How Service Agreement Improve Customer Satisfaction and Loyalty - Published in the The Mirror
In today’s hyper competitive electronic security marketplace customer satisfaction and loyalty are two of the most important metrics that a system integrator must diligently track in order to keep a lid on customer attrition. As most integrators are still servicing their customers on a time and materials basis which has been proven to decrease customer satisfaction and therefore loyalty, they risk jeopardizing their hard won customer relationships. Luckily, there is a solution that’s often overlooked due to its perceived complexity, building that formal service agreement program that they have been considering for years but did not have the proper guidance to properly execute. In the short term, customer satisfaction will help you measure how happy a customer is with a specific interaction, such as a technician’s last service visit, but improving your customers loyalty is the ultimate goal as it’s a long term metric that measures their overall commitment to your brand and ensures that they will be more likely to refer you to their fellow business owners and brush off your competitors repeated advances.  

The reason that servicing customers on a time and material basis does not foster customer satisfaction or loyalty is the simple; its foundation is transactional, meaning that the only time you interact with the customer is when there is a critical service issue which requires your service department’s attention. This type of Service Relationship is not ideal as you do not want to only be interacting with your customers when the are stressed or unhappy with your service. Properly built service level agreement programs on the other hand offer Preventive Maintenance as a hallmark of their design which ensures that you are interacting with your customers on a regular basis, not just when all of the doors suddenly pop open after suffering a critical system failure!  

Service agreements offer several features that improve customer satisfaction such as clearly defined service standards. How can you fulfill your customers service expectations if you do not clearly define how and when you are going to service them? This is especially important for businesses owners who thrive on a lack of uncertainty, if you clearly define how you will service them it removes that uncertainty leading to an improved customer experience and satisfaction, Customers are also more likely to be satisfied with their security system investment if their system integrator offers a service agreement at the time of the sale, and when an unexpected complication or system failure occurs, they are less likely to be dissatisfied. As your customers are primarily human beings, they will also develop a positive relationship with their favored service technician contributing to increased satisfaction.

Savvy systems integrators understand they are in the customer satisfaction business, not the installation business, and chances are as they are selling the same equipment as their competitors, the only way to truly differentiate their company from the rest of the pack requires them to continually increase their customer’s satisfaction by exceeding their expectations on a regular basis. Improving the customer experience by continuously increasing their satisfaction leads to improved customer loyalty, which should be every business owner’s ultimate goal as it results in happier customers. Happy customers tend to refer you to their friends and family, which leads to sales opportunities which in turn increases  profits. It is evident that system integrators who take a leap of faith and make the necessary investment in processes and people to finally start that formal service agreement program that they have been considering for years pays off in dividends in terms of customer satisfaction, loyalty, and profitability!     

How Service Agreements Can Unlock Hidden RMR Opportunities - Published in the The Watchman, The Sentinel, and The Sentry Magazines for the Global Electronic Security Forum

The electronic security industry has undergone seismic changes since the English inventor Tildesey attached chimes to his homes doors to warn him of intruders, yet the one thing that has remained constant is the industry’s need to find new ways to use equipment installations as means to sell recurring monthly revenue back to the consumer. In my experience, this need is rarely fulfilled as numerous integrators don’t have a shred of recurring revenue coming in the door, yet their installation revenue is in the tens of millions of dollars.

Instead of constantly hunting for new installation opportunities which require repeated effort for each sale, a company can simply use that network video recorder the technician just installed as a vehicle to attach RMR which will be sold back in the form of a service agreement to the consumer. For example, T-Mobile has successfully implemented several innovative programs recently which revolve around offering frequent cell phone upgrades to retain customers. This program was developed based on internal analysis which concluded that recurring monthly revenue was more valuable than the transactional revenue they lost due to frequent upgrades. This shift in philosophy has resulted in a current market cap at 215 billion dollars which their calculated risk paid off in spades.

Our industry is generally perceived to have healthy margins, but once margin erosion is taken into consideration, they are typically 50% of what was originally calculated. On the other hand, the margin on a typical service agreement is at least 80%. Additionally, revenue collected is mostly on services yet to be rendered, making RMR dollars are more valuable than transactional installation dollars. For companies who rely primarily on installation revenue, a shift in mindset is required to build a successful service agreement program. The integrator must come to the realization that they are not in the business of installing security equipment but are rather service providers who need help monetizing undefined services which they have been almost certainly giving away for free.

