Discover New Sources Of Retail POS Revenue
This ISV (independent software vendor) expects to increase revenue 25% through recurring support income and returns on its marketing efforts.
Bookstores are a specialty retail market you don't often hear VARs talk about. Yet, according to the U.S. Census Bureau report in 2004, there are nearly 11,000 of them in the United States (14,000 if you include college bookstores). Computerworks of Chicago is an ISV specializing in retail POS (point of sale) solutions for bookstores. Of that market, the ISV primarily targets independent bookstores, including Christian and college bookstores. In 1983, Computerworks saw an opportunity in this underserved market and has been creating custom POS software and hardware solutions for the vertical ever since. While most of the ISV's success can be attributed to the sale of its own Booklog software, a considerable portion of its 25% revenue increase in 2007 came from revenue earned via its support offerings and from returns on its marketing and lead generation.
Earn Recurring Revenue With Support
If you're not selling support contracts to your customers, you may be missing a huge opportunity. Jean Fishbeck, president of Computerworks, explains that while her company initially didn't consider support a major source of revenue, the ISV made more than $800,000 in 2007 from recurring support fees alone due to the addition of some large customers. A Computerworks customer initially is given three months of free maintenance when it purchases one of the ISV's Booklog (Windows-based POS and inventory control system designed for booksellers and specialty retailers) software packages. After the three months, the ISV charges $500 a year for single-user store support. Stores with more than one user can purchase support starting at $750 a year, depending on the size of the organization.
Computerworks also earns revenue from offering training services. When customers purchase the ISV's Booklog software package, they receive a complimentary online training session. The ISV has developed 19 different training sessions. Once a customer uses its free sessions, it is able to purchase bundles of four, 1-hour online training sessions for $100. Fishbeck explains that Computerworks uses GoToMeeting and Unlimited Conferencing (at a cost of $390 a month) to deliver the online classes and tutorials. Additionally, the ISV offers on-site training — at a cost of $750 a day, plus expenses — to those customers needing or wanting training in their own operating environment. In 2007, Computerworks earned $86,251 by hosting just over 100 on-line and on-site training sessions.
Finally, Computerworks also earns support revenue in a roundabout way. Part of the ISV's support service includes making proactive courtesy calls. That is, the ISV's sales force schedules at