The topic of recurring monthly revenue (RMR) has been top of mind within the custom installation industry for some time now. While the idea of RMR is appealing and makes sense to many people, getting started and building a sustainable business is a challenge for many dealers.
As Pakedge launches its Bak-Pak Cloud Management System, a technology platform that enables dealers to remotely monitor, manage and maintain AV networks, a common refrain we hear from our dealers is how to get started.
Here are five tips to help dealers develop this potentially lucrative stream to their business.
Understand What You Are Really Selling: Peace of Mind
Unlike selling products, which customers can see, touch and experience, a managed service is less tangible to the customer. While one can talk about the benefits, and maybe even quantify the benefits through financial analyses, those are simply justifications for the real customer need.
Whether it is for security or assured network uptime during critical periods, the customer is ultimately buying peace of mind. Focus on discovering this key unstated need during the initial discussions with the customer, and build your differentiating service offering and proposal around this requirement.
Build Your RMR Business Around Differentiation
A common challenge for integrators is differentiating their managed services business, often resulting in a commodity offering and lower margins. To design a differentiated RMR business, the dealer must think in terms of customer outcomes, or the end-state desired by the customer.
Dealers must look beyond what the customer is asking for to what the customer really wants or needs. Accomplishing this may require the integration of multiple and separate technology/service offerings into one solution, managed through new processes and delivered in new ways.
An Integrated Selling Approach: Products and Services Together
Many dealers approach the sale as two parts — sell the products first, and then sell the services after the fact. The need to “re-sell” the customer a second time for service sales yield a low success rate and a longer sales cycle. A best practice is to present upfront the products and the services together as one integrated solution, designed to meet the customers’ needs. By treating this as an overall solution, and bringing up the services element early in the sales cycle, your rate of success increases significantly.
Adjust Your Sales Compensation Structure
Product sales compensation structures are based on “one-time” transactional revenue collected whenever a product is sold. This model does not work with RMR because the revenues are collected over a period of time. RMR compensation structures based solely on the revenue collected per period will demotivate the salesperson from selling the service — where’s that big cha-ching moment? — and instead have them focusing on selling products alone.
Best practice RMR compensation structures should include a one-time upfront commission (based on a percentage of the Total Committed Service Contract Value — i.e., total value of the service contract, including penalties and other guaranteed fees, over the committed period), and a monthly/ quarterly commission (based on a portion of the recurring revenue collected over the measured period).
Demonstrate Your Value Continuously After the Sale
The selling process does not stop once the customer signs the service contract. While the services you render may be in the background and be transparent to the customer, you must be proactive and keep the customer informed continuously. Whether it be monthly reports, incident alerts and resolutions, status emails, or phone calls, regular proactive communication is critical to the value that you provide to your customer.
When it comes time to renew their service plans, clients will be certain — through your updates and communications — that you have played a valuable role in their system maintenance. Make sure they are constantly reminded of your value.