This Post Originally Appeared on Residential Systems on April 11, 2017
How to Get Paid for the Unlimited Basic Support You’re Currently Providing for Free
If you’re like most home technology professionals, then you are likely providing your clients with unlimited basic support (e.g. phone and email) for free. For example, if a client calls about an issue with her Apple TV, you probably don’t submit an invoice for the 15 minutes it takes to walk the client through a quick reboot. However, given the steady erosion of product margins in our industry combined with the increasing demand for support, it may be time to rethink this approach.
Getting compensated for 100 percent of the service that you provide is growing ever more critical. But billing for basic support can be a real challenge since many of your clients have simply come to expect simple solutions, such as the Apple TV reboot described above, for free. Presenting a single line item on your project proposal (what we’ll call unlimited basic support) that covers the cost of this service can be an effective way to combat this challenge. (**UPDATE: While we still recommend showing a single line-item for unlimited basic support, we now recommend presenting that line at $0. The method outlined in the next section for calculating the value of this support is still relevant, only the presentation of the end result will change. Keep reading to see how…).
How to Arrive at Your Number
Calculating the price of your unlimited basic support is a simple process based on a few key metrics. Below are some guidelines that will help you arrive at the right number. These numbers are based on large amounts of data we’ve collected at OneVision. Your exact number will of course vary based on the specifics of your business…
Average Price of Support Call Prior to Billable Engagement: A good starting point is 30 minutes x $100/hour = $50
Call Cadence: This is simply the frequency of support events (calls and/or emails) for a given client. This is likely around once every one to three months for luxury projects, and once every 12-plus months for low-value projects.
Average Lifetime of a Client: How many years between major projects for your clients (e.g. for how long will you have to service a given system)? We usually assume five to 10 years (or 60-120 months).
The equation looks like this: (Average Lifetime / Call Cadence) x Average Price
So, for example, if we assume a given client will use their system for five years (60 months), and will call for basic support once every three months, then our unlimited basic support should cost $1,000 (60/3 x $50).
The price value (**UPDATE: see explanation below) of your unlimited basic support line item can range from a few hundred to several thousand dollars based on the variables above. In calculating this final price, I also recommend including the cost of your remote systems management (RSM) appliance of choice within the unlimited basic support line item. This allows you to keep a single line item, as opposed to multiple, simplifying the sales presentation and increasing your chances for a quick approval as you are now selling experience and a level of service, not another piece of hardware.
(**UPDATE: We now recommend that, instead of displaying the price of the basic support calculated as a standalone item, it be shown as a $0 line-item. Instead of displaying the price, we believe the number you arrive should be used as a metric to help you gauge a small premium you can rightfully justify on your overall project price. Just like luxury auto-makers, who use complimentary maintenance plans as one way to justify a premium on the overall price of their car. By presenting it in this way, you can avoid painting yourself into a corner with a client who decides that they’d rather not pay for the basic support, as outlined in the paragraph below.)
What if a Client Says No?
It’s safe to assume that at least some of your potential clients will question your unlimited basic support during the sales pitch. This is actually a good thing as it opens the door to a conversation about the importance of service and maintenance on their new system, managing their expectations, and even allowing you to pitch your premium membership plans if you so chose.
This all leads to the key question, of course: What if a client absolutely refuses to pay? As tough as it can be to walk away from a project, you should think hard about whether this client is worth doing business with. While the need to bring in project revenue is obviously a factor, this client clearly doesn’t appreciate the value of the service you provide. Their lifetime value may even be negative if they are high users of support but aren’t willing to pay this line item.
A client who refuses to pay for basic support is much more likely to cause you and your team headaches. By presenting your unlimited basic support line item right away, you’ve brought this fact to light, allowing you to make an informed decision about whether or not to proceed with the project.
(**UPDATE: While we still believe that the type of client described above is not an ideal one, there may be situations where you still want to enter the relationship. By using your 24/7 support as a marketing tool to justify your premium positioning, as opposed to a direct line-item, you can gauge if these clients are willing to pay a premium for excellent service, without putting yourself in a spot where you’re forced to haggle over line items.)
Now’s the Time
It’s no secret that the demand for support is increasing, while profit margins on hardware sales are in a steadily decline. Exacerbating the challenges we face is the fact that today’s home technology products are becoming more and more interconnected, increasing the overall fragility of the customer experience. In light of these factors, the “traditional” approach of providing unlimited basic support to your clients for free is no longer sustainable.
When it comes to covering your costs of basic support, you’ll never have a better opportunity than during the initial project sale. By pitching unlimited basic support during this phase, you maximize the likelihood that your client will approve while also applying a filter to clients who don’t value your service.
Are you a business owner or service manager? Did you find this article helpful? If so, check out this post as well – 5 Service Plan Offerings You Should Avoid
There are plenty of articles in our blog that you might find helpful. Or even better, use the contact form below if you want help taking your service and RMR efforts to the next level!