Service rate study

Service is cash flow you can count on. We recently delved into this topic with our readers-and got an astonishing response rate of 100 percent, so we know this topic grabs their interest. Problem is, whether or not security resellers are using service contracts to gain additional revenue, or simply include it as a courtesy to customers, is where the challenges exist.

Research conducted by SD&I found that some 80.43 percent of the security resellers who responded to the "service rates survey" here in the U.S. said they provide services to "all" their customers-after the installation of products and systems-with only 5.43 percent who strongly disagreed that they service "all" of their customers! So with these results, it should be safe to say that this is a service industry, right? Although, significant time and discussion has centered around the lack of recurring revenue or measurable contracted revenue associated with servicing one's customers. And we likely all agree that maintaining the integrity of the systems is as important as the system itself, if not more so. So, to what degree do we service our customer's security systems and at what cost to us or to them?

According to our research, 51.11 percent of the survey respondents defined themselves as Dealers; 44.44 percent Systems Integrator; and 4.44 percent Fire Solutions Providers only. (Note: the number of fire solutions respondents is so low that it statistically does not affect the end results of this survey). Some 90.22 percent said they are presidents, C-level, owners, operators, vice presidents, directors and managers, with the remaining 9.78 percent being sales, service managers and service specialists.

Respondents, 17.78 percent, only provide services when a customer calls because they are having a problem. Some 30 percent strongly disagree that they only service your customers when the customer calls with a problem, leaving 52.22 percent servicing your customers in varying degrees of when and why you service their systems.

Here are other notables from the study:

34.44 percent only charge customers for time and materials with 18.88 percent strongly disagreeing that this is how they sell service, leaving 46.68 percent in the middle in varying on how you bill your customers for service.

34.44 percent always offer customers a service agreement to regularly review, monitor and maintain the health of their system with 17.78 percent strongly disagreeing that they always offer a service agreement, which leaves 47.78 percent varying in whether you do or don't offer to service a customer's system.

9.09 percent of customers will not sign service agreements, preferring to call when they need assistance; 7.95 percent will sign a service contract and the remaining 82.96 percent are those who will or won't sign in varying degrees.

46.07 percent of respondents have customers with signed service agreements and 17.78 percent strongly disagree that they have signed agreements with 36.25 percent having varying results here.

28.89 percent always provide ongoing training after the sales and installation process; 6.67 percent do not, leaving 64.44 percent providing training in varying degrees (see Ongoing Training Chart 1).

Ongoing Training Chart1

Only 13.64 percent always charge for ongoing training and 21.59 percent strongly disagree that they charge for training, leaving 65.47 percent charging in varying degrees (see Ongoing Training Chart 2 below).

Ongoing Training Chart2

It's important to know that if you go into the raw data and look at the difference between the way dealers and systems integrators answered these questions, you'll find no significant differences between whether they offer service to their customers, charge for time and materials, signed service agreements or if their customers are willing or not to sign agreements. What you do see is that those who define themselves as systems integrators charge more per hour in every billable field available than those who define themselves as dealers.

Most importantly only 34.44 percent always offer customers a service agreement, and that makes me think that there is an opportunity to at least better define your company's standards and systems for providing services to your customers and thus potentially increasing your service revenues or annual service contract business. I know it takes a certain amount of money to roll a truck or to push a service person out the door but there has to be ways to organize the profitability and growth of this part of the business. And as I indicated in my Publisher's Viewpoint on page 8, as systems become more technologically sophisticated and demanding, it will raise your customer's expectation of what support they will expect, potentially making this part of your business a more complicated but more profitable and organized segment of your growth going forward.