Residential Systems: Service Contracts vs. Warranties: The Difference and Why it Matters Apr 14
This article appears in the April 2012 issue of Residential Systems Magazine and was written by Michael Maniscalco is ihiji co-founder and vice president of technical operations. He is also the instructor for the CEDIA University course, Service Contracts with Teeth: How to Create and Sell Service Contracts to Build Your Business.
In my experience teaching system integrators how to structure and realize the benefits of service contracts for CEDIA University, one topic that typically receives a lot of attention is the difference between service contracts and extended warranties, and how manufacturer policies ultimately affect service contract offerings.
To start, let us first define and clarify the differences between a service contract and an extended warranty.
Dealers that sell electronics, appliances, automobiles, and many other products typically offer extended warranties. They act like an insurance policy and serve to extend the manufacturer’s warranty coverage of the product, providing repair or replacement, often at little or no additional cost.
Regardless of any brief description, a certainty remains that the value of these warranties continues to wane. As consumers have become savvier and technically adept, and the prices of consumer electronics have continued to fall, the perceived value of electronics and their associated warranties has dropped significantly. Furthermore, as technology evolves at a feverish pace, products (especially electronics) often become obsolete before the extended warranty expires. Consumers are keen to these limitations, and dealers themselves have been stung by warranty companies that either do not pay or make the reimbursement process entirely too cumbersome to be effective.
Protection for You and Your Client
As opposed to extended warranties, service contracts protect the customer and the dealer, and legitimately have a place in every installation. Unlike warranties, service contracts can provide dealers a compelling bottom-line enhancement, delivering a steady stream of healthy, recurring revenue that can easily offset declining equipment margins. These serve as customer maintenance agreements and can be similar in many ways to what comes with the purchase of an automobile.
I like to use Lexus as an example. With Lexus, customers pay a premium for their vehicle, and in return, they receive white-glove service that includes preventative maintenance, some prepaid labor hours, discounts, and other valueadded services or amenities. In our world, service contracts are similarly designed to protect a client’s investment by extending the life of the equipment purchased, and operating at its optimal level. What’s more, service contracts provide a means for dealers to establish an ongoing relationship with their clients after the installation. This enables a positive customer experience from the start, and provides many opportunities for future upgrades.
Unfortunately, service contracts are often misunderstood. This is primarily because dealers are unclear as to how a manufacturer’s equipment warranty fits into the service contract picture, and it requires a change in the way that service departments are structured and services are rendered. The upside potential, however, is huge.
Today, dealers typically provide a one-year warranty on installations. This is usually just an extension of the manufacturer’s warranty, with labor also warranted for the same one-year period. The problem with this antiquated model is that manufacturers typically do not cover troubleshooting, repair, or replacement of defective products that are still under warranty (placing the cost entirely on the dealer).
As a dealer, how many times have you been called out to a site to resolve a defective product or do a firmware upgrade? How many times have you been fully (or even partially) reimbursed for the entire cost of that type of service?
The fact of the matter is that the benefits rarely, if ever, outweigh the costs. This model is broken and outdated. To make matters worse, it is costing you and your organization valuable time, money, and resources.
It is a given that the systems we install are complex. They also require a specialist to properly sell, maintain, and support each of the components involved. In a sense, we are no different from Lexus or other car dealerships. Yet, those dealers are still compensated by manufacturers for time spent servicing vehicles, whereas electronic systems integrators typically are not.
Changing Your Business Model
To rectify our current structure, dealers must evolve their standard practices and revise their business models. Service activities must be covered. Some suggestions for this would be to include labor in the initial warranty or to cover workmanship only– charging for time spent on troubleshooting, repair, or replacement services. One could also reduce the new installation warranty on labor to 90 days, then extend it under a service contract, or allow the customer to pay as they go. Regardless, dealers should be tying all of these options back to a service contract, which they and their customer understand and agree to upfront.
Putting all of this into practice is not a difficult exercise. My advice is to start with a very basic service contract package that does not include an extended equipment warranty. This will keep both your costs and the consumer price at a reasonable level. You can then add a few value-added services (e.g., firmware updates or annual inspections) that your customers will appreciate. At a minimum, your service contract should cover these value-added services, and then, let it evolve to include additional options or services provided.
