Price system says to consider most profitable services
- By Kevin Lehan
- Apr 01, 2017
In free-enterprise systems, common economic theory dictates
that business resources—meaning time, money and labor—
should be allocated in the manner that obtains maximum profits.
For decades, the most profitable activity for alarm contactors
was to sell a system (at a loss), recoup costs via recurring
monthly revenue from monitoring and then profit from good service
that retains the customer for many years. The next step was to repeat
this process at a rate much greater than your attrition to grow your
customer base and overall recurring monthly revenue (RMR).
Today, however, you should consider focusing efforts on existing
commercial customers by offering two-way, mass-notification service
from your central station, which represents an added layer of RMR
for those accounts.
Another opportunity is to sell mass-notification service as a
stand-alone system to operators of facilities in which you do not currently
have the system under contract. With your foot in the door,
you may be able to gain the entire system from your competitor, thus
increasing your market share.
EARN REVENUE FOR EACH BUILDING OCCUPANT
Offering a mass-notification system to existing customers that draw a
repeat daily population, such as schools, offices, hospitals, factories or
government agencies, enables you to earn additional revenue based
on the number of “contacts” who must be notified in emergency and
Your compensation includes the revenue you already receive for
equipment, installation, maintenance and monitoring, but you gain
an additional revenue stream for making individual notifications by
text, email or digital voice to each “contact” subscribed to the massnotification
service. Those messages could be received—and replied
to—via a smart phone, tablet or computer.
Further, you can provide ancillary services that schools pay for
now to facilitate non-emergency communications, such as promoting
a school-wide function, a teacher informing parents of an upcoming
field trip or cancellation of classes due to severe weather.
In other words, mass-notification could be the most profitable service
you can offer existing customers who have a system in place already.
OPEN DOORS TO A NEW MARKET
Alarm contractors can also sell mass-notification service to communities,
which is a huge new segment of potential customers. Those
communities in turn would then promote a website or text address
that enables citizens to OPT-IN to receive local alerts. Whoever
chooses to opt in will receive the notices that the community decides
to generate from the mass-notification portal.
Depending on the wants of the community, the service could
either be free to constituents or require a subscriber charge, which
could cover the cost of the service or priced so that the community
creates a new revenue stream, as opposed to a cost.
A mass-notification system could be used to alert citizens of an
impending tornado, crime sprees, a boil order, a train derailment
that’s blocked the main drag—anything really—and the means to receive
community feedback, including requests for help.
For example, an attempted child abduction takes place at a community
park and officers receive a description of the perpetrator and
his light blue four-door sedan. The sergeant tells a dispatcher to notify
opted-in community members of the pertinent information by
text, email or digital voice. This will make people aware of the incident
and they will be on the lookout for the perpetrator.
After the notification is generated from an online portal, a recipient
may see a car fitting the description at a different park? That
person can then send a response text message, possibly accompanied
with an image: “That guy might be in city park—here is a photo of
Maybe the license plate is showing or the sender says that the blue
car is heading west on a certain street. That’s valuable information
that could lead to apprehension—and a safer community.
It is also a means to generate a new stream of revenue for your
company without installing a single piece of equipment. Instead, you
are selling access to secure online portal from which two-way communication
MAXIMIZE PROFIT POTENTIAL
Economic best practices require that a business focuses on its most
profitable functions. Tightly related to this thinking is that the cost of
every good or service is relative to perceived value. Because prices are
expressed in terms of currency, which is a commodity, price allows
people to develop their own comparative values for the products/services
When this is applied to mass-notification service for existing customers,
the best way to present this is that the cost per contact is
pennies a month.
With such a nominal cost—compared to the horrific potential of
not having such a system in place—alarm contractors can be assured of
gaining a significant share of this new market and revenue stream.
This article originally appeared in the April 2017 issue of Security Today.