Debating How to Sell RMRBy Brian Rhodes, Published on Jul 11, 2012
RMR proponents claim it is a cure-all for cash-strapped integrators. One company, Integrator Support, is focused on helping security installers become profitable 'service' oriented businesses. In this note, we examine a recent webinar positioning the value of why integrators should sell RMR solutions at every opportunity.
See the full 53 minute presentation of "Selling Services As Solutions" below:
The following are the webinar's most intriguing claims, with timestamp in brackets:
- Bid at Cost: Quote equipment & installation at break-even prices. Instead, build profits into service fees. [49:15]
- Sign the Paper: If customers elect to monitor own systems, have them sign a waiver they are 'declining' monthly services. [20:27]
- Bury Pricing: Do not give up equipment cost in proposal, only quote single recurring monthly cost when possible. commentary Analysis [50:20]
In many cases, the advice given in this presentation resembles the Home/Commercial Alarms business. Various market sources cite the stability of RMR bookings as an ideal goal for security integration companies. Traditionally, video surveillance and access control systems have been 'project' purchases. Once the final invoice is submitted there is no guarantee of future revenues, unlike alarm monitoring contracts that often extend for years after system installation. The crux of Integrator Support's offers are to expand and transition integrators to an RMR-based business. In the following list, we examine the webinar's main thrusts on how this can be achieved.
Bid at Cost: We find this the most controversial claim, and also the most shortsighted. While it may result in a higher proposal 'close rate' through undercutting competitive bids, it accelerates the issue of reselling equipment with increasingly thin margins, a source of trouble for many integrators. Low pricing is often as a negotiation point when deciding between bids, this information is often shared. Over time, this practice can significantly reduce margins in an entire region. This recommendation encourages 'alarm business' practices loathed by many, including:
- Quick, cheap, and sloppy installs: When installation is a 'zero profit' activity, the rule becomes to install new jobs, as quickly as possible. This emphasis inspires shortcuts and shoddy work so the installers can get to their next job without delay.
- Poor maintenance skills: Quite simply, the types of installers most qualified to troubleshoot and repair systems are employed by integrators not building business around 'zero profit' installations. Consequently, the field technicians employed by these companies experience high-turnover and lack the skill sets of their more experienced counterparts.
- Cheap equipment: When equipment is chosen solely based on cost, the cheapest stuff gets installed. Despite the availability of better options, since the installer views equipment as a 'pass-through' cost, attention is spent on profitable business aspects.
Sign the Paper: This strategy appears lifted directly from the used car lot. Inferring the customer is accepting liability when they decline monitoring services capitalizes on their fear and uncertainly. Worse, the resulting signed 'waiver' has no legal value. Not only does this strategy dishonestly represent the consequence of declining service, it can potentially backfire when if the customer signs it and expects compensation from the provider when an event occurs.
Bury Pricing: By divulging only the 'monthly payment' rather than 'acquisition cost', dissecting the 'true' cost of the hardware and services is cloudy. While this strategy may be effective when dealing with hapless residential alarm customers, very few large purchase orders are cut without discrete accounting of what is actually being purchased, and professional purchasers will not approve vague charges. In the case of large systems, equipment purchases may be capitalized and depreciated, and this information must be separated. In effect, this strategy limits prospective customers to the small, token installs, which places it at odds with the 'RMR cures all' concept of sustaining business.
Do not Oversell: When selling hosted/managed services, the #1 rule is being honest and not overpromising features. We wholehearted agree with this, and based on our own experiences think it is necessary to describe how 'assumed functions' are made different through the hosting platform. For example, hosted video systems perform differently than 'host bound' systems - framerates and bandwidth for starters - and addressing those differences is vital.
Blunt Objection: The webinar recommended reading prospect's body language during the pitch. If they get uncomfortable during the RMR portion, directly ask why they are uncomfortable with hosted/managed services. While directly confronting confusing issues is vital during any sales process, abruptly stopping the sales pitch and asking point blank 'whats the problem?' could create more distance on the issue and ultimately backfire. We do not disagree that addressing concern is a vital part of the sales process, it is important to let the customers address their questions on their own terms. Simply 'wearing the pants' on tough selling lends itself to being a high-pressure technique that many customers loathe and will subsequently avoid.
Stay Close: A benefit of the RMR relationship model is that it precipitates 'stickiness' in picking up additional business. In our experience. this advice rings true. The concept is that when an integrator submits regular invoice, the proximity makes it easy to pick up subsequent work. However, this concept is nothing unique to RMR companies, and most integrators have some form of 'customer relationship management' software or process in place.