fitzhenry.
Management — Allowing the customer to see and know “there is a team supporting him is truly key in quickly advancing the sale to a winning result,” Fitzhenry says.
From sales leadership to service and operational leadership, once the customer knows that everyone from the sales rep and beyond is on the same page, he quickly gains confidence in the message being delivered.
“Dispatch not only by location, but by skill set,” adds Nemerofsky. “Measure first-call fixes. Measure length of time per call. Measure days to invoice after call.”
Ensuring profitability — Estimating the agreements correctly is an obvious first step, according to Nemerofsky. “Understanding what material and labor are covered under your agreement is part two. Are you servicing equipment still under a warranty period and charging time and material to an MSA?”
Business profitability is a direct result of successful operational delivery and high customer satisfaction. “Focusing on all the details and components of your support services to customers will allow you to provide that service at a competitive or best-in-class price,” Fitzhenry says.
Achieving high customer satisfaction increases the length of the business relationship, and thus the profitability.
Leveraging for additional sales/upgrades — “Clients typically hold onto computer hardware longer than they should,” Nemerofsky points out. “Involving IT, and bringing IT policies into pay, will typically enforce hardware upgrades every four to five years.”
When the integrator can propose solutions and services that support the greater business and provide a measurable ROI, additional sales will be won as the company grows and retains confidence in the consultative approach.
“Again,” Fitzhenry says, “staying knowledgeable in the customer’s business and winning ‘trusted advisor’ status beyond your key contact can assist in this endeavor.”
Heeding the Changing Landscape
As the industry’s landscape continues to change, security dealers and integrators must be prepared to change along with it.
According to Felix Gonzales, senior vice president strategy & business development at SES, the expansion of Cloud-based services to the security space is among the biggest changes to the industry during the past several years. Such services have proven a dominating trend in the business and consumer space.
“The introduction of these Cloud services and solutions to the security industry has made the industry more dynamic and open to fast change,” says Gonzales.
Leading-edge security companies are now able to offer local storage, Cloud-based storage or a combination, “whatever the customer prefers,” Gonzalez adds. “Web-based solutions that do not require as much onsite hardware and software are available for access control, video, intrusion and more.”
For Nemerofsky, the foremost change to the business has been the challenge of hiring installation and service technicians. CGL’s response has been to contract out the cable pulling and device mounting, while having the technicians that hold all of the certifications work on programming and trouble shooting.
Going forward, Nemerofsky says he sees more utilization of structured cabling companies to run cables and mount devices, and continued hiring and certifying of technical support personnel.
Perform More Efficient Service Calls With Tablets
Tablets, apps and GPS devices are making service calls more efficient and saving costs by enabling better personnel management. Indeed, installing security contractors that embrace the advanced technology available today “can add tremendous value to both the customer and the integrator,” says Bill Fitzhenry, senior vice president, commercial sales, for Securitas Electronic Security (SES).
Being able to provide customers real-time alerts of when to expect a service tech, a photo of who that service tech is and their certifications will assist the customer in having confidence in a firm’s total service offering.
For dealers and integrators, Fitzhenry suggests, leveraging GPS and real-time tracking, being able to route technicians in real-time based upon their current location and the needs of the customer in the area “not only allow for increased customer confidence, but also for greater efficiencies that can add more margin back to the integrators bottom line.”
“The tablets help in many ways. In our case, we are able to receive a service call and dispatch it to the technician, and the client receives an email response showing a picture of the technician, his or her certifications, and their approximate distance for the client site,” says John Nemerofsky, president of CGL Technologies. “After completion of the service call, the client can sign the tablet and invoicing is in progress.”
Leveraging Connectivity Advances
Some installing security contractors are using connectivity advances to achieve greater efficiency in doing remote diagnostics, and in many cases remediation, instead of rolling a truck. According to Fitzhenry, providing remote diagnostic and technical services to a customer provides cost savings for the customer and operational efficacy for the integrator.
“Additionally, the integrator can connect to most platforms and troubleshoot various events and/or coach the local user remotely to assist in resolving a system issue, all without rolling a service truck,” he says.
For those sites where a service truck is still needed, he added, the advance work the remote diagnostics team has done will provide key troubleshooting details that have already been performed to the service tech. This saves time and allows the service tech to immediately advance to the more onsite diagnostics/testing needed to repair the system.
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