Price or quality P Norstrom_issued
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What’s more important?Price or quality
Pauline NorstromManaging Director, NetVu Limited
Vice President, Dedicated Micros Inc.
British Security Industry Association Chairman of the 2014-July 2016
Immediate past Chairman July 2016-2017
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• Introduction
• Market Commoditisation
• Importance of high quality
• End user needs
• Minimising cost of ownership
• Bridging the gap between
features and benefits
• People, Technology, Process
• Case Study
• Conclusions
• Checklist, references
Contents
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• NetVu Limited is the sister company of Dedicated Micros Inc, Dedicated Micros Malta and AD Aerospace
• Develops, manufactures, sells, supports and warrants all Dedicated Micros products
• Portfolio of specialized Fire and Mobile products
About NetVu
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• Started off in BSIA as elected Chair of BSIA CCTV Section Committee and Technical Committee 10 years ago
• The Association is run by its members, whom otherwise have “day jobs” as Directors and Senior Managers.
• BS8495, Digital Evidence Standard, Privacy Masking Guide, Chip and PIN Guide for Retailers
• First Industry representative on the National CCTV Strategy Board shaping the National CCTV Strategy
• Contributor to BSIA’s Planning, design, installation and operation of CCTV surveillance systems – Code of practice
About the author
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• Driver behind the BSIA research project into the number of UK CCTV cameras and their ownership and use, achieving a raised public profile for all BSIA members...key findings between 4.5m and 6m cameras in the UK predominantly in the private sector.
• Elected Non-Executive Chair of BSIA Board 2014-2016
• Current Immediate past Chair of BSIA Board 2016-2017
About the author
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• It may be obvious to a security solution seller what they see as the value of their products or services.
• Many fail to communicate these benefits effectively.
• Instead feel compelled to compete on price alone.
• Often this is due to a lack of consultation with the end user to establish their needs.
• Many providers do not establish whether there is a cost to the user if they do nothing.
• This presentation aims to help security and safety providers to stand out against their competitors.
Introduction to the topic
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• Lots of companies doing the
same thing with broadly similar
products
• Typically mass market scope
• Few barriers to entry such as
no minimum quality, no
working practices, no standard
of installation, design
• Anyone can do it….
• Very easy for another provider
to undercut on price
Commoditisation?
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• Every product has a life cycle.
• New products are introduced.
• They are tried out by early adopters.
• Then achieve mass appeal followed by a gradual tail off.
• This is a normal and expected cycle.
• Companies overcome; Add features or innovate to solve problems in a new way.
• Have to find ways to be different.
Market Commoditisation
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Market Commoditisation
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• Industry issue is not one of product life cycle alone.
• The entire security market changed after the crash of 2008/9.
• Capital outlay became the primary driving factor in the procurement of what could be still be considered as a grudge purchase by many users.
• Short term thinking and lack of wider view.
• Providers have to work harder to sell value solutions.
• Consultation with end user is imperative in order to establish what the user values and needs to protect, what risks they feel they have.
Market Commoditisation
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• We are discussing security and safety of employees, public, assets and commercial outputs
• Security and safety considerations should not be classed alongside other business procurement tasks
• Directors have a statutory duty and responsibility for the health and safety of their employees and the impact of the business activity on the public and environment
• An assessment of the business risks and vulnerabilities must precede any selection of product or service for the purpose of security and safety
Price or quality?
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• “High quality” may be subjective. One provider may define quality in a different way to the other.
• The user may value quality in different ways.
• If a cheap and expensive product do the same thing, in the eyes of the user, they will need some help from their provider to appreciate why paying more will pay off?
• What else can be achieved? Is it passive?
• What is the life of the system? Renewal cycle?
• Only when things go wrong is a solution put to the test.
Importance of high quality
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• Anyone can sell more cheaply. No need to challenge.
• This is not sustainable for many companies due to cost base, commitment to training and maintenance of high standards and certifications.
• Barriers to entry such as certification serve to assist security providers – fewer competitors.
• Even then if all pitch the same features and quality, the value benefits again may become commoditised.
• The key is to create a tight fit between the end user’s needs and the solution provided.
End user needs
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• Insurance risk assessment?
• Profit driven?
• Efficiency?
• A discussion about what the issues are– What happens if the user does nothing?– Are there any regulatory penalties involved?– What is important to the user.– Holistic view/general business questions.– Understand the sector, understand the customer,
understand the customer’s competitor.
End user needs
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Cost of Ownership
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• Many users may not appreciate the impact of the whole life cost of the system.
• Instead are fixated on outlay.
• What does whole life cost actually mean?
• How do you work out what whole life cost is?
• Are you prepared to do this?
• Why does the user end up paying more when only the capital outlay is considered?
Cost of ownership
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• Why does quality cost more?
• Quality does not always cost more, but typically does – why?
• Investment into the product development incurs cost in time and resource, this is typically charged back to the user over the lifetime of the product or service. Brings benefits. Lessor offerings may not have this investment and are cheaper as a result.
• Support and care during the life of the product incur cost, this is added to the cost of the product, but there is a proportionate benefit.
• Training and development of people costs money
Cost of ownership
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• Why are some providers cheaper than others?
• One size fits all “cookie cut” service.
• Offer less in the basic costings, extra functionality and benefits are all extra.
• Recurring licence costs per year?
• Features claimed but not delivered, copying quality providers terminology to sound like them
• No support and training, warranty.
Cost of ownership
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How to bridge the gap between cost and
benefit?
