If You Hate Getting Your Quotes Picked Apart, Do This

The time honored tradition of making money on product markup is not so easily discarded by integrators, and with good reason:

In the absence of price transparency, it's a simple and clean way of billing that integrators can use to insure they meet their profit targets without undue haggling. IMO consumers seem to argue far more about labor/man-hours issues than product pricing assuming they have only vague information about price.

Also, as has been already pointed out, if the integrator has a trusted relationship with the client then internet pricing is not a factor.

The tacit assumption with your proposal is that it requires the integrator either abandon markup as a general rule or predict what clients will price-shop. When you say:

... just adjust your labor rates / hours upwards accordingly to get the projected overall margin while listing product pricing at the equivalent of online pricing.

I'm assuming you mean before the first quote, because the reactionary 'I can match on price if you really want me to, but I will then be adjusting my rates and fees accordingly to come out the same' is a hard sell after the fact.

So I imagine a lot of contractors try sizing up their oppurtunities, vis a vis 'internet shopper' vs. 'just get it done' types, and quote accordingly and when they're wrong it has a negative impact on the bottom line.

On the other hand always quoting internet price and detailing labor/fees unecessarily weakens the contractors position, and ultimately his profit for those consumers who do not demand it.

That is the dilemma.

Security integrators are always on the lookout for good products. Cheap and good preferably. Something new. Something that will give them a perceived edge in the market for 5 minutes. Nothing wrong in that really.

This problem however, goes a lot deeper than 307 $ v 347 of the same.

The problem in general is that most integrators are not focusing enough attention to the question on how they themselves provide value to their customers.

A skillful security integrator will ensure, right from the start of a project, that the focus is on obtaining security functionality that overlaps the business functionality of his client. Eg. getting to the root cause of the problem whilst focusing on building a full understanding of the clients business, needs and economic drivers.

If this is done properly, the result should be an improvement his clients business functions. If a little more effort is put in, actual numbers of savings and risk reduction will ensure a good continued dialogue.

There are no tricks to becoming a clients preferred security provider. Just lots of hard graft getting to understand their bussiness before moving onto a solution that can add real value. Every client has unique threats and risks that can impact the business. As our job is to find the balance of a solution that can help our client grow, we must also fully understand his level of risk acceptance. If we then do our job properly, the value that we provide will hopefully be an incentive to increase this investment.

Again, focus on the the client. Focus on his business. Not our product. Small or big businesses. It does not matter. The name of the game is the same.

If this is done correctly, the customer will never argue individual line items. And if they against all experience still do.....ask them which internet provider will take responsibity of the security function during their 48 hour repair/return time.!? If there is still a discussion, then walk away, just like Marty said. You have met a client without a security problem.

Sadly, this subject goes deeper stilll.

As only 10-20% of a true solution is about product, how does this subject really keep being an issue? It does, because our industry is still nowhere near a stage of being mature. Many customers still see their local security contractors as the "electrical contractor", installing kit only and not really being a partner in times of need. More often than not they are right in doing so.

Look at the facts and figures. How big are our clients losses in all segments worldwide due to security related issues (banking, transport, retail etc). How big is our industry. It is so small in fact, that it is embarassing in comparisson to our clients yearly losses. Why does it not grow more rapidly then, when there is a definite wish to increase bottom line and improve flow? Because - our industry does not provide enought value.....Because our model of business is not built around the business of our clients in the way that, say the IT industry is. We still want to install kit when others are taking responsibility for the flow of the entire enterprise. Come on Gents!

The precense of "price/product" integrators are sadly part in preventing our business from maturing and gaining a higher stature. (If you want to be the electrical sub contractor, please, no offense, we need you too.)

Bottom line? It is time for security integrators around the world to step up to the plate, take more responsibility in their involvement and in their solutions.

If you provide real value, build trust, 24/7 service and demonstrate your integrity by taking a holistic solution approach, the discussion of profit margins will fade. Stop worrying about the manufacturing industry's need for volume driven solutions. Be the turnkey provider that takes responsibility from inside your clients domain!

You will never be more profitable.- together with your client!

So, next time a client asks you: - Why should I pay you more money? , it really is time to look yourself in the in the mirror. It will tell you that you are in this for the wrong reasons and that you have been found wanting in the one area that your customer really cares about. His business and how to improve it. Security is a win-win game. Now go make some money!

"As only 10-20% of a true solution is about product, how does this subject really keep being an issue?"

Hi John. I was talking about the overall cost from the clients perspective and one which includes the total security function. The function itself being defined as mangement, planning, policy, procedures, practices, staffing etc and.... technology. If the intention is to add true value in the interaction with the client, then this total picture must be included and if not, atleast as a minimum - understood. If I understand you correctly, the "security" integrators that you are mentioning are more or less box movers? Part of the overall technology chain that can be traced back to the major producers asbsolute requiement for constantly higher volumes?

Is this subject then perhaps made easier if we label the integrators differently?

1. Those few that provide value to the clients business by providing an overall security function that fits like a glove around their clients business functions and

2. those who are only installling kit. E.g. (simplified) has the knowledge to position camera A in the left side of the room where backlight problems will be less of an issue + get the best of the surrounding infrastructure to provide an acceptable image in a control room. Etc, etc,

For the latter there is no way that they will ever make money on the equipment, except for short bursts of time when they are "first-in" and can close quickly. They are trapped in the same negative price spiral for electronic equipment as the manufacturers are themselves (your article on Panasonic spings to mind) so why, when so closely related to the spiral should their woes be any different. What is their true value to the client really? We can quickly agree that it is difficult to be unique in your value offerings when your focal point of attack is kit. But please, dear integrator, stop the whining on profits and start understanding your position in the thick of things. You might just fund that this is a position that suits and compells you. Although you are now competing with everyone and their dogs for the titbits.

