Gravitate Toward Hospitality Sales
This POS (point of sale) VAR is continuing to grow its revenue by tailoring its business to meet the needs of the hospitality market.
Have you ever had one of those days when you say to yourself, “Why am I in this business?” More than likely, all of us have uttered these words under our breath at some point in our careers. And if you’re a VAR who has been selling POS equipment for at least 10 years, you probably have asked yourself this question more than once. Slim hardware margins, Internet competitors, and plug-and-play hardware have all gouged the profits of POS VARs over the last decade. Consequently, growth rates have been low for these VARs. But as POS VAR Information Systems & Supplies, Inc. (ISS) has demonstrated, steady POS sales growth is attainable, even in a vertical market like hospitality, which is saturated with channel competitors.
To the Potter brothers of ISS, POS sales are a family tradition; their father and two of their uncles were POS dealers. “I started selling cash registers for a POS dealer in 1977, and my brother Jim joined me in 1979,” recalls Tom Potter, president of ISS (Jim is VP). “In the late 1980s, everyone was finding a market niche due to the growth of PC-based systems. The grocery market offered the biggest deals, but IBM and NCR controlled it. So, we gravitated toward hospitality, which was the next biggest market.”
In 1991, the Potters decided to capitalize on a portion of the hospitality market they felt was underserved — paper consumables, namely receipt rolls for printers and POS terminals. That’s when they started ISS and essentially left their POS hardware sales behind. And business was good. They were selling $30,000 to $40,000 worth of paper rolls each month. After two years of these sales volumes, ISS had built a portfolio of loyal customers. So loyal, in fact, that those customers began asking ISS to provide POS hardware, too. Suddenly, they were back to being full-service POS VARs. “Over the years, larger competitors entered the paper roll market, and our paper sales leveled off,” Potter says. “We used our POS solutions to grow the company.”
Offer Leases To Spur POS Sales
The hospitality market includes table service restaurants, quick service restaurants, bars/nightclubs, and hotels. For all of those clients, Potter says the owner or CEO is making the purchasing decision, and that the typical sales cycle is six months.
He says table service clients employ a more experienced staff, and thus, have fewer problems with their POS systems. In contrast, quick service restaurants tend to employ younger, less experienced people and have more equipment problems and require more training. “Table service restaurants and nightclubs are the most lucrative kinds of clients for us because they require more terminals and the least amount of service,” adds Potter. Whichever hospitality client ISS deals with, it’s likely a lease is involved for the hardware. Actually, nearly 70% of ISS’ projects include leases. Potter says this percentage is so high because many of his clients don’t have the cash on hand to purchase the equipment they want to make their businesses more profitable. He says since most POS systems have a life span of five to seven years, most of his customers choose five-year leases. These customers also commonly automatically renew their leases with ISS. Potter says he works with a leasing company that isn’t specific to POS equipment.
Service/Support A Must In Hospitality
“To stay competitive in hospitality, you need to be known for your service and support,” Potter explains. “That’s why one of the most important changes we have made recently has been reorganizing our customer service/support department. We organized our support group into project managers and customer support/help desk techs.” ISS has four employees in both of these departments. The customer support manager assigns project managers to a project after a sales rep has turned in an order with a deposit. The project manager first schedules a discovery session with the client and obtains access to the data (e.g. menu items, number of employees) that will need programming services. Security and operational aspects of the system are also discussed at this point. The project manager then begins programming the new system. Once completed, the project manager schedules staff training and support coverage for when the system goes live. “Often, our project managers are more successful than our sales team at selling additional software modules [e.g. gift cards] or other equipment like terminals, since the customer doesn’t view them as sales reps,” Potter says. “In fact, about 50% of our customers end up purchasing an additional POS terminal after a project manager gets involved.”
The customer support/help desk techs provide online, phone, or on-site support. These techs also provide additional on-site training to the ISS project managers. Potter says that since the hardware products his company sells have few problems, his customer support/help desk techs rarely have to go on-site anymore. And since most of the support is done over the phone, ISS now can service customers nationwide, if needed.
Approximately 50% of the company’s clients purchase service contracts. ISS offers the first 60 days of support free and then mails an unsolicited letter outlining the customer’s options for continuing support. Clients that sign up for a service contract can request service and see the status of a current service incident via a secure login portion of ISS’ Web site.
Network With Other Hospitality Suppliers
ISS has two full-time sales reps (in addition to the Potter brothers) dedicated to new business development. The company exhibits at the Northwest Food Show — which is the biggest event in ISS’ region dedicated to hospitality — and smaller trade shows produced by quick-service franchises. At the Northwest Food Show, ISS typically generates 50 leads and closes 6 of them. An added benefit of attending this show, according to Potter, is the opportunity to network with other companies that provide services and equipment other than what ISS offers to hospitality clients. Two examples of these kinds of companies include a manufacturer of kitchen dishwashers and a uniform supplier. Also, Potter is a member of a few local tip groups which hold networking events where local businesses exchange leads. Only one company from each business segment is usually allowed in these meetings. Potter says he often uses these leads to find out about new hospitality clients opening in his market area or existing businesses that have a specific POS need. He also monitors the state liquor control board’s online liquor applications to determine which new restaurants, bars, or nightclubs are opening.
Potter says he had hoped to have a sales growth rate larger than his expected 10% this year, but one of his software developers unexpectedly canceled ISS as a dealer. ISS had been selling the vendor’s software for only 10 months, but had been doing very well. In fact, the Potter brothers were thinking ISS might have been voted the software vendor’s rookie of the year due to its strong sales. However, just a few days before the vendor’s partner conference, ISS received a call explaining the software vendor had restructured its territories. ISS’ territory had been given to a VAR in a neighboring state that had been selling the vendor’s software for years. Suddenly, the Potters had to scramble and sign up with another hospitality software vendor. It was one of those, why-am-I-in-this-business types of days, but it didn’t cause ISS to abandon its hospitality roots or stop looking for a way to grow sales revenue.