Business

What We Can Learn about Service and Recurring Revenue from SnapAV’s OvrC Pro

How much can you charge for service? That's the question on everyone's minds after SnapAV dropped the recurring fees for its OvrC remote management service.

What We Can Learn about Service and Recurring Revenue from SnapAV’s OvrC Pro
SnapAV is no longer charging a recurring fee for OvrC Pro, the remote network monitoring system introduced at CEDIA last year. What does this mean for service and recurring revenue in this industry?

Joseph Kolchinsky · May 17, 2017

SnapAV’s recent decision to restructure the licensing costs of OvrC Pro has rekindled the ongoing conversation about recurring monthly revenue (RMR) in our industry.

Last week, the company eliminated the licensing fee for the monitoring platform completely for all dealers at the Silver level and above. For everyone else, the license, which used to come with a 2-year term, is now good for life.

Ostensibly, these changes are due in part to slow progress by SnapAV’s dealer base to leverage the OvrC platform as part of a broadly successful RMR strategy. With dealers struggling to monetize the services that OvrC enables, SnapAV likely saw their licensing fees as little more than a roadblock to gaining broader adoption for the platform.

Given SnapAV’s significant investment in the product to date, it’s safe to assume that the company ran the numbers and concluded that they had more to gain by eliminating the license fee as a way to increase OvrC’s market penetration.

However, the significance of this news begins and ends there. SnapAV’s decision should not be interpreted as a sign that RMR strategies as a whole have failed. Rather, this is only further evidence that the industry at large simply hasn’t found the right formula to effectively monetize service yet.

It’s a problem that we at OneVision are all too familiar with and have built an entire business around solving for our growing partner network.

How Much Can You Charge for Service?

Believing OvrC Pro’s new pricing model is an indictment against RMR strategies misses a critical point — that the price we can charge for the delivery of premium support and services has little to do with the costs we incur doing it.

The belief that your costs are the primary driver of the price you charge is a classic example of cost-based pricing, a method of price-setting widely regarded by business experts as a great way to leave money on the table.

Instead, we should remain focused on RMR as an exercise in value-based pricing, which Wikipedia defines as “...a pricing strategy which sets prices primarily, but not exclusively, according to the perceived or estimated value of a product or service to the customer rather than according to the cost of the product or historical prices.”

In other words, the price you can charge for a well-structured premium service plan has much less to do with your monitoring hardware or licensing costs (although there are fundamental technical differences which do differentiate the platforms), than it does with your client-relationships.


Related: Position your company to take advantage of the cloud service opportunity.


Put simply, monitoring hardware doesn’t drive value, you do. And your ability to provide an elevated service experience through offerings like 24/7 availability, guaranteed response times and priority on-site services, can never be quantified by an MSRP.

In fact, one of the most appealing things about selling premium services is the fact that they don't easily commoditize, even as your monitoring hardware and licensing fees inch closer and closer to zero.

SnapAV’s decision to drop their pricing on OvrC Pro is no doubt a calculated move, and one that makes sense for a company with a thriving bottom line driven by profitable hardware sales.

But as an industry, we should be careful not to conflate their internal business decision with a condemnation of the ongoing efforts to monetize the extremely valuable services we provide. In order for us to succeed with RMR we must source our own conviction, taking ownership of the pricing conversation instead of looking for implicit permission from our manufacturers to charge what we know we’re worth.


For more information about creating a service-based culture in your organization or to learn how to structure scalable and profitable RMR offerings for your clients, visit www.onevisionresources.com/blog or call 617-778-2515.



  About the Author

Joseph Kolchinsky is the founder of OneVision Resources and investor of companies in the personal and home technology industry. He is also a frequent speaker on the evolving nature of supporting the connected home and related IoT. Have a suggestion or a topic you want to read more about? Email Joseph at [email protected]

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  Article Topics


Business · Service & Recurring Revenue · News · OneVision · OvrC · SnapAV · All Topics
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Comments

Posted by Julie Jacobson on April 30, 2017

Absolutely, Adroit1. Many integrators fall into the trap: “Well, the vendor isn’t charging me, so I can’t charge my client.”

Posted by Adroit1 on April 30, 2017

Just because Snap AV isn’t charging us, doesn’t mean we can’t be charging our customers for the service they are getting. The billing can be built into the original installation price, or simply added as part of a service contract. In fact we need to be charging, at least something, for OVRC pro, because people don’t value what they get for free. Many of the reset functions are available for the customer to do themselves, so you know when they call you it is something more complicated and will need you to get into the diagnostics, and possibly even need a truck roll.

Posted by Roy French on April 28, 2017

“that the price we can charge for the delivery of premium support and services has little to do with the costs we incur doing it.” - A conscious shift must occur within the industry - imagine a customer will pay more to have a router power cycled now vs. after a truck roll tomorrow. Price is a function (in part)of demand, we must establish (marketing) the demand in our customers.

Posted by Julie Jacobson on April 27, 2017

“However, the significance of this news begins and ends there. SnapAV’s decision should not be interpreted as a sign that RMR strategies as a whole have failed. Rather, this is only further evidence that the industry at large simply hasn’t found the right formula to effectively monetize service yet.”

100% agree.

Posted by Julie Jacobson on April 27, 2017

“However, the significance of this news begins and ends there. SnapAV’s decision should not be interpreted as a sign that RMR strategies as a whole have failed. Rather, this is only further evidence that the industry at large simply hasn’t found the right formula to effectively monetize service yet.”

100% agree.

Posted by Roy French on April 28, 2017

“that the price we can charge for the delivery of premium support and services has little to do with the costs we incur doing it.” - A conscious shift must occur within the industry - imagine a customer will pay more to have a router power cycled now vs. after a truck roll tomorrow. Price is a function (in part)of demand, we must establish (marketing) the demand in our customers.

Posted by Adroit1 on April 30, 2017

Just because Snap AV isn’t charging us, doesn’t mean we can’t be charging our customers for the service they are getting. The billing can be built into the original installation price, or simply added as part of a service contract. In fact we need to be charging, at least something, for OVRC pro, because people don’t value what they get for free. Many of the reset functions are available for the customer to do themselves, so you know when they call you it is something more complicated and will need you to get into the diagnostics, and possibly even need a truck roll.

Posted by Julie Jacobson on April 30, 2017

Absolutely, Adroit1. Many integrators fall into the trap: “Well, the vendor isn’t charging me, so I can’t charge my client.”