The Hidden Cost of “Free”

The idea that our industry needs to collectively shift towards a service-based pricing model finally seems to be gaining some real traction.  Many firms have come to the realization that we must change the way we price our service, or risk a slow and arduous demise.  The idea has been kicked around for a while now, certainly not a ground-breaking discussion we’re having here.  But as an industry, it seems we’ve been long on talk, and short on action.  And at risk of sounding trite, talk is cheap.  Giving away labor is anything but.

Service after the sale has always been an integral part of what differentiates top notch Integration firms from their competition.  However a variety of factors have made providing that high level of service increasingly difficult.  The number of “moving parts” in today’s systems has increased dramatically from years past, while product margin in most categories has dwindled.  Meaning Integrators are tasked with providing more frequent service, on a much tighter operating margin.  But there’s no room for whiners in business.  Most of us have simply taken this on the chin and lived to fight another day.

But it doesn’t take an MBA to know that working more and getting paid less is bad business.  And while many of the costs are obvious, I think that our collective decision as an industry to simply absorb the increased expense of service also has a hidden price.  One that’s not as easy to quantify as burnt fuel and overtime wages.

Misaligned Expectations…

I’ve heard it said that the key to happiness is low expectations.  I find that saying a little too cynical.  How about something more like this:

“The Key to Happiness is Realistic Expectations”

 Many of life’s greatest disappointments are the direct result of expectations being misaligned with results. This is true in relationships, in careers, and in business dealings.  But I’ve found that many Systems Integrators seem to have forgotten this simple fact, particularly when it comes to closing a sale.  For this reason, amongst others, many new clients will enter a relationship with expectations that are simply unrealistic.  Marketing campaigns and sales pitches have left them envisioning a home full of the coolest technology, and somehow devoid of any need for ongoing service. We all know where that road leads.

Eventually some sort of tricky issue arises requiring multiple service calls.  Often it will turn out that the root of the issue was unpreventable.  But by the time it’s finally resolved frustrations are running high across the board.  And this is hardly the time to have a conversation with your client about misaligned expectations. That ship has already sailed. So the service calls are deemed un-billable, and life goes on.  That is, until the next crop of issues arises.

This is where the hidden cost comes in.  The first few hiccups in the system may have eliminated the expectation of flawless performance. But there is a danger that a new set of expectations will creep in…  that the Integrator should fix all similar future issues for free… indefinitely. 

This scenario represents a failure on our part, as Integrators, to effectively communicate to our clients that home automation systems will always require on-going service and maintenance. And, in some cases, this failure eventually diminishes our value so badly in the eyes of the client that they start to see us as the problem, instead of the guys who fix the problem.

At this point we’ve gone beyond losing money.  Now we’re losing our client’s good will, which is much harder to make back.

It has never been more important to effectively communicate what it is we’re actually selling. It’s more than boxes full of gadgets and pair of hands to hook them up.  It’s expertise, support, and ongoing maintenance.  One of the easiest, most effective ways to do so is through the creation of a tiered service plan for your clients.  It can be charged monthly, or annually.  And there’s plenty of room for creativity in terms of what exactly the plan will include.  One thing that’s not debatable however, is the fact that it should be discussed up front, before any contract is signed.

A properly structured service plan will actually save your clients time, money, and frustration.  Perhaps even more importantly though, it will establish the expectation that on-going service is just part of the deal.  As Integrators, it’s our responsibility to communicate this with the client.  Thereby bringing expectations back inline with what we’re actually capable of delivering.

And when we deliver what clients expect, everyone wins.

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