The company had been aware that a shift toward recurring revenues was necessary for several years, but a tough economy jolted that priority into high-gear.Bradford Caron
Increasing under-contract service revenue from 15 to 33 percent isn’t easy, and neither was putting the plan in place.
Dec. 06, 2011 — by Tom LeBlanc
Bradford Caron, president of Signet Electronic Systems, let his guard down for a moment while I interviewed him about his goal of increasing the company’s under-contract service revenue from 15 percent to 33 percent of its overall business.
Pride in customer service had been a staple of Signet since it was founded in 1974. One of its key manufacturer reps, Salvador Marinello, educational regional manager for Rauland-Borg, confirms.
“They are always engaged with the customer, always on top of customer service, Frankly, I’d like to see some of my other [dealers] that read your magazine emulate Signet’s approach to customer service.”
What had not been a staple of Signet’s operations, however, was getting paid for post-installation service and consultation. It must be difficult, I suggested to Caron, for Signet’s sales people to tell its long-time clients who are accustomed to high-level service for free that they now have to pay for it.
Caron threw his head back and laughed. “You must have been a fly on the wall during some of our meetings.” He recalled that some clients would politely decline the proposed service contracts and “tell us they’ll stick with the service they already have.”
It is very challenging, but necessary for integrators to embrace a service-based revenue model. “Not only do [service] agreements provide a source of dependable, consistent revenue, but it allows us to plan and better support our clients,” Caron said. Also, service revenue isn’t dependent on ever-dwindling product profit margins; it’s something that a savvy integrator can control.
Signet really began to appreciate that during the recession. The company had been aware that a shift toward recurring revenues was necessary for several years, but a tough economy jolted that priority into high-gear.
One way to get over the hump with clients that Signet discovered was including extra incentive in service contracts. Its custom-created agreements promise clients better response times, longer warranties, employee training and deeper discounts. Those discounts are the result of manufacturers’ support for the programs, Caron pointed out.
Signet offers service agreements for all of its systems, which include security, life safety, audio/video, nurse call and communications. Caron says the company now has “tremendous success” with the service contract program.
Transparency of the contracts is a key to the program’s success, said VP Daniel Chauvin. “They haven’t been a tough sell once [the clients] can see what we’re bringing to the table,” he said. “It gives them a certain amount of certainly about what service they’ll be getting and it puts their costs in a box.”
Of course, service revenue comes at a price. Signet invested in ramping up its infrastructure. It hired full-time service sales reps entirely dedicated to selling contracts. Meanwhile, the Norwell, Mass.-based integrator, which serves all of New England, had to become more geographically strategic about hiring technicians so they can deliver on guaranteed response times.
Based on what Chauvin, who heads up Signet’s low-voltage integration division, sees in the field, he says Caron’s goal of increasing under-contract service revenue from 15 percent to over a third of the company’s proceeds is “definitely attainable.”
That’s the thing about service. Even a success story is always a work in progress.