Like I Said, Get into Service

Opinion: Page (1) of 1 - 09/23/04

Like I Said, Get into Service The Final Sayye by Gary Kayye By Gary Kayye, CTS

Gary Kayye, CTS InfoComm 2004 convinced me that it's already happening -- a few years ahead of schedule.

Virtually everyone has been predicting that a time will come when we will no longer be able to make money selling most ProAV products without selling services along with them. Most of us felt comfortable that that time was still a few years off in the future. But, after InfoComm 2004, it's clear to me that that time is here.

It all started less than half-dozen years ago with the words "street price" being placed on projector press releases -- repositioning the list price. Then, within 14 months, the average dealer margin for selling projectors dropped for most dealers from about 28% to less than 15%. And, now it's well less than 10%.

Now it's happening with Plasmas, LCDs, Electronic Whiteboards, VTC systems and signal routing and distribution gear -- systems gear.

At InfoComm, I met with dealer after dealer who said they've already seen their margins reduce to less than 10% for complete system packages and custom integrated solutions.

But all is not doom and gloom.

The services segment of the ProAV market is flourishing. Expertise in systems design, systems programming and systems installation is where you'll find the Holy Grail. We all know people in each market segment category and they are all making money and growing.

Systems Design: The only segment of the ProAV market to remain virtually unaffected by the economic slowdown, design consultants, are growing and have expanded their businesses into even more services. Once specializing in only meeting rooms and large systems projects, ProAV design consultants not only generate revenue [and profits] from designing systems, but many now perform systems programming, outsourced installation and even outsourced meeting room design. So, if there's an entire segment of the market populated by over 55 different companies all focused specifically on systems design, don't you think there is incredible margin potential there?

Systems Programming: Speaking of design consultants getting into programming, did you know that both AMX and Crestron have over 300 "certified" programmers? Although not as mature as the industry of design consultants, programmers specialize in just programming systems. There's no question this is an art and a science, together. In programming systems, meeting the needs in both simplifying systems usage (ease-of-use) and making all the gear work together are two giant tasks in one. Unlike selling products, this is selling services, which means that it's harder to fall into a pricing trap where you are bidding one company against another.

Systems Installation: About a year ago, a friend of mine here in North Carolina left a dealership he worked at for over 10 years and started his own outsource installation company. Although nervous about doing it, he did it and now he's employing 12 people and says he's making three times the profit his former employer was making - and, ironically, his biggest client is his former company. Installation is the ultimate labor/service intensive job, but no matter how easy they [the manufacturers] make it, it can't install itself.

Look, the point is you really need to more your organization into profitable services as a primary model - rather than a model to support product sales. A simple rule-of-thumb: can your company survive if you did away with your product sales team? In other words, is your business model profitable enough to support your organization on systems design, programming and install?

And what ever happened to rental? Heck, when I first got into the ProAV market, that's how dealers supported the operational costs of their businesses. But, when the systems business first started taking off, it seemed like almost a way to print money and many organizations actually eliminated their rental departments.

Rental is still profitable, by the way.

Gary Kayye, CTS is Chief Visionary at Kayye Consulting, Inc., a Chapel Hill, NC-based marketing consulting firm that serves the ProAV and Home Theater markets. In addition to strategic marketing consulting, Kayye Consulting, Inc. is also a training development company. Gary can be reached via e-mail at gkayye@kayye.com or through his Web site at www.kayye.com.

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Like I Said, Get into Service by DMN Editorial at Sep. 23, 2004 4:35 pm gmt (Rec'd 2)

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