As the industry-wide dialogue surrounding service-based pricing strategies continues to gain momentum, it’s become more important than ever that we are all speaking the same language. Having a well defined terminology around these methods will not only assist us in sharing ideas and best practices, but will also help our clients quickly understand exactly what we’re selling (an important factor in the buying decision process).
To that end, let’s take a quick look at some of the common terms and phrases surrounding service-based pricing, and examine areas where the potential for confusion and overlap exists.
Service Plans vs. Warranties
Many integrators use the terms “service plan” and “warranty” interchangeably. These, however, are two fundamentally different concepts.
•Service Plan – a predetermined approach toward providing service, such as guaranteed response times or critical loaner equipment;
•Warranty – a billing strategy, usually seen as insurance when things don’t work as expected within a certain time frame post-purchase.
Service plans and warranties are not mutually exclusive. They often go together, especially at the beginning of a service relationship after the initial installation is complete. But they are inherently separate concepts and should be presented and sold accordingly.
The hope is that a service plan will continue for the life of the client, while a warranty may only be active for a short period of time following the project’s completion. Another approach may be to give the service plan away for free during the warranty period (or even better, build its cost into the project). Regardless of your approach, the terms shouldn’t be confused with each other.
Terms of Service (ToS) and Service Level Agreements (SLAs)
Terms of service are what dictate the terms under which service will be performed. For example:
•How much will you charge per hour?
•How will your clients reach you for support?
•What will your billing policy be?
•Is travel time billed separately? Or at a different rate?
•What will you do if an invoice goes unpaid?
•Or my personal favorite: what happens when a client calls for support on a product you did not install?
The service level agreement represents a commitment of quality and service, which is usually defined by factors such as availability (e.g. 24/7) and speed of response times (e.g. 30 minutes or less).
Proactive vs. Reactive Support
Credit is due to Ihiji for helping the industry standardize on the terms of reactive support and proactive support (full disclosure: I am an investor in Ihiji). When a client calls us to report an issue and ask for help, we are providing reactive support. If a monitoring system notifies us of an issue and we reach out to the client letting them know (and hopefully fixing it before they notice), then that’s proactive support.
Speaking the Client-Facing Dialect
Describing all these concepts to a client can be complicated. This is why at OneVision we have moved away from using these terms in client-facing dialogue, instead referring to our service relationships simply as “memberships.” Furthermore, each component within a membership is defined as a benefit.
Memberships, which come in both free and paid versions, can include a variety of benefits, which makes it a perfect term for describing the many variations of a service relationship. These memberships are formalized with a signed terms of service (or “contract”), which includes an SLA.
It’s important to note that memberships should be made available in a free variety. By offering a free tier with benefits such as 24/7 remote basic support (something we believe clients expect for free anyway), you make it possible for all clients to be a member and therefore commit to your terms of service. This critical step ensures that 100 percent of your clients know exactly what service they will be getting, how and when it will be delivered, and how they will be billed. Offering a free membership plan has the added benefit of highlighting the additional benefits of your paid memberships—for example, a faster SLA, proactive support, or priority on-site support.
As an example, these are OneVision’s memberships as offered to our partners’ clients.
Sending the Right Message
As our industry moves steadily toward wide-scale adoption of service-based pricing, it is becoming critical that we craft a consistent message. In a business that’s been focused for decades on executing large projects, speaking the language of service can be foreign at first. But it’s worth it. This will this ease the process of sharing best practices internally, and will help us form a consistent message as we enter the critical phase of educating consumers about our exciting new offerings.
As always, don’t hesitate to leave me a comment below or reach out through our website if we can help you craft the right message for your clients!