It might be overwhelming to consider overhauling your organization. However, I urge you to consider the cost-benefit analysis regarding warranty versus service work provided to your customers. In most cases, the upside potential for customers and dealers alike is significant, and well worth the effort. Service contracts not only work, they protect and provide. It is that simple.
This article appears in the April 2012 issue of Residential Systems Magazine and was written by Michael Maniscalco is ihiji co-founder and vice president of technical operations. He is also the instructor for the CEDIA University course, Service Contracts with Teeth: How to Create and Sell Service Contracts to Build Your Business.
Custom Retailer IPIQ : The Internet of Things Apr 13
Improve the collective knowledge of the industry by educating yourself
This article recently appeared in Custom Retailer Magazine in April 2012 and was written by Michael Maniscalco, VP of Technology for ihiji.
One can’t help but notice the growth of network-connected systems influencing our industry. A popular example is the Nest Thermostat. While it is an innovative new product that many consider to be a DIY solution, it is also one that a surprising number of integrators are embracing.
Consumers are taking notice, and just yesterday an entrepreneur in Austin came to me asking, “Hey Mike , have you heard of these new temperature sensors from IBM that they use in data centers to allow them to monitor the temperature of individual servers and the environment around them? They’re only a few dollars a piece and I think they’d be great for home brewing. What are your thoughts?”
Now, that’s something I can really appreciate because I not only love a good craft beer, but also because much of my time is spent researching ways that sensors and intelligent equipment affects our industry and our lives, now and in the future.
The technology we’re talking about here is pretty incredible. Five years ago, a thermostat that could be adjusted easily and remotely without having an expensive control system didn’t exist, and an expansive home network was considered cutting edge. Then came networked control processors, and within a year, networked touch panels were abundant.
Next, we saw media servers, networked TVs, Blu-ray players, and now, even your steak can be Wi-Fi-enabled with an iPhone app. Funny as that last example may seem, it was mentioned at a recent CEDIA Discovery Advisory Group meeting as a means to illustrate the abundance of connected devices in the consumer electronics world.
The Technology Pavilion at CEDIA shows us what is coming, and at last year’s event, there was an entire home full of connected appliances and technologies that are clearly going to become ours to install, maintain and support. The Pavilion provides us all a glimpse at new sources of business opportunities and revenues. Based on what was shown in September, it is clear that connectivity will continue to accelerate and drive our businesses. You probably get where I’m going with this. The Internet and these network-enabled devices are taking over everything. They’ll be tracking you and you’ll be tracking down your connected keys from your shiny new iPhone app. to you though?
What Does It All Mean?
It means that it is time to take networking seriously, as this knowledge is now a baseline requirement at every stage of a project, including design, engineering, pre-wire, trim, final and into service. Each member of your technical staff, including your technicians and engineers, must have the proper training. Without it, you endanger the quality of the delivered product and ultimately jeopardize the client experience. Therefore, it is critical that technicians have the right training and tools to troubleshoot and repair the potential problems they will encounter in the field, doing the job right from the start.
Thanks to Custom Retailer Magazine for permission to use this article.
Residential Systems Magazine ihiji Editorial: “Selling Service Contracts with Teeth” Jan 6
The number-one complaint from integrators who are successfully selling service contracts has been that they waited too long to start selling them. As technology continues to evolve at a manic pace, it is up to you to find effective ways to service each of the components you install and integrate in order to ensure reliable performance. Service contracts provide not only the means to secure an ongoing relationship with your client, but they also proactively protect their investment.
Some of your clients will immediately embrace your service contract option, some will ask for changes, and others will pass altogether. This is normal and to be expected as one single package will rarely meet the needs of all clients. Learn from the feedback received during the sales process, and then tweak your offering accordingly.
At First, Start Small. A basic service contract is relatively simple to put together, and can include a simple checklist of items that can save you time and money while providing real value to your customers. Some examples for this could include services such as an annual twohour inspection and basic calibration, an hour of firmware upgrades, a VIP call in line, access to remote support and service, or a basic remote monitoring solution. Once established, you can gather feedback from clients and utilize it to build a more robust service contract over time.
