Imagine your next sales presentation with a client. You get to the end of your pitch and out pops the inevitable question, “This all sounds great, but how much does it cost?” says Mr. Big. “$899 monthly,” you reply. “That covers everything from initial installation, ongoing upgrades, and 24/7 remote support.” This isn’t as far-fetched as it sounds. Let’s explore how this new model might work in your business.
The commercial IT world has shown us the way to this new reality with various Audio/Video as a Service (AVaaS) models that are all oriented around giving the client an easy monthly payment that can be classified as an operating expense (OPEX) vs. capital expense (CAPEX). While P&L classification might not matter as much to a residential purchase, consider that most of your clients tend to be senior executives, professionals, or entrepreneurs. They don’t stop thinking this way when they leave the office. Every decision they make is based on perceived value and ability to transfer risk. By offering them a low monthly payment and the utility of easy home technology, you’re removing a number of mental roadblocks and are addressing many of the unspoken concerns, which are listed below.
In the classic scenario of driving a new car off the lot, it’s widely understood that 20 percent of the value gets immediately written off. The why do people buy new cars? There are myriad reasons, but at the end of the day, the perceived value outweighs the financial considerations in the mind (or heart) of the buyer. Price becomes the determining factor during the buying process only in the absence of value.
In our custom installation world, much of the purchase is perceived as a means to an end. All the amplifiers, switches, cables, and racks serve to deliver solid Wi-Fi, great sound, or killer video. In other words, much of the black box gear becomes an annoyance to the buyer as they deal with sticker shock and the knowledge their new system will need an upgrade in three-to-five years. No one ever brags about the new HDMI matrix switcher they just installed.
What if we could replace that friction with the promise of neverending updates and support? Clients pay big bucks upfront for home technology solutions thus far because that’s all we’ve ever offered. Look at the rest of the world right now. Everything’s available “as a service.” Our customers don’t necessarily care about owning the products; it’s the utility they care about. What the products deliver is “who’s on first.” They want solutions that will work during the brief windows of time they have to use them. By offering AVaaS solution options, we’re appealing to the utility-minded buyer.
No matter how many budget exercises we guide clients through, there will always be a segment who aren’t able to effectively parse the big number as it relates to a phased installation approach. We’ve seen time and time again clients who balked at a $200,000 project, but were just fine with a $10,000 rough in, $60,000 trim out, and a $130,000 finish out. Same money, just presented differently.
Presenting AVaaS takes this buyer segment and delivers the exact opposite of sticker shock. It’s an easy monthly payment that gives them support and upgrades whenever they want. Most clients understand the ongoing need for technology upgrades, so they’ve become more comfortable that it’s a neverending dance of installation, service, and new gear. By presenting the AVaaS monthly subscription upfront, we’re addressing that reality head on, which has huge appeal to a large swath of buyers.
Also by Henry Clifford: Making The Case For Memberships
In order for any of this to take hold in your company, it requires a significant mindset shift. You’re now in the services business, not the hardware business. If you weren’t already thinking about ongoing relationships vs. transactions, this is another essential big mental leap to take.
There are a ton of AVaaS providers out there, and they all tend to follow a similar model.
- You design your solution as you would have done in an upfront cash deal.
- You partner with a AVaaS provider and size the deal to arrive at a monthly payment.
- You present the solution and monthly subscription to your client and offer both upfront cash and AVaaS options.
- Close the deal and schedule installation.
- AVaaS customers get ongoing checkups and upgrades with their subscription, while upfront cash deals get the same service you’ve always delivered.
- Single Monthly Payment: Offers a single-payment solution that combines hardware and services. Dealer gets paid upon project close with a fixed term (usually three years) where upgrades usually occur on renewal and the whole cycle starts over again. Providers: Great American Financial Services and other financial services vendors
- Bank Backed: You finance the equipment yourself on a credit line or credit card. This can end badly if the client decides to stop paying or your credit facility runs out. Unless you have a ton of credit, this model doesn’t scale well for integrators. Providers: Major banks and credit card companies
- Manufacturer Based: Programs are available from individual manufacturers that enable financing of their own gear. Solutions very seldom come from a single vendor, so complexities can arise from not being able to cover a deal from a single source. On top of that, unified billing can become challenging with one bill coming from the manufacturer for hardware and another monthly service bill from your company. Providers: Ingram Micro, Cisco, and Panasonic
- Hardware Lease: Partner with a hardware leasing company and they’ll pay you cash upon deal close and invoice your client directly. That means two bills; one for hardware and one for service. At the end of the lease, there isn’t necessarily a clean transition back to your company for upgrades. Providers: Lease Corporation of America, Crest Capital, and Avalon Leasing
Which model is right for you? Each business is different, but if the whole point of AVaaS is to get the client in the mode of subscribing to our products and services as a utility, we need to keep simplicity top of mind.
While AVaaS may be novel in the residential world, it’s moving fast in commercial and it won’t be long before the market shifts. Get out in front of this emerging trend and start offering service options to your customers alongside your current offerings.