Service Contracts and RMR are Not the Same Thing
This Post Originally Appeared on Residential Systems on March 23, 2017
Understanding the real goal of a service contract, and why 100% of your clients should be on one
Despite all of the attention being paid to RMR (recurring monthly revenue) in our industry these days, there still seems to be a critical disconnect in the way many integrators are thinking about service contracts. In our daily work of helping businesses ramp up their service efforts here at OneVision, we have discovered a widespread belief that service contracts should only be put in place for clients who are paying a recurring fee (either monthly or annually) for service. As a result, many integration businesses have absolutely no service contracts of any kind in place with their clients.
It turns out that many integrators are still viewing the term “service contract” as synonymous with a “paid service plan” (what we at OneVision call “Memberships.”) But this is a fundamental misunderstanding of what a service contract is meant to accomplish. As defined in one of my previous articles, a service contract dictates important concepts to your clients such as terms of service (ToS) and a service level agreement (SLA). These contracts should be in place with 100 percent of your clients, whether or not they opt-in to a paid membership plan.
Let’s take a look at some of the reasons why this distinction is important, and why you should focus on getting 100 percent of your clients to sign a service contract, whether or not they are interested in a paid membership…
The Real Goal of a Service Contract
There are many benefits to having a well-defined service contract in place. By establishing your terms of service and an SLA with your client, these contracts serve to set clear expectations as to how you will deliver and bill for service, thereby improving your billing cycles and minimizing disagreements.
But perhaps less obvious is the fact that your service contract provides a framework through which you can highlight your premium service offerings. By asking all of your clients to acknowledge your ToS and SLA, you also create an opportunity to present the benefits associated with your paid membership plans – priority support or proactive monitoring, for example.
If your client opts-in to a paid membership plan, great! If they opt-out of your paid plans, then their signature on the service contract acknowledges that they cannot expect the same level of service as your premium members. In this way, having a service contract in place for 100% of your clients not only sets clear expectations, but it also acts as an incentive for those who might otherwise sit on the fence when presented with a premium membership plan.
Making the Transition
Once you’ve grasped the important distinction between service contracts and membership plans, getting your entire client base to agree to your new approach can still seem daunting. But in our work with integrators all over country, we’ve found that this process breaks down to three simple steps:
Develop your service contract, which should include the ToS as well as a SLA
Notify your client base (typically through an email campaign) and give them a grace period to process and decide
Refuse to provide advanced support without their acceptance/signature of the contract
Because your service contract is no longer tied to a paid monthly plan, but rather is simply an agreement to terms, your clients shouldn’t push back on giving their signature. That is, unless they disagree with your hourly rates, billing policies, etc. In this event you should probably consider parting ways with the customer. After all, every other profession with ongoing service relationships won’t do business with you without an agreement—why would you?
Selling White-Glove Service to Those Who Value It Most
Building RMR in your business will requires a sharpened focus on providing concierge-level services to all of your clients. One of our core beliefs here at OneVision is that all of your clients (even those who opt-out of paid membership plans) should receive 24/7 Instant Triage. Beyond that, however, services like proactive system monitoring and priority on-site support should be reserved for your premium members.
Applying this systematic and tiered approach to service across your entire client base requires that 100 percent of your clients know exactly what level of service they can expect. To get everyone on the same page in this way, you must separate your service contract from your paid membership plans. By removing the payment barrier you are able to require a signature on your service contract from every single one of your clients, even those not interested in your premium service offerings.
Clients who still refuse to sign your service contract at this point have clearly demonstrated that they don’t place any value on you as a service provider, and are probably not a great fit for your company.
Clients who do sign the contract but opt-out of a paid plan have implicitly acknowledged that they cannot expect the same level of service that your paying clients can. Perhaps most importantly, this process eliminates all ambiguity in your service-based pricing strategy. This allows you to get laser-focused on building RMR by providing the highest level of service possible to your clients who value it most.
Are you a business owner or service manager? Did you find this article helpful? If so, check out this post as well – Speaking the Language of Service.
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!