Know Your Service Costs. Even a basic service contract structure requires a thorough understanding of associated service costs, which is a healthy exercise for any organization to go through. Once costs have been determined, you can establish the services you intend to offer, and calculate your desired margin and the prices you will need to charge for each service tier. It is not uncommon for an integrator’s base service contract program to be based on a fixed price while their higher-end contract is based on a percentage of the total system package price.
Create a Name for Your Contract. Not surprisingly, titles are important. Thus, many integrators have found that they have had greater adoption rates when calling the service or maintenance contract something similar to a “Preferred Client Care Program.” This provides the client with a sense of protection and security. Be careful, however, not to employ excessive fear tactics. Instead, simply illustrate the benefits and costs savings, and you will have far greater success.
Marketing, Training, and Roll Out. Finally, create compelling marketing material, train your sales staff, and roll out the program to your customers. Be sure to present these new services to your previous customers and those with whom you have not interacted with recently. Review the equipment they have, make suggestions for upgrades, and perhaps add remote monitoring and support that provides insight into the connected equipment’s health and status. Take advantage of the opportunity to show them something new, to assist them with any issues they may be experiencing, and create a new transaction. Show your customers that you care, and you may be pleasantly surprised by their reactions.
Michael Maniscalco (info@ihiji.com), ihiji co-founder and vice president of technical operations, served as one of the principal architects of invision, the company’s cloudbased real-time remote systems monitoring and support solution.
ihiji Custom Retailer Article: “Our Converging World: Owning The Home Network” Dec 21
So, here I am… sitting at my desk, writing this on my laptop, connected to the world via a wireless network, using Google docs, listening to Internet radio, taking phone calls on a Voice over IP (VOIP) phone, and essentially living in a state of complete connectivity. Unbelievably, this level of connectivity (while perhaps excessive for some) will soon mimic that of your typical client. It is already happening and will quickly become the new normal.
You see, the home of the future is destined to be fully connected. We’re already seeing it happen with smart appliances, which are entering the mainstream market as we speak. Society will rely on this constant connectivity more and more, and companies just like yours will be necessary to maintain all of the pieces and parts that ultimately make up the home network. In case you are wondering, this spells nothing but opportunity. However, you, the electronics systems integrator, must ensure that your IPIQ is up to par so that you can properly manage your client’s needs, now and into the future.
An ihiji Rookie’s Guide To The First 10 Yards! Oct 26
An ihiji Rookie’s Guide To The First 10 Yards!
This is the first part of ihiji’s new Dealer Playbook, a resource kit that will help you roll out remote monitoring and support to your company and clients.
Here are a few successful approaches to use when deploying ihiji’s invision to the first 5-10 customers:
- Approach a few friendly clients
- Install in problem installations
- Simply include it on newer installations that are under warranty
From a customer service, scheduling and financial standpoint, any of these scenarios provide an opportunity for dealers to immediately benefit from remote monitoring and support.
Our recommendation is that you start remote monitoring and support with a limited number of critical devices. This approach helps you and your customers get comfortable with the way the system works, helps you keep the initial cost down, and most importantly ensures that the most critical equipment is monitored. By simply installing the ihiji appliance you are automatically providing valuable internet monitoring out of the box which allows you to quickly identify ISP connection or installation problems.
When you are able to better monitor and control the core of the system, the entire stability and performance is enhanced. Here is a quick list of the core critical devices that ihiji recommends dealers begin with.
Network Equipment:
Modem
Router
Managed Switches
Wireless Access Points
Control System Devices:
IP Touch Panels
Control Processors
Power Devices:
UPS
PDU
Media Devices:
Request Servers
Kaleidescape Systems
As you become more familiar with the devices that frequently have problems you can slowly expand on this list. You’ll also find that as your customers become more comfortable with remote monitoring and support that they’ll begin to request monitoring of specific devices.
How Upgrading Network Skills Can Improve Client Service Oct 26
Integrators and their clients can realize time and cost savings from enhanced understanding of network technology.
This is a post that was originally written for as an article Commercial Integrator magazine and is expanded on in an older ihiji blog post on network troubleshooting tools and recommended equipment.
As integrators migrate to business models based on service as opposed to profit margins, their command of networks becomes even more critical.
