In the increasingly competitive world of security integration, you would think guaranteed income would be hard to come by. The truth is, creating guaranteed income is possible for all security integrators, they just need to know where to start.
Generating recurring revenue via service contracts and extended maintenance plans is a proven way for security integrators to improve both their bottom line and customer retention. These types of contracts provide value to integrators in the form of guaranteed, passive income, while offering their customers a peace of mind when it comes to the longevity of their security system.
Succeeding at this kind of recurring revenue generation does not have to be hard. In fact, security integrators can make simple changes in their business models to successfully generate recurring revenue and boost their profits.
In our previous article, we outlined five reasons why many integrators find themselves struggling to generate recurring revenue. In this article, we will examine how to turn those failures into successes by exploring the five ways security integrators can succeed at recurring revenue generation.
1. Add Value to Your Business and Customers
Offering extended service contracts to your customers can do more for your business than just create revenue. Research shows that two-thirds of organizations that used recurring revenue models reported their customer numbers at or exceeding their goals. Similarly, three-fourths said their revenue goals were met or exceeded with 81% reporting operating costs on or below their budget. This goes to show that recurring revenue models can improve sales forecasting and customer retention too.
But, if you do not see added value in your recurring revenue services, then you certainly will not be able to properly communicate added value to your client.
The only way to add new levels of value to your business is to communicate how this type of service model adds value to your customers. Customers most likely will not ask for contract services on their own. You must sell this model to them by actually providing value in the form of superior service and expanded service offerings such as dedicated technicians, after-hours service, and quick response times. Understand that you are selling more than a system, you are selling a peace of mind.
2. Set Up Your Business to Sell Recurring Revenue
Changing the way your organization fundamentally does business is no small task, but it all starts with a change in mindset. Specifically, shifting from a project mindset to an account mindset. Spend a little more time with existing customers, communicating the value of extended service contracts, rather than moving quickly from one install project to the next. Remember that a recurring service contract is a core value offering, not an add on.
Once you have the mindset for selling recurring revenue services, your organization will have to make changes across all departments in order to support this new account mindset. Marketing teams will need to shift their messaging to include service and contract focused content. Finance teams will need to learn a new invoicing process. Along with training, the infrastructure required to handle your new service offerings will need to be implemented. Consider the resources needed for dedicated phone support, ticketing automation tools, keeping stock of commonly replaced hardware, etc.
3. Use a Lifecycle Management Tool
A cloud-based lifecycle management tool can help you manage the workload when it comes to administering recurring revenue services. These tools bridge the gap between internal departments by bringing design, install, and system management functions under one platform. They also create standardization in your organization by providing solid processes that ensure information integrity and consistency throughout a project’s lifecycle. Standardization, whether applied organization wide or to recurring contract services, improves internal communication, boots efficiency, and improves service quality.
Similarly, lifecycle management tools provide the digitization of service contracts and their associated data. This means that security integrators can design floor plans and catalog system information such as serial numbers, IP numbers, and warranty information in the cloud. Service technicians can then easily access this data via the cloud to deliver applicable services quickly and efficiently. Because this data lives in a digital space, there is no room for human error. The centralized visibility of system information provided by lifecycle management tools allow you to best administer recurring revenue solutions.
4. Encourage Sales Teams to Think Long-Term
One-time sales are good. Repeat sales are great. Recurring revenue is best. Unfortunately, many salespeople are only attracted to the one-time sales because the large commission on a one-time project is attractive. While theoretically the payout from a single security install can be more than a single service contract, salespeople fail to consider the additional resources used when bidding and winning a new project. The time spent developing and submitting proposals can account for tens of thousands in labor costs that have no monetary return.
The best way to mitigate these one-time project costs is by encouraging your salespeople to look for recurring revenue opportunities in their existing clients. Statistics show that the success rate of selling to an existing customer is 60-70%, while successfully selling to a new customer lags far behind at 5-20%. Further incentivize salespeople to sell long-term service contracts by using quotas or providing payment up front. The process of selling recurring contract services is different than what they are used to and therefore requires a different approach.
5. Elevate Service Offerings
For your long-term service contract to offer intrinsic value, the kind of the solutions offered within the contract must exceed the standard level of service. Otherwise, your customers will see there is no added value and cancel the contract. Examples of these elevated service offerings include preventative maintenance, hands-on training, priority or after-hours support, quarterly reports, or in-stock guarantees. Research shows that nearly 75% of US customers consider experience a key factor in their purchasing decisions. By delivering on the white-glove treatment, you become the go-to for future projects and references.
Consider other ways to increase your value position by offering customer-centric solutions that extend beyond service. For example, consider deploying a loyalty plan that encourages repeat business. Over 75% of consumers say they are likely to make another purchase after receiving an incentive. Offering exclusive access to private customer-appreciation events and individualized discounts may also help drive customer interest in your service contracts. The more value you can add, the easier the sale will be and the more recurring revenue you can generate.
Generating recurring revenue via extended service contracts is a great way to improve upon many existing aspects of your security integration business. From generating guaranteed income to strengthening bonds with existing customers, recurring service contracts are becoming a must-have offering for today’s modern integrator. By adopting these five tips for recurring revenue generation, you position your business leaps and bounds ahead of other integration companies looking to take advantage of this growing business model.