When home security companies choose to sell contracts, it’s the customers who suffer.
Customers have a history of being dissatisfied with traditional home security companies and the way they do business. Out of eight major home security companies in America, over 50 percent have lower than a B rating with the Better Business Bureau or are not BBB accredited. One reason for customer complaints may be that the companies are selling customer contracts, which has been a common industry practice for years. LiveWatch on the other hand, has a perfect A+ BBB rating, a 5-star Google rating and a 5-star Amazon rating and we’ve never sold a contract.
3 Signs That a Company Sells Customer Contracts
Online reviews of traditional home security companies indicate that many consumers consider their experience to be unsatisfactory. Several major home security companies average one to two-star ratings on Yelp, Yellow Pages and other review sites. LiveWatch works to change that reputation through outstanding customer service and tireless dedication to provide the best products and services. This document will help you understand the consequences and help you understand how to minimize the negative impacts of companies selling customer contracts.
One potential source of customer displeasure is the common industry practice of selling customer contracts to outside organizations. These organizations, such as banks or financial institutions, buy contracts and often outsource service and support to cut costs.
In some cases, this leads to a poor customer experience with more headaches for consumers who thought they had signed a contract with one company, only to find themselves transferred to another without notice. The companies often use cheap, low quality equipment, offer subpar customer support and aren’t invested in a long-term relationship with the customer. To avoid these problems, here are three warning signs of a company that sells customer contracts:
Warning #1: Three to five-year contracts: To sell the contract, the bank or finance company may require a 36 or 60-month term to justify the upfront payment.
Warning #2: “Free” systems: These “free” systems are often subsidized by the upfront payment they receive from the finance company for your contract.
Warning #3: Mandatory credit checks: Another buying requirement from the bank or finance company may be that the contract has a credit score above a certain level.
While our competitors will not discuss their practice of selling contracts, LiveWatch will be the first to attest that we have never once sold a contract.
How Competitors Sell Customer Contracts
Traditional home security companies sell customer contracts because of the substantial financial benefits, despite the negative impact the practice has on customers. Here is how the process of selling your contract works.
Competing security companies and alarm dealers have customers sign contracts ranging from three to five years. These competitors then sell the monitoring contracts to an alarm “dealer program,” bank or finance company. Once these financial organizations purchase the contract, they outsource customer service and support in order to cut costs.
In such cases, the bank or financial institution offers to pay the home security company less than what the contract is worth over the life of the contract. Because these companies can use an upfront payment from a bank—even if it is less than the value of the contract— to invest in aggressive marketing and unscrupulous door-to-door sales, they choose to accept a lump sum payment rather than wait for monthly installments.
The banks or financial organizations may also choose to sell the contracts to investment groups or public funds at a discounted price, for another lump sum payment. The financial institutions can then take the lump sum they also receive and invest it.
Ultimately, this can result in two or more sales to three or four different outside organizations. That means the company that originally signed a customer to a long-term contract can easily become separated from the contract by multiple steps.
How Selling Customer Contracts Hurts Customer Service
Service and support are crucial when customers trust a company with the safety of their family. Selling a customer’s contract can have a very real and noticeable impact on customer service. Once a customer’s contract has been sold, it can be very difficult for him or her to get adequate customer service.
If the customer has a question or would like to change or cancel an order, he or she may be unable to get in contact with the person who sold the system. When companies sell customer contracts to organizations that outsource service, they may be cutting off contact between the customer and the original installer.
Some large home security companies buy contracts from many local home security dealers, and aggregate the contracts. Then, they sell those contracts to a bank or financial institution in order to bring in revenue as quickly as possible.
Financial firms have been buying and selling contracts for a century. The practice is not new, but customers need to consider how it impacts the way service and support are delivered. If a company is willing to sell your contract, it may be a sign that it is not fully committed to delivering great service.
Who Does Not Sell Customer Contracts
LiveWatch values our customers as the most important aspect of our business, which is why we’ve never sold a contract. We work hard to earn our customers’ business and no third party could make us give up that contract. If you sign with LiveWatch, you are our customer from start to finish. No tricks and no manipulative maneuvers.
LiveWatch takes delivering exceptional service a step further with our 12-month contract that renews on a month to month basis. While other companies have to lock you into a 36 or 60-month contract to keep your business, we earn your business back every month with award-winning customer service.
With LiveWatch, you pay for your equipment up front, because we do not use gimmicks like “free” systems. Over the life of the contract, consumers will overpay for a “free” system or it will be subsidized by selling the contract–either way, the consumer loses. The average cost of a system from a traditional home security company adds up to about $4,974, whereas with LiveWatch the total comes out to about $2,124!
Since we believe you will want to stay with us, we do not force you into automatic one to five-year renewals on your contract. Once your 12-month contract is up, you have the option to renew on a monthly basis. And at LiveWatch, we never require credit checks before you sign because we will not sell your contract.
This is how we do business. Make sure to find out where the other guys stand on these issues before you sign anything with them.