IP control systems, Wi-Fi-based touch panels and content delivery via the network are becoming standard. Clients demand the latest and greatest, and expect it to function as it did on day one. To keep up with that demand, integrators must keep up with networking tools and technologies.
To ensure the customer experience is not compromised due to equipment malfunction or failure, integrators must utilize the power of network technology and incorporate advanced diagnostics into their technical support offerings. This may seem daunting, but once you understand the basics there are significant and tangible benefits that soon can be realized. For instance, by implementing cloud-based remote monitoring at client sites, integrators receive alerts that aid in the early detection and resolution of client-site issues.
Easily identifying that a malfunctioning projector or touch panel is the result of an accidentally unplugged wireless access point, and then eliminating an unnecessary service call to reset it, creates a much more positive experience for your clients. They’re happy and you potentially saved a bundle; it’s a win-win scenario.
Networking Devices Perform Distinct Functions
We’ll assume that you are using a Windowsbased system (although much of this information is relevant and some of the applications mentioned are available for Macs).
Networks derive their functionality from routers, switches and wireless access points (WAPs). Each of these devices has a unique and distinct function to perform on a network. To understand network functionality best, you must understand how each functions within the environment, how best to configure them in order to maximize their performance, and troubleshoot any issues that occur down the road. Utilizing the right networking equipment will not only improve your client’s overall experience, but your firm’s productivity and profitability. Remember: Face time with clients is good, but being efficient with their time and yours is better.
Routers: These can be thought of as the main brains of the network, ensuring information (data) is properly routed from its originator to its destination. They create a network and serve as the controller, enabling networks and their devices to talk to each other efficiently. Many routers also include services for firewall, Network Address Translation (NAT), Dynamic Host Configuration Protocol (DHCP), Port Forwarding, Dynamic Domain Name Services (Dynamic DNS), and Virtual Local Area Networks (VLAN).
Network Switch: A switch connects network segments, effectively expanding the reach of the network and the number of devices connected to that network. Network switches are both a more common and a more efficient way to expand a network in comparison to older ‘hub’ technology.
Managed Switches: A managed switch is configurable, offering greater flexibility and capacity than an unmanaged switch. They can be monitored and adjusted either locally or remotely, giving integrators the ability to expand their service offering and improve the customer experience. Managed switches also provide for more advanced troubleshooting, such as bandwidth management, port role assignment, and port status, as well as advanced configuration for VLANs.
Unmanaged Switches: Unmanaged switches are more “plug and play” than managed switches but are basically “dumb;” they are neither configurable nor accessible remotely. They are completely “transparent,” typically requiring onsite technician visits to troubleshoot and resolve issues.
Wireless Access Point (WAP): Expanding network access to 802.11 wireless devices, WAPs come in four general varieties; A, B, G and N (each offering different range and speeds). The higher-end WAPs provide expanded features such as Virtual SSIDs, VLAN integration, Auto channel selection, removable antennas, and central controllers.
Additionally, many IP-based power distribution modules exist, allowing integrators to remotely reboot equipment. You also can get creative with relays and a control systems processor for added functionality.
Networking Tools and Terminology
Basic routing, Ethernet, and IP principals are the fundamental building blocks from which solid troubleshooting skills can be established. To stay ahead of the curve, you will need to expand your horizon and add more definitive network administration skills. Become comfortable with the OSI model; OSI layers establish functionality across a network and each stage is essential for any information to be passed through a network. Using these layers, you can easily troubleshoot and pinpoint the exact source of network problems.
Windows comes standard with diagnostic tools that can be run from the command line to assess the status of the network. Here are just a few that you should know about and use as part of your troubleshooting regime:
To access the command line in Windows go to start 1run, type “command,” and hit Enter.
ipconfig: Will display the IP address, subnet, and gateway of the associated computer and each of its interfaces. Ipconfig /all will show DNS information. ipconfig /release or ipconfig /renew will reset the IP connection if it is using a DHCP. ipconfig /? Will display help for the ipconfig command.
Ping: Basic troubleshooting tool to determine if a device is able to communicate over the network. Internally you can ping the local gateway to test LAN connectivity (typically the router). Once LAN connectivity is verified, you can ping DNS servers or your service provider’s gateway to verify Internet connectivity. Two common DNS servers for testing are Verizon 4.2.2.2 or Google 8.8.8.8. Type ping — help for more information on the ping command.
