Know Your Place
One records management VAR's decision to focus on departmental installations and refine its sales approach has lowered expenses and increased opportunities.
If you offered a Donnegan Systems, Inc. (Northboro, MA) salesperson an enterprise-wide document management contract for an entire insurance company or other large organization, you might be surprised by the response. Instead of rallying the in-house integration team, he or she would introduce you to another VAR with expertise in enterprise-wide integration. To some, Donnegan's decision to specialize in departmental installations sounds like leaving money on the table, but Dennis Coll, president of Donnegan, says that just the opposite is true. "I'd much rather land 20 deals at $75,000 each than 5 deals at $200,000 each. While we have to secure more contracts, the return is much better, and maintaining smaller contracts is a lot less complicated."
After five years of pursuing - and winning - enterprise installations, Donnegan decided not to take on accounts with more than 100 seats. "It's expensive to provide the level of support an enterprise demands," says Coll. "We wouldn't be in business if we didn't support our departmental customers, but an enterprise operation requires a whole different level of service. For that you need a help desk and 24/7 availability. As a result, you need a larger technical staff and that carries a big price tag. Sometimes we even had to have one employee at the customer site full-time. We found we just couldn't recoup that investment."
For instance, when the system administrators at one national company couldn't identify why Donnegan's enterprise-wide solution wasn't working, technicians spent three days at the site tracing the software conflict. They found that an employee had brought his kids in over the weekend, and they had installed games on the server. "When we tried to collect on that time, which wasn't part of the contract, they refused. As a big company, they felt they could run all over us and even threatened to ruin our reputation. When their maintenance contract came up, we gave it away."
And about that money on the table. Donnegan doesn't leave all of it there. In exchange for the recommendation, it claims a finder's fee based on the level of involvement. A simple reference may result in a fee of only 10% of the total contract, but if there are studies and numerous introductions to make, it could go as high as 20%.
Horizontal Sales Approach Increases Sales Opportunities
The decision to pursue smaller installations has impacted Donnegan's sales technique. With more than a quarter of a century in records management, Donnegan continues to offer traditional services including hard copy storage, microfilm processing, and a service bureau. Those offerings are supplemented with production scanners, document management software from Aquarius Imaging, numerous mass storage options, and even hosted document management through Critical Technologies' FilesOnTheNet. Until about 18 months ago, Donnegan salespeople specialized in a specific aspect of the company's product line. "Because it's so hard to get in front of people at the highest level, it didn't make sense to tell only part of the story," says Coll. "Now a rep goes in and presents our document management expertise - not a departmental solution, or an application, or even digital imaging."
That approach can also increase the value for a customer who is already sold. "Sometimes I would go on a call with a sales rep and mention a service we offered, and the customer's response would be 'I didn't know you had that,'" comments Herb Lyon, Donnegan's VP of sales and marketing. By stressing all the ways of maintaining records, a customized system that crosses multiple technologies could be created. "Most people choose a combination of traditional and digital. It's easier to accept and cuts the expense of backfile conversion. If a company has 300,000 existing documents, the cost of converting all of them to digital could bring the whole deal down."
Lyon admits the transition required some adjustments on the part of the sales team, and not everyone was enthusiastic at first. "They used to think only vertically, and now they have to think horizontally as well. There are no more 'vanilla' presentations and no brochures to fall back on." Though the company hasn't yet worked out the hard numbers, it is already clear the initiative is having a positive impact on the bottom line. Salespeople are gaining enthusiasm as well as they are realizing the financial benefits of having more to offer their clients.
Sell To The Top, Install In The Middle
Donnegan's salespeople may be looking for departmental contracts, but the initial pitch is often made to top-level executives. Since most companies make decisions from the top down, a meeting with the president or VP helps Donnegan assess whether the company is technology-minded. A top exec is also the person who knows which departments are having problems and whether money is available. Not all department heads have power to make large purchases, so cultivating a relationship with one of these individuals may be a waste of time. "If money is budgeted, the sales cycle could be faster, but they rarely budget enough," notes Coll. "What slows down the process much more is the procedure. We come in with a proposal, but in an effort to be fiscally responsible, most give the same time and effort to the proposals of other companies before they come back to us."
Buying Face Time
Since face time is such a valuable commodity, Donnegan spends a significant amount of its resources meeting corporate decision makers. One way that has been successful for Donnegan is seminars. The company often holds these sessions in a rented space in a target market. Letters are sent to prospects identified from Donnegan's own database or from a purchased list from a trade organization or other entity. Those letters are often followed up with phone calls.
"We find that we have the best success when we focus on a specific topic like 'Thinking About Imaging? 10 Things You Need To Know,' rather than just having a general open house," says Coll. The presentations emphasize how to plan and evaluate records management options, rather than products which are demonstrated in the back of the room afterwards. Donnegan has also realized benefits from events targeted at specific vertical markets, such as law enforcement, and how they can benefit from a horizontal approach to record keeping.
At one time, Donnegan attended local business shows to meet potential customers, but that proved unsuccessful. "It's not that I think we're better than anybody else because we offer technology, but we might end up in a booth next to the Frito-Lay distributor," says Coll. "The producers of those shows just don't seem to be going for the same audience we are." Instead, Coll is more likely to send his employees to state library association shows and regional shows in specific verticals like banking.
Regional business journals haven't delivered the desired results either, so Donnegan's marketing messages are generally delivered via the mail. "We're experienced enough to know that 9 times out of 10 a customer isn't ready to buy the first time we make the pitch," comments Coll. "We are constantly working our database to expand relationships with new and existing accounts, even telemarketing when appropriate. Whether it's a message about new products or just a new way of presenting our services, direct mail ensures they remember us when the time comes to buy. This week alone we sent out 5,000 pieces of mail."
It's Not About Fame
The combination of refining its sales approach and focusing on smaller target installations has brought more money to the table for Donnegan. Without enterprise headaches like weekly meetings with feuding bureaucrats and writing seven workflows for an important account that didn't contract for any, Coll says there are fewer expenses eating away at the margins. A showcase enterprise-wide account may be great to brag about, but ego doesn't increase your bottom line.