In today's rapidly evolving security, surveillance and related technology industry, the traditional model of one-time project-based sales and installations is gradually giving way to a more sustainable and lucrative service-focused sales model that leads to building recurring monthly revenue (RMR).
Security integrators are finding that making the pivot towards selling more multiyear maintenance, monitoring and service contracts at the point of sale not only ensures a steady stream of RMR, but also fosters stronger relationships with clients by providing a hassle-free experience with ongoing support services.
This service-focused model is preferential on both ends of the sale. Organizations, too, are beginning to demand a subscription consumption model. Customers are becoming less concerned with hardware ownership and focusing more on having access to and use of the needed technology to achieve their desired outcomes. Simply put, more customers prefer this hassle-free, fully managed experience for their security technology solutions.
However, while there is demand on both sides of a sale, a study our firm conducted in recent years among 200 different integrators uncovered that integrators are only securing multiyear services, on average, 10 percent or less of their project-based sales. With an average margin of 52 percent on contracted multiyear maintenance agreements vs. a 20 percent margin on new system project-based sales. With margins that significant, why are we not seeing more integrators selling service agreements?
There seems to be confusion and an industry-wide disconnect among integrators on how exactly you successfully shift to service-focused sales to capitalize on these wider margins, build more RMR, and propose experiences and outcomes for customers.
Therefore, I’ve compiled an eight-pillar action plan to guide security integrators in this service sales, RMR endeavor. Integrators must address these cohesively and collaboratively if they are serious about making the pivot to a more service-focused sales model and reaping the lucrative benefits that can follow. Otherwise, it is almost certain that there will be a shortfall in the execution and results.
Let’s unpack this action plan and eight pillars:
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Leadership Commitment
It starts from the top down. Leadership must be all in and be an agent of change.
Selling service/maintenance agreements needs to be the priority. You must present and believe the “what” and “why” for your company and the customer. For your company, it's about the RMR, customer lifetime value & differentiation. For your customer, it's about greater control, flexibility, and peace of mind. You must lead by example, be active, and be consistent.
The integrators whose leadership hands this off and isn’t pushing to make this shift are not going to see the results they desire.
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Have a Service Offering
There needs to be a solid service support infrastructure model in place. You need to have the ability to price multiyear maintenance. Stand behind your Service Level Agreements (SLA). Fulfill the promise of value of your maintenance agreements. Selling something you can’t deliver on is going to hurt you in the end. So, you must have the bandwidth to offer and support your services being sold.
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Productize Service Offering
Sell your service/maintenance offerings like you sell products. Simplify the maintenance products for your customers and sales team (i.e. bronze, silver, gold level). Package up your offering and communicate and market it as the centerpiece of your value.
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Have A True Technology-As-A-Service Program
You have two choices; you can use your funds or partner with a finance company that can support you in this effort. The program you offer needs to align with a service or subscription consumption model. It cannot be designed for ownership, it's about use, access, and outcomes. This is not a lease and I’d recommend removing the word lease from any representation and your narrative. This offering should include value like a penalty-free technology obsolescence provision. (This is a critical component of creating an offering based on flexible, customer-controlled usage.)
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Technology-As-A-Service Training
You have to invest in training your sales teams to sell a different way than they’ve always known. Selling a subscription versus cash sales can be a challenge, but if supported well by leadership, it can be successful for you and valuable to them. A great way to overcome initial friction is to require maintenance plans to be attached to every proposal. You can’t sell what isn’t offered. Leadership should have to sign off on exceptions.
Additionally, proposals should speak to service, not to cash sales and ownership. Be prepared for common customer misconceptions about as-a-service offerings. No matter how skilled a sales professional may be, it takes a new skill to sell a service.
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Compensation for Selling Service Offering
If RMR is a priority for you as a business leader then pay your salespeople for selling RMR. Don’t pay them over time. Pay them upfront. That’s the way salespeople are wired. Include a quota retirement piece for securing services. Salespeople read their comp plan once a year, so create illustration examples of side-by-side sales on cash vs as-a-service so they can see the difference.
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Marketing Aligned To Sell As-A-Service
Tell the world why you are offering it and why they should have it. Everything from your proposal to your website, it is time to flip the script. Formulate a comprehensive content marketing strategy. Integrate as-a-service and service-focused messaging into all the different ways you market and communicate to prospects and existing customers. (i.e. blogs, social media, collateral, email marketing, ads, proposals, etc.)
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Leadership Inspection/Enforcement
The goal is to increase RMR. Therefore, create milestones, objectives, and KPIs. Manage and implement these pillars. Monitor, scorecard, adapt, and adjust. QBRs. Believe.
There’s been a lot of talk about RMR and its value. It’s hard to question the irrefutable financial strength it gives any company, but making a change is hard. Especially because this industry has operated one way for a long time. But it’s a change that can have highly lucrative results.
Executing this eight-pillar action plan will lead you to value-added differentiation, securing long-term customer relationships, and building predictable RMR for your organization.