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• End user needs and operational processes should be discussed in detail.
• If the solution is a product, service or manpower, these elements of the system do not work without a strategic overview of the goals and defined KPIs.
• Tech talk? – how relevant is it when asking the user what the issues are.
• Scope the needs first.
• Then respond with a solution to the problem.
Bridging the gap
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People, Technology, Process
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• People need to use technology and processes in an organised way to achieve the outcomes they require.
• Technology alone does nothing.
• People without technology achieve less.
• People with technology without a clearly defined usage and goal achieve uncertain outcomes.
• All three factors need to be considered.
• Each can carry a unique value.
People, Technology, Process
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• Remote video monitoring quality defined in BS8418, a British standard designed to ensure all areas are considered, detection areas match video coverage .
• Quality system design and installation have a direct effect on false triggers.
• More false triggers means high chance of missing a real incident.
• Cheap systems use non-compliant products and have non-compliant designs.
• Cost of ownership is higher due to the additional resources needed to manage a real incident – so many false alarms
People, Technology, Process
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Case study - Retail Crime
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• Insurance fraud, slip and fall claims an issue in Retail.
• Lone worker issues in 24 hour warehousing and logistics.
• Increases the cost of retailing, pushes up prices, reduces the
safety of employees, reduces the opportunities for employment.
• These are sector issues, each retailer has a different set of
priorities. Best not to assume what they are.
Case study – Retail
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• In 2014 an average of 13,070 incidents of crime per 1000 premises were reported by Retailers in the UK.
• 41 % of total wholesale and retail premises were a victim of crime in 2015 (Home Office Statistics).
• 4.1 million retail offences across the retail industry in 2014-15 (British Retail Consortium).
• £613m of losses were incurred in the sector in 2015.
• Retailers are motivated to prevent these losses by combining the best out of their people, technology and processes.
Case study – Retail
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• A good example of a user who chose quality over and above price is a UK based fast growing bargain retailer.
• You would perhaps expect a retailer in this segment of the market who is expertly qualified in buying at a low price, to do the same with their surveillance and safety monitoring systems.
• Price was not the driving factor as cheaper systems did not help them to achieve their objectives. e.g. centralised evidence retrieval.
• Add back c.2% to the bottom line through effective loss prevention. Runs into tens of millions.
• Key considerations – the issues were discussed first.
Case study
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• Network security issues?
• Trend toward IoT and “everything open”.
• Consumers happy to access device data regardless of the
route, and in return allow providers to collect their data.
• Cheap surveillance equipment may use UPnP to discover
devices, this does mean that anyone can discover them.
• Many cheap devices derived from the consumer market where
everything is open. No specialised development for the security
sector.
• Disaster for a retailer whom has to keep transaction data safe
or face liability in the event of fraud.
Case study
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• Robust evidence trail?
• Retail crime was “in effect” decriminalized, making it harder for
retailers to secure Police prosecutions for petty crimes.
• The design of the store and layout of the CCTV cameras is a
critical part of securing the evidence trail.
• There must be continuous evidence of the alleged criminal
moving through the store with the stolen goods.
• If there is a gap in the footage, a prosecution may not be
secured. Poor cabling, lack of alerts for camera fail?
Case study
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• The video surveillance system design can be used effectively if
this is taken into consideration from the outset.
• Evidence can be difficult to export and store in an appropriate
way which is suitable for replay by law enforcement agencies.
• Standards set out how evidence should be exported and stored
in order to ensure a robust audit trail.
• e.g. Video exported should be proportionate to the media.
• e.g. Only export the video needed.
• Quality Video management products can create “play lists” of
video scenes for playback in court or the evidence suite.
Case study
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Summary of conclusions
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• The case study proves that quality and value won out over and above a cheaper solution with fewer features.
• Consultation was the key to making this successful.
• Clearly defined goals. User’s needs were understood.
• Regular reviews.
• Partnership approach to working.
• Provider becomes trusted advisor rather than just a vendor.
• Discussions elevated above procurement.
Conclusions
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✔ Regular face to face meetings.✔ Simplify tech language and try and relate to the users issues.✔ Understand and define the need not just what you want to sell.✔ Saying your product is good may not resonate if you don’t
understand the issues and express the benefits to the user.✔ Stress the value of service and support and other additional
benefits.✔ When up against price look at the displaced costs which can
increase the cost of ownership.✔ Become a subject matter expert.✔ Obtain certification, NSI, SSAIB, BAFE.✔ Train your employees to be the best at what they do.✔ Join Industry Associations and rub shoulders with the best in
the industry.✔ Demonstrate that your are different, and better
Checklist - actions
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Did we determine what is more important?Price or quality
The user will decide that, and still may go for the “no frills” solution which has few benefits.
Stress the displaced costs over the life of the product, add those to the outlay of the cheap system and see if the user
still wants to cut corners?
If they do, they clearly don’t care enough about preventing loss in their business.
Go and find another customer but be professional when the user comes back.
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• BSIA Best Practice Guides– 62676 grading of security systems (Form 217)– WEEE an installers guide (Form 221)– Installation of IP CCTV systems (Form 235)– Planning, design, installation and operation of CCTV
systems (Form 109)– Integrated security management systems (Form 203)– Lone workers guide (Form 228)– Various CN and alarms guides (Form 279, 275, 276, 327)
• The (Real) Price of Security Solutions– A white paper due to be launched by the BSIA at the
end of September.
Further reading
