If You Don t Ask, You Don t Get!

Transcription

1 DB04: How To Design, Price and Sell Service Agreements Alan Kruglak Genesis Security Systems LLC Wednesday: April 10, 2013 If You Don t Ask, You Don t Get! 1

2 Growing Service Revenue Why Sell Service Contracts? Growing Service Revenue Why Sell Service Contracts? The Excuses! 2

3 Growing Service Revenue Why Sell Service Contracts? The Excuses! Designing the Right Package Growing Service Revenue Why Sell Service Contracts? The Excuses! Designing the Right Package Selling Service to Prospects 3

4 Growing Service Revenue Why Sell Service Contracts? The Excuses! Designing the Right Package Selling Service to Prospects Selling Service to Existing Clients Growing Service Revenue Why Sell Service Contracts? The Excuses! Designing the Right Package Selling Service to Prospects Selling Service to Existing Clients Pricing Strategies and Laws 4

5 Growing Service Revenue Why Sell Service Contracts? The Excuses! Designing the Right Package Selling Service to Prospects Selling Service to Existing Clients Pricing Strategies and Laws Q&A Why Sell Service Contracts? Why Not Just Through T&M? 5

6 Service: Why Is It Important? Power of Recurring Revenue Predictable Calm in a Sea of Turbulence Flexibility Why Don t Companies Sell Service Contracts? The Most Common Reasons... 6

7 Reasons to Not Sell Service Contracts #1 Inertia We ve Always Done It This Way (ie, T&M). We Don t Need to Change. Valid Invalid Reasons to Not Sell Service Contracts #2 Customer Needs Our clients don t want service contracts. They prefer T&M Service. Valid Invalid 7

8 Reasons to Not Sell Service Contracts #3 We ll Lose Money If we offer our clients firm fixedprice service contracts with a guaranteed response, we ll lose money. Valid Invalid Reasons to Not Sell Service Contracts #4 It s Impossible! No one can honestly provide 24- hour a day, 7-day a week service, with guarantees. Valid Invalid 8

9 Reasons to Not Sell Service Contracts #5 It Rips Off Clients Service Contracts are overpriced and rip-off the client. Selling service contracts would be an economic injustice to the client. Valid Invalid Reasons to Not Sell Service Contracts #6 Revenue Too Small The revenue from service contracts is too small to meet our overhead needs. We view service strictly as a necessary evil to win installation contracts. That s where the meat is. Valid Invalid 9

10 Biggest Reason Client: Your Firm: Do you provide service after the installation? Yes What s Wrong with This Exchange? Commodity 10

11 Your Services Designing the Right Package Designing the Right Package My Role Models for Service... DEC IBM 11

12 Client Needs What Do They Really Want? Clients want any and all features that Minimizes... 12

13 Risk! Risk Management Primary Focus of Corporate Manager Achieve Job Security by: Job Security Maintaining Budget Risk Avoidance (Not Rocking the Boat) Integrated Systems are real-time, tech solutions 13

14 What Features Should It Include? Important Features One Fixed Price for All 14

15 Important Features One Fixed Price for All Priority Response Important Features One Fixed Price for All Priority Response Fast Response 15

16 Important Features One Fixed Price for All Priority Response Fast Response Instant Loaner Important Features One Fixed Price for All Priority Response Fast Response Instant Loaner Guaranteed Resolution 16

17 Important Features One Fixed Price for All Priority Response Fast Response Instant Loaner Guaranteed Resolution Simplicity Important Features Simplicity One Contract Meets 90% of Client Needs 17

18 Feature Summary Simplicity One Fixed Price for All Priority Response Fast Response Instant Loaner Guaranteed Resolution How Important is a Name? 18

19 Selling Service Agreements Two Markets Prospects Existing Clients 19

20 Prospects - 3 Legs Presentation Adding Value Sales Force Motivation The Presentation The Ask For It Principle Seamless Integration into Installation Proposal Place Price Below Install Price Avoid Looking Like an Option Make It Easy To Sign (one T&C) 20

21 System Investment Summary Our price for the turnkey supply and installation of the system outlined in our proposal is as follows: Base System Investment $125, One-Time Discount ($26,102.00) Total System Investment $99, Full Service Agreement (monthly) $1, (Five-Year Term) Recommended System Enhancements List Both Prices Together, so They Appear Linked If the budget allows, we recommend the following system enhancements: Additional Storage $1, Expand Security Console $4, How to Add Value 21

22 Adding Value Differentiate Service From Warranty Limit Warranty Services 7-24 Availability Priority Response Instant Loaner 10% Discount on Add-Ons Reduce First Year Price Adding Value Secret Weapon Reference Letters 22

23 Selling The Sales Force Eat Well, Sleep Well Selling The Sales Force Increases Your Cash Flow Annuities 23

24 Selling The Sales Force Increases Sales Add-ons Referrals Selling The Sales Force Increases Client Satisfaction! 24

25 Compensation Plan Drives Sales Sales Commissions Compensation Plan Drives Sales Reward Sales Longer the Term, the Larger the Commission Renewals 25

26 Overcoming Objections Reasons Not to Buy a Service Agreement #1 Indifference Why should I pay for a Service Agreement? Aren t you going to provide service anyway? 26

27 Reasons Not to Buy a Service Agreement #2 Warranty Expectations Aren t I covered under warranty? Isn t that the same thing as service? Reasons Not to Buy a Service Agreement #3 Alternative Shopping Do you have a less expensive plan? 27

28 Reasons Not to Buy a Service Agreement #4 You re Too Expensive These prices are pretty sporty, aren t they? Results of Our Approach 90% Purchased Service Agreements from the Git-Go 28

29 Why 90%????? Made It Easy (signing mood) Appear Install & Service (one and the same, interlinked) Met Their Needs (Reduced Risk, Budget) Pre-programmed Behavior Selling to Existing Clients 29

30 Why Buy a SA From You, and Not Your Competition? Two Prong Solution Follow Xerox Model (risks) Differentiate T&M and Service Contracts (budget cycle) 30

31 Value Added Comparison Table Feature Availability Response Priority Response Time Defect Corr. Response Time Loaner One Fixed Price T&M M-F After FSA As Available N/A N/A N/A FSA 24Hr 2 to 4 Hr Sales Strategy - Mailer Develop an Intro Letter Include Feature Table Reference Letters One-time Reduced Price Selective Follow-Up (face) 31

32 Price Alan s Rules on Pricing Alan s Rule #1 Law of Gravity 32

33 Alan s Rule #2 Law of Added Value Alan s Rule #3 Price Your Product at What The Market Will Bear 33

34 Alan s Rule #4 Raise Your Hourly Rates! Why Raise Your Hourly Rates? 34

35 The True Hourly Costs Base Hourly Rate $25.00 Benefits (30%) $8.00 Inefficiency (20%) $6.00 Call-backs (15%) $4.00 Truck and Equipment $7.00 Overhead (35%) $18.00 Total Cost (Hourly Rate) $68.00 Alan s Rule #5 Raise the Rates of Your Existing Service Contracts! HOW OFTEN???? 35

36 How Do You Price Your Services? Alan s Rule #6 Law of Price Sensitivity 36

37 Glen s Rule Law of Client Complaints Service Agreements 7% to 15% of Installed Price Rule of Nickels and Dimes 37

38 Service T&M Make a Competitive Matrix Identify Premium Providers? Do Not Exceed $99 Barrier Land of Expectations Delivering On Your Promises 38

39 Questions and Answers 39