I hate the alarm monitoring side due to things like this. I can give you a reason why they do this...from what I have been told.
When the customer signs up, they usually get free equipment if they sign a contract for 24 to 36 months. The alarm dealer does not make a profit until the 3rd to 5th year.
IPVMU Certified | 11/13/15 02:08pm
Stuff like this is why there is a rash of DIY installed and self-monitored intrusion alarms flooding the market right now, ie Simplisafe, Scout, Canary, Sentri, and many others.
The numbers provided by End User 1 are pretty accurate. No profit until at least the 3rd year. Generally the company provides the equipment at cost and pays the installer, so they are out of pocket a good deal of money. As with any leasing program, there are charges to pay. Money is a commodity like everything else.
Having said that, we do not lease. We only sell our systems. As a "bonus", we do not have any long term contracts either. Customers can cancel with 30 days notice. It seems fair to me.
It is a State-by-State issue, but customers are allowed to cancel service with proper notice and the company is bound by law to observe it. At the same time, a term contract for payment is still a contract. I don't care for it, that's why we don't do it.
If you lease a car and later decide you don't want it anymore, for whatever reason, more often than not, you still owe the lease payments, even if you don't drive it.
So I've been one of those guys who had to enforce contracts. There are many reasons to hold a person responsible and this isn't the only industry.
Have you ever leased a vehicle or apartment. Was it easy to change your mind and terminate when something in your life changed? Did you ever pay rent on an apartment you didn't occupy, or knowingly sign a lease with a penalty for early termination that was essentially the balance of the lease?
If it's a simple monitoring agreement almost all alarm companies will let you out since it's really not worth the effort. Although what you lose is a multiple of 24 to 44 times that monthly payment in value if you were to sell your company.
If it is a lease or rental there is an installation labor, equipment, sales commission and business operations expense factored in. Again, there is a value of the contract which exceeds this simple monthly payment.
IPVM uses its policy of returning any unused value if you quit as a marketing tool to calm the nerves of anyone believing there is a risk. Many alarm companies that only provide monitoring fees will do a month to month and you might pay slightly more for the benefit for a similar reason. IPVM has no labor or product invested that they wouldn't have with or without the customer. An alarm company with a few hundred dollars in parts, a few hundred dollars in labor and commission wants to make a profit and they should, at least IMHO.
I was in the business for 18 years and the numbers given are spot on. We did a lot of SMB and for door contacts, a PIR, a panel and keypad we were at about $1,000 to install no chage.
Typical contract was $40 per month on a 3 yr. contract so the profit didn't show up till that 3rd year
Commercial and residential are two entirely different worlds, they really are. The expectations are completely different. Commercial customers understand that in order to run wire, we may have to make a hole somewhere. They understand that we don't control the bandwidth provided. They get things. Residential customers don't always understand that. Their home is their kingdom and you had better respect that; and they watch way too much CSI TV.
I've been in the alarm industry going on twenty years. Monitoring agreements are perceived as rip-offs and I have seen instances of unscrupulous behavior by some larger companies (I won't name any names, but think solid orange color) selling the elderly and financially challenged 60 month contracts at outrageous monthly rates.
The industry has suffered a bad reputation, but a reputable dealer will sell a valuable service that is in the customers best interest and believes in the service they provide. Point-in-fact, I do not ask residential customers to sign more than a two year agreement, but I typically charge more up front for installation. I only sell comprehensive systems and I see it as my job to help the consumer understand that you get what you pay for. Kit systems rarely offer much protection and provide a false sense of security, not to mention their prolific existence in the market, especially residential, has done great harm by driving up false-alarms and damaging the industries reputation with local law enforcement.
Selling anything other than the most complete protection, to me, is simply an effort to generate as much RMR as quickly as possible. This method requires strong and aggressive sales to keep up with customer turn-over. I prefer to sell slowly and retain my customers, with auto-renewing contracts and responsive service. (In my town simply answering your customers phone calls goes a long, long way.)
As an added incentive and service, I include basic cellular charges and system service in the monitoring agreement. If a residential customer defaults on a contract, I usually let it go. But keep in mind, most monitoring companies have a stake in these contracts as well, and the dealer has to work to protect their relationship with the central stations as well, so sometimes contracts that go into default must be pursued.
I have been in the industry the same and i remember when you paid for what you got and then nogotiated the monitoring . Well the status Quo has changed this . No Everyone thinks it s free and you just have a monthly payment.
Well how is this scenerio. The Blue Sign company signs up the school district with a great 3 year savings contract at a low rate you just cant beat on the street.
Then the company begins to rake in the bucks at double the service rates and Trip, truck, distance charges that come out to about 4 times the cost of the other guys locally.
YOU SEE there is no FREE Lunch , you will pay one way or another.
local guys 2 hour @ 90/hour no trip or other charges , The BiG Blue comes out @ 560.00 per 2 hour service call. I think your paying @ least twice the rate.
Orange , Blue Guys have a great slogan (Free) with a gift card when you set up.
Auto renewing, 3-5 year , Extreme Service Rates
Great Free System
FWIW, I have some dealers doing this with video systems as well, primarily for commercial accounts.
Customers don't want to pay for the install up front, so the equipment cost is amortized over roughly 2 years. They typically require a 4 year contract since they don't make any money the first 2 years. It's not a *bad* deal, but of course the financing cost of this is built in to the price. If the customer paid for the install up front and then just paid 4 years of monitoring they'd probably save about 15% overall, but not every business has the cash flow for that.
Thanks for the comments
I like to believe there is Still Integrity in the industry and the True Criminals are on the street, and not in the company salesman who does not care about anything but long term contracts.
There Should Be a "Truth in Advertising Act " allowing a contract out clause for deception and not up front disclosures. and a larger lettering so senior are not taken so easily.
If the standard is to be high for security professionals , the they should have to be held responsible for their actions.
The Financial picture should be upfront and not after you get the bill.
Clear and Transparent
There Should Be a "Truth in Advertising Act " allowing a contract out clause for deception and not up front disclosures...
Fraud is already a valid reason for breaking a contract.
BTW, there is already a Truth in Advertising Act, though still in bill form and it applies mainly to 'Photoshopping' of images.