by the drop is best for both you and the customer. If by the hour you MUST be upfront with the customer on what it takes to install, program, train, and any followup work performed. ie. by drop you carry the brunt of all work & training and phones calls and emails and return trips to adjust. By the hour you get paid each and every time you do anything. 

I have found BOTH to work out as long as you are upfront with all.  I recently did a install by the hour. 6 ip cams, cable, PoE switch, and wi-fi. I quoted 8 hours total and explained all other scope on the estimate. Customer actually though it would only take 6 hours and told if I finished early I would owe him money. 2 days later I had to bill him for all and he tried to say the total was 8 hours labor. Reviewing the estimate and his email comment corrected the possible conflict. If I had not documented the process from start to finish I would have had to eat the time to be fair to the customer.

As I stated, put everything you are doing on the estimate and then in the note you MUST spell out that the labor is an estimate and additional time will be billed by the hour labor rate specified. I also put in the note that any warranty work is billed at a hourly rate of $xx.xx dollars with a $xx.xx service call fee. The hourly estimate is usually 40% lower than a drop estimate but in the end they always even up. The by the hour bid is best since the customer likes lower numbers and you have a better chance of winning a bid processes.

Cover all your time in the estimate and provide notes in the estimate to ensure that your not eating the profit. Smart Business Owners will allow you to come in weak and then they will work you after you "get'er done". Smart Business Owner will also recognize a seasoned Professional if your upfront. They are not stupid and will try to save on every penny.

FYI...........I divide my equipment costs by .66 to get a decent markup and funding to get backup cams and PoE switches. If your customer wants to compare lower pricing at Costco, tell them to go buy it and you'll install it............put everything on paper. He is responsible, responsible, and responsible and you get paid by the hour. Yes, if you have to read a manual you charge them by the hour to figure it out. The point is, your in business and you want to be able to provide a solid install with solid support. If your spending your dime to do this then your doing it wrong. Your reputation of providing support in a hurry ad having the backup equipment onhand will become your business model that others will heard about. ie. installed a Major Mall Business and they have had 2 service calls in 4 months. PoE switch burned up...............on a Sunday at 8am I had it back up and running no sweat. I had a backup and if not the turn around time was 10 days. ie. called me on Sunday during a Play-Off game. His battery backup died. I troubleshot over the phone with one of his employees and got it back up in minutes. yes the Owner was checking his system. Again, I supported imeiately and had a solution in hand.................always will!