With that in mind, it is imperative to develop these into a streamlined list of “value added services” which clearly defines responsibilities and creates an equitable service relationship. A customers’ loyalty and satisfaction to their current provider will increase when they are covered under the warm blanket feeling a strong service agreement provides.  It also affords the opportunity to continue building a strong relationship with the customer through taking care of them through service calls or inquiries, usually resulting in repeat business and referrals. 

Establishing a strong service reputation goes hand-in-hand when it comes to building a healthy RMR base. It is also crucial in obtaining the qualified talent needed to support a “service agreement culture” and maintain steady RMR growth.  What does this culture look like? In my experience transitioning clients from an installation business to a fully-fledged service provider, it starts by hiring the right people who are on the front lines when responding to a service ticket. Eventually, the head count of the service department exceeds the installation department, enabling adequate response and care to the growing customer base and their ever-expanding service needs.

 Equally as important, the hiring or appointment of someone to oversee the entire operation while motivating the sales team by compensating them appropriately will ensure that the opportunities created by the service department are leveraged adequately.

As Albert Einstein famously said, if you can’t explain it simply, you don’t understand it well enough. At Service Level Advisers, we’ve developed a simplified approach which enables integrators to build their SLA programs in weeks, not months by enduring the trial and error of building profitable service agreement programs from the ground up.

How Time and Materials Service Leads to Unhappy Customers - Published in the The Watchman, The Sentinel, and The Sentry Magazines for the Global Electronic Security Forum

Unhappy customers are being created if they are being serviced on a time and materials (T&M) basis.

You heard me correctly!

Contrary to popular belief, managing a relationship with a customer through the narrow lens of time and materials service ultimately results in missing the bigger picture. The bigger picture is the importance of deriving feedback from a customer as it relates to their experience interacting their provider’s staff. This feedback creates the ability to gauge their satisfaction, which is the most important indicator of a business’ longevity. It is nearly impossible to track this crucial indicator if the customer is being serviced on a T&M basis. Simply put, a customer relationship predicated by a T&M service agreement does not lend itself to customer satisfaction.  

Tracking customer feedback with a customer on T&M generally begins with the servicing technician initiating a customer survey after the work has been performed. In a scenario where the service call is responding to a critical service issue, the last thing on the technician’s mind is soliciting feedback from an unhappy customer. An unhappy customer who probably hasn’t interacted with their servicing company since their original installation was completed.

A customer’s best interests are almost never being served when being serviced on a T&M basis. The technician is generally attending to the customer needs after a critical service issue has already taken place. As service calls of this nature are usually received during the most inopportune times, the service coordinator is usually scrambling to find a technician willing to travel to a client site afterhours or late Friday afternoon instead of meeting a date for dinner at Applebee’s. Now the customer is unhappy meeting with a stressed out technician who will likely not be able to determine how long it will take to resolve the issue on the spot, with worst case necessitating repeat service visits which will contribute to increased customer dissatisfaction.

Providing a service agreement which includes routine preventive maintenance ensures interaction with customers on a regular basis, creating a positive Service Relationship where the customer feels their best interests at heart. In the case of the beleaguered technician who missed the date at Applebee’s, the whole situation could have likely been avoided if a service agreement had been instituted to proactively address service issues before they reached the critical stage. 
Minimizing customer dissatisfaction is so important that some businesses pay consumer satisfaction research firms such as J.D. Power nearly a billion dollars per year to provide them with actionable consumer intelligence data. This data is the currency which enables them to accurately gauge customer satisfaction and improve their buying experience.

 Understanding that improving the customer experience turns satisfied customers into loyal customers is the Holy Grail of business.  It is not uncommon for a business’s revenue to account for up to seventy-five percent from their existing customer base. It’s probably common knowledge that a customer base which shows a high level of satisfaction is more likely to buy again from their current provider without shopping elsewhere. Reading between the lines, a satisfied customer is also more resistant to advances from the competition. In this vein, it’s imperative that any customer being serviced on a T&M basis is transitioned to a recurring service agreement model.

As happy customers lead to everything else you want from your business, you must shed the notion that you are taking advantage of them by offering service agreements. The fact is a manufacturer’s warranty is not for the end user, but actually the dealer. Additionally, a dealer loses money by servicing their customer on a T&M basis. It is difficult to monetize T&M service because time and resources can better be spent elsewhere, such as sales and marketing. Do not lose out on the opportunity to create an equal Service Relationship with your customers by educating them on the benefit of a clearly defined set of standards which to properly align their expectations.