Big boys after your customers

Toward the back end of last year I received an irate phone call from one of the installation companies that I inspect. They were asking for advice. Apparently, one of their customers, a TV and video shop, had received an un-requested visit from an ADT sales rep who was offering their customer a cheque for £800 cash back if they would dump their alarm company and sign up with ADT. The best of it is that the system is still in the original 12-month guarantee period.

The questions that were fired at me in very quick succession were “Are they allowed to do that?”, “Is it ethical?” and “Is it legal ... can they actually do that and get away with it?”.

I contacted the local ADT office in Leeds and they confirmed that YES it is legal and YES it is ethical. And more to the point, they said they had put the scheme before the DTI and got the go-ahead from them.

THE REASON I’M POOR

From my point of view it may well be legal, but I disagree wholeheartedly about it being ethical. In fact I think the whole idea is totally unethical. But, there again, this is why ADT is rich and I am poor.

Is it just a case of a large company looking for genuine and legitimate ways to expand their business? Or is it a classic example of the big boys trampling all over the smaller ones with no care or concern that they are possibly destroying their livelihood?

I have also to ask: Why has a gigantic company like ADT got to start targeting the smaller businesses? Are they not happy that they are the biggest security company in Britain and probably the rest of the world? To find out I called the ADT head office and spoke to David England, Director of Marketing & Strategy, who confirmed that ADT are no longer waiting for the phone to ring. They have now adopted a policy of targeting the end user directly, very much like the big supermarkets that advertise to the public on TV. After speaking to David I am sure it is not a vendetta against the smaller installers.

For many years now all the big nationals have been steadily losing customers to smaller installers. For the most part this is due to ever increasing prices and poor service. ADT are looking to correct this and offer better deals to the end user. They are setting out to improve levels of service and maintenance in an effort to stop that steady flow of customers out of the door. At the same time they are looking to expand their share of the market.

As well as any new installations (big or small) that come along, ADT are looking to attract any end user with an alarm system that is coming to – or has reached – the end of its contract term. They are then offering their “Double Value” trade-in. The deal on the face of it is a good one, they will take over and up-date an existing system and give the customer a cash-back incentive of twice the amount of their present annual service and maintenance fee. ADT don’t see themselves as the bad guys in this instance. They only see an opening in the market ... and they have vast resources to attack it.

Just to put the cat among the pigeons, at roughly the same time as I first heard of the current ADT marketing strategy, a leaflet dropped through my letterbox. It was from the Office of Fair Trading informing me about the competition act 1998 that comes into force on March 1 this year. The leaflet starts by mentioning that if you fall foul of the act your business could be fined up to ten per cent of its UK turnover.

One of the things the act prohibits is “the abuse of a dominant position”. Although I know that it is not what the OFT has in mind, a great many smaller installers will see the idea of dangling a cash incentive in front of a customer as an abuse of a dominant position. Particularly when, in an effort to compete in an ever-competitive market, the smaller installer has not got the financial resources to fight back.

Today the market, although still growing, has slowed down a great deal. Add to this the fact that there are many thousands more installers all competing for the same work and realisation dawns on us that it is very much the survival of the fittest. I heard someone remark the other day that “every man and his dog thinks they can fit a burglar alarm, and by the look of most of them it’s the dog that fitted them”

More and more companies are fighting for less and less work so it follows that sooner or later someone was going to start poaching. It’s a sort of cannibalism that happens in nature – when there’s not enough food to go round animals start eating each other – and now it has reared it’s head in our industry.

DIFFERENT ENGINEER EVERY TIME

On the face of it, it seems that the big installation companies have got it sewn up: they are large, they have loads of cash and they have a large, trained, sales force out there with only one instruction: Find new customers. On the other hand, all large companies tend to be great lumbering leviathans that bog themselves down with rules and paperwork. They are top heavy with office staff who have to be paid, so the end user soon finds out that prices are rising steeply.

The next thing they discover is that there is no arguing with the guy who turns up to repair the system. For a start it’s a different person every time who, often, has no idea what transpired on the last visit. His answer to this is to refer the end user back to the district office. They in turn, having never visited the site, are left with only one solution, consult the job sheets and the rulebook.

Here we encounter the next problem ... there is a very distinct shortage of good engineers in this industry who can actually solve problems. Larger companies, desperate for engineers, tend to have to take on anyone with a clean driving licence who can hold a screwdriver. It is then all too easy for a poor engineer to hide behind the sheer numbers of other engineers working for the company and the blame goes round like “pass the parcel”. If the last engineer (to hide his own failings) has put the fault down to customer error then the office staff (a totally different department) start sending out the bills ... and we are currently hearing stories of call-out fees approaching the £100 mark.

Trying to persuade someone within this top-heavy organisation that the engineer got it wrong and they shouldn’t have been charged can be a nightmare. Trying to get the bill cancelled and a credit note or a refund brings up a situation where the previous nightmare begins to look like an episode of the Tellytubbies. In the meantime the death-threat reminders from the debt collecting department go on and on.

Finally, enough is enough and the end user decides to go back to using a smaller installer ... and this is where they also fall out with the insurance company that forced them to use a larger company in the first place.

So, after a second look, perhaps now it seems like the smaller companies have the upper hand. They are far cheaper because they have much lower overheads. They are often more caring and more conscientious with the standard of work because it is their own company, or at least they feel it is their own company because they are trusted by the boss to make on-the-spot decisions. The bloke who came to do the survey is the bloke who turned up to fit the system, and it’s the same bloke that comes to sort out the problems.

This is the very same bloke that the customer can tackle if they think they shouldn’t have been charged. Provided that each party can keep his temper then problems get solved to the satisfaction of all concerned – hopefully.

SELLING IS WEAKEST POINT

The only problem with the smaller installer is their lack of sales skills. They get their work via recommendation and keep it by giving good service at reasonable prices. There is no fault in that but when a competent sales rep tackles the end user direct the tables are quickly turned and the small guy loses out.

Having asked around a good selection of companies I discover that this direct approach is becoming widespread and ADT is not the only company doing it. One thing is certain, the little companies are beginning to fight back. As one small installer put it to me “If they approach any one of my customers I will declare an open season and I will go round every one of their systems I see and offer a better service at a lower price”. Another lad said “Yes I have already heard of it, so I wrote to all my communicator customers and asked them to tell me when they were approached. To my surprise three had already received visits. My next step was to get hold of copies of the quotes they received and go through them step by step with the customer. It didn’t take me long to prove that I was far cheaper anyway, even if there is a big fat cheque dangled in front of them”. Another one saw it as an advantage: “Great, now I can unload some of the bad payers and the moaners and groaners”.

One thing is certain, by trying to poach customers the big companies are going to start a very big ball rolling over the weaker companies. But they may well find that the ball does not roll in the direction they desire. When it comes to the survival of the fittest you have to remember that some of the smaller animals have some very sharp teeth, and the dinosaurs became extinct.