Finding answers to pricing questions can be tricky

Monday, March 1, 2004

MANCHESTER, N.H. - One of the biggest challenges Centra-Larm Monitoring ran into when it wanted to offer video monitoring was the question of how much to charge (See related story above).

According to Amanda Hel-mig, the company’s director of sales and marketing, asking around didn’t bring much in the way of answers, so the company was forced to “shop the competition.”

“[Pricing] has such a stigma to it,” she said. “I’m usually pretty good at finding out things like that, so it’s been kind of frustrating.”

Consultant Craig Leiser, president of Kismet Group Ltd., said this should come as no surprise.

“Legally, we cannot discuss pricing structure with another firm or firms, as that is a clear violation of federal antitrust legislation,” he said. “It could be construed as an effort to engage in price-fixing.”

While this could leave companies lost in a sea of numbers as they check out their competition’s prices, Leiser said all is not lost. There are several very basic issues that can be discussed vis-a-vis video monitoring, or any service for that matter. Leiser has devised a list of criteria for companies to investigate as they contemplate the move to video monitoring.

Here are Leiser’s criteria:

1. Cost of operation should include labor (and benefits), facilities, utilities, capital equipment, service agreements for equipment or software, operating software license, administrative overhead, office supplies, etc. Don’t miss anything if there is a cost to it.

2. Are you going to offer any specialized services, such as two-way voice or video monitoring?

3. What is the client mix of the dealers that you serve – residential or commercial?

4. Are there any licensing requirements for the services being rendered in the communities or states being served? Are there security clearance requirements to meet local, client, or federal requirements?

5. Do the owners expect to operate at a profit or are they doing this to assist the industry?

Leiser said once a company has considered each of these points, it can then decide what it wants to charge for its video monitoring service. The result will be a price that is fair to both customer and monitoring company, he said.

“If you know your operating costs, know your customer mix of services, have an expected profit margin for the business and are aware of competitive pricing for similar services, make up a price page that meets those objectives,” he said. “You can be sensitive to volume of accounts, charge for excess activity, offer special services, provide billing services, etc., at a cost to the dealer.”