My point is merely, that if you really want to make money as an integrator, start looking closely at how you can provide real value and thus move up the food chain. If this is not possible, the only other option would be to look more closely at the methods and cost of installing kit, seeing that this is where the expertise lies anyway. Perfecting by experience, so to speak. Not much mileage in this though unless you can do it very large scale. And even here the winds blow.

I appreciate that this is very much a technical forum John and we do love the value that you add, but I cannot help but feel that there is sometimes a lack of understanding in the various forums for what components (and I dont mean just technical) that shape a total security solution.

Those integrators who want more gold needs to understand better what ultimately drives their customers and this is only achieved by improving their knowledge of their customers core businesses together with a broader understanding of security.

Otherwise they need to understand their position in the market and make the best of it. There was a time when selling private alarm systems was a gold mine. That foodchain has changed and so will every other similar technology vertical. They need to start planning ahead because it will not get any easier. We need them to be profitable and stay healthy, but we do not need them to lable themselves as "security" providers. Internet competition should be a minorl part of this problem.

My hope is that we all get a bit more focused on the subject of security rather than technology. If we manage that, innovation will follow more rapidly and our customers will finally come to respect our industry as an equal team player in their own efforts to move ahead.

The recent perimeter incidents around three large US airports with full-blown, massively expensive, state-of-the-art technical solutions in play, clearly demonstrates what happens when technology is sold under the pretext that it will solve all the clients problems - - as if total security is something you can merely buy your way into, - if you have enough cash.

That said, we all enjoy a bit of kit talk from time to time. Keep it up John! and sorry for the long rant. Passion comes at a price I'm afraid.

As an end user, (purchaser), my issue is not that I can find products online cheaper. I already understand the issues that come with an online purchase versus an actual integrator selling, installing and servicing the product for me. The issue I have is knowing that the integrator I've chosen to do work with tells me I am getting volume discount pricing because of their size, and I know if I went with a smaller local integrator that i can get the same product much cheaper.

I know this to be true because I have over the years done cost comparison shopping. Sent RFP's to two or more separate integrators, one large with offices in my companies various cities and in other parts of the nation, and the others local small shops and only in one or two cities my company has officers and the local small shops who can't possible buy the same number of the products each year the other guy does and the price has always been cheaper with the little guy.

So were is my volume discount pricing they claim to be giving me due to their size the volume the do each year........

NOTICE: This comment has been moved to its own discussion: Why Are Large Integrators Charging Me More For Products Than Small Ones?

I'm in Dubai and to tired to Elaborate but the industry has changed and those competing on price alone are going to either continue to struggle or die struggling.

Professor, much smarter than me, said on one sales conference that if you are competing with the same type of products, don´t sell the same product. Meaning, as John said at the start, figure out how your product differs from the other, for example warranty, service and add-on features. Now if you and your competitor are selling the same product, you have added some extra value on your product. And in the end, you have a different product and now it is the customers choice to make.

One thing that HVAC, electric and security installation companies do here in Northern Europe is that they give price to the installation using their own products and if the customer have bought some other products, the installation price is different (much higher). And this is ok for all and customers understand it.

I can't think of a lot of customers that won't do at least a bit of googling upon receiving a quote.

Ari, as a consumer I know I do, mainly as a reality check and way to keep the dealer honest. Nine out of ten times I won't say anything to him even if the price is marked-up 50%. Why? I know how expensive it is to run a business and frankly I am often shocked at how little they make! For me I find it better to know what the 'pad' is rather than to play some 'inflate all the other numbers' and/or add 'new parts/labor' that's not necessary just to make his goal...

As I said before its easy to talk about showing the customer value, but the customer is normally clueless about whether its worth $50 extra bucks for the Axis camera with WDR or $100 for the Sony with better color in low-light... Just as I am when I was replacing a carbonater on my post-mix soda machine. The dealer quoted me two different parts w/desc but no numbers. By googling I could see that the dealer was basically setting his margin to be $25 no matter which one I chose!

Though I must admit I have a tendency to google so as to question design assumptions or challenge part selection. I'm sure alot of dealers hated me for it but the real experts enjoy it of course.

Unfortunately I can sometimes take it too far, like the time my wife was in the delivery room about to get an epidural and I just nonchalantly asked the doc 'Are there different kinds if epudurals?' and 'What kind are you doing?' and then returning moments later iPad behind my back saying "i've heard some studies show procedure Y to be more effective than X (the one he was performing), what do you think?", just as he was plunging the needle into my now mortified wife's spinal column... Needless to say I'm much more reticent now...;)

I am with Undisclosed D on this. Don't give line-item pricing. If you want me to hand over a complete material list so you can verify I am providing all the same stuff, that is understandable. When I provide line item pricing I am then subject to being lowest bidder on a per line item basis instead of the project as a whole. If I was charging 20% less than all the other bidders for a particular line item, will the customer notify me and let me raise my price? I doubt it.

Line item pricing makes sense when it is Home Depot vs. Lowes (or ADI vs. Anixter). The cost to purchase, stock and sell wood studs, shingles, drywall, etc. is fairly predictable. Remodeling a home is far less so. Does anybody ask their builder to give them a line item breakdown and then haggle them over the projected cost per stud? No.