This Post Originally Appeared on CEPro.com on April 26, 2017
Why we must source our own conviction and take charge of the value proposition instead of looking for implicit permission from manufacturers
SnapAV’s recent decision to restructure the licensing costs of OvrC Pro has rekindled the ongoing conversation about recurring monthly revenue (RMR) in our industry.
Last week, the company eliminated the licensing fee for the monitoring platform completely for all dealers at the Silver level and above. For everyone else, the license, which used to come with a 2-year term, is now good for life.
Ostensibly, these changes are due in part to slow progress by SnapAV’s dealer base to leverage the OvrC platform as part of a broadly successful RMR strategy. With dealers struggling to monetize the services that OvrC enables, SnapAV likely saw their licensing fees as little more than a roadblock to gaining broader adoption for the platform.
Given SnapAV’s significant investment in the product to date, it’s safe to assume that the company ran the numbers and concluded that they had more to gain by eliminating the license fee as a way to increase OvrC’s market penetration.
However, the significance of this news begins and ends there. SnapAV’s decision should not be interpreted as a sign that RMR strategies as a whole have failed. Rather, this is only further evidence that the industry at large simply hasn’t found the right formula to effectively monetize service yet.
It’s a problem that we at OneVision are all too familiar with and have built an entire business around solving for our growing partner network.
How Much Can You Charge for Service?
Believing OvrC Pro’s new pricing model is an indictment against RMR strategies misses a critical point — that the price we can charge for the delivery of premium support and services has little to do with the costs we incur doing it.
The belief that your costs are the primary driver of the price you charge is a classic example of cost-based pricing, a method of price-setting widely regarded by business experts as a great way to leave money on the table.
Instead, we should remain focused on RMR as an exercise in value-based pricing, which Wikipedia defines as “…a pricing strategy which sets prices primarily, but not exclusively, according to the perceived or estimated value of a product or service to the customer rather than according to the cost of the product or historical prices.”
In other words, the price you can charge for a well-structured premium service plan has much less to do with your monitoring hardware or licensing costs (although there are fundamental technical differences which do differentiate the platforms), than it does with your client-relationships.
Put simply, monitoring hardware doesn’t drive value, you do. And your ability to provide an elevated service experience through offerings like 24/7 availability, guaranteed response times and priority on-site services, can never be quantified by an MSRP.
In fact, one of the most appealing things about selling premium services is the fact that they don’t easily commoditize, even as your monitoring hardware and licensing fees inch closer and closer to zero.
SnapAV’s decision to drop their pricing on OvrC Pro is no doubt a calculated move, and one that makes sense for a company with a thriving bottom line driven by profitable hardware sales.
But as an industry, we should be careful not to conflate their internal business decision with a condemnation of the ongoing efforts to monetize the extremely valuable services we provide. In order for us to succeed with RMR we must source our own conviction, taking ownership of the pricing conversation instead of looking for implicit permission from our manufacturers to charge what we know we’re worth.
Are you a business owner or service manager? Did you find this article helpful? If so, check out this post as well – How to Apply Incentives to Your RMR Strategy.
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!