Follow up on pricing and renewing service contracts - April 13, 2013

Follow up on pricing and renewing service contracts 

    April 13,  2013

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 Question

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Ken

    How about a different thought on how to price the aging customer…  charge a lower rate for monitoring only, all repairs charged at T& M…?  you don’t lose the customer or the referral base and the responsibility to take care of the system is a shared responsibility, one in which they are a bit more cautious to overlook.

Yours for better security,

Steve Sopkin, President

Mijac Alarm      

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Response

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    There are various criteria for pricing the service contract.  In fact, pricing any service, whether it's monitoring, inspection, runner or guard service, ECV or video monitoring, each have criteria that need to be considered, such as what will it cost you for third party expense, such as the central station charges.  However, no matter which service you're trying to price I think they all share at least two common issues: you want to know what your fixed expense is going to be to provide the service and you want to be able to charge as much as you think the subscriber is going to be willing to pay.   Figure this out and you can come up with a RMR price.

    From a cost standpoint pricing monitoring is the easiest.  Your only expense should be the central station charge and your cost of sending out an invoice, assuming you send invoices.  Pricing the service contract becomes more problematic since you don't know for certain what the material cost will be and how much labor will be involved in covered repairs.  Another service that is more difficult to price is monitoring video.  Depending on what video monitoring is required, from a quick check of a video clip to 24/7 watching a monitor or door man and escort service, the amount of time is going to be hard to estimate and you may have to price it on actual time spent over a fixed minimum priced with RMR.

    So what about the elderly subscriber?  I suppose from the question one would think that an aging subscriber may have the same breakdown frequency as an aging alarm system; both requiring more attention for repairs.  I'm not sure that's the case.  Some elderly may not use their systems, just pay for the service.  Others may cause false alarms because they don't remember how to use the system.  Seems like everyone is offering discounts to the elderly.  I'm not sure why, but I do ask for senior discount when I go to the movies.  

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