Tracert: Troubleshooting tool that allows you to determine where in the network latency or network outage exist. Trace route will show you the hops across a network to the final destination. Try tracert 8.8.8.8 to see the route to Google’s DNS server from your home or office, through your ISP network, and through the “Big I” Internet.
nslookup: Will look up the IP address for a domain name. Try nslookup to look up Google’s server address.
ihiji is committed to helping dealers increase their knowledge of networking because we feel it is a critical skill for all businesses and technicians. We continue to help create and instruct our own networking essentials webinars, CEDIA University courses, write blog posts, guest editorials and work with our dealers to accomplish this. Please follow us on Twitter and Facebook for the upcoming news and resources.
Sifting Through CEDIA Expo Educational Opportunities Aug 3
ihiji is fully committed to helping dealers obtain the education needed to grow their business and continue to refine their technical skills. In addition to our ihiji trainings for networking and service contracts we also work closely with CEDIA on many of the CEDIA University courses as instructors, subject matter experts and committee participation. Residential Systems recently did an article on how manufacturers such as ihiji and Access Networks contribute to CEDIA University which I’d encourage you to read to learn more about how dealers can also contribute.
We realize sifting through the course catalog for CEDIA Expo can be intimidating so we wanted to pick out a few that revolve around networking, service and support. Here is a short list of courses that we are teaching at Expo, have taught, have contributed content to or think are key to your future success. At the end is a link for registration options and I would encourage you to check out the flat rate education pass that is now offered by CEDIA for only $399 – which, in my honest opinion will pay for itself for years to come.
Networking Skills
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EST233 Networking for Technicians *Hands On
EST243 IP for Technicians *Hands On*
EST253 Wireless Network Technologies *Hands On
EST333 Advanced Networking *Hands On
EST350 Networking & IP Workshop for Integrators *Hands On
ESD065 Fundamentals of Power Over Ethernet (PoE)
ESD070 VLANs and Other Advanced Networking Techniques in the Automated Residence
Other Recommended
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ESCR034 – Service Contracts with Teeth: How to Create and Sell Service Contracts to Build Your Business
EST306 Troubleshooting, Repair, and Preventive Maintenance
ESD029 – New Technologies Update
ESD091 Future Technologies – The Inside Scoop from Silicon Valley
EST012 Telepresence and Video Conferencing Systems
ESD033 Apple, Google, & the Cloud – Content Delivery in the 21st Century Home
ihiji Dealer First Impressions – Will Pisula – Encore Audio Video Jun 13
An ihiji invision first impression video of Will Pisula – Encore Audio Videor in Portland, OR
How You Can Address Client Site Security? Mar 18
ihiji recognizes the need for integrators to properly secure and protect their client networks. By utilizing strong firewalls and VPN solutions, dealers can ensure those sites are as secure as possible. Another concern among some integrators is access control to those networks, especially controlling which employees have access to certain pieces of equipment and keeping logs of that access.
To address these concerns ihiji has formed a new partnership with LastPass, a best-in-class cloud-based password protection andihiji partners with lastpass security user 
account management system (www.lastpass.com). LastPass Enterprise offers true Single Sign On capability to your organization. It allows your users a simple and secure method to login to both websites and applications. It is browser neutral and platform agnostic. Powerful centralized administration tools allow you to manage, control, and audit end user actions. Simply put, LastPass Enterprise is SSO done the right way.
Call us at 888.321.9170 with questions or contact LastPass directly at 703.542.1885.
Why Use a Modern Browser? Mar 13
“Surfing the Web on an old browser can be a lot like running a steam engine along the tracks of a bullet train — it may still work, but it doesn’t take advantage of the speed and security of the new technology.”
ihiji recommends that dealers use a modern browser that has robust support for open standards that our rich web application is developed in. These browsers support multiple operating systems and include Firefox, Chrome, and Safari. Unfortunately Internet Explorer is lagging behind, so if you are using IE we recommend that you check out one of the previous mentioned alternatives. For current dealers who do use Internet Explorer check our extranet for settings that might need to be changed to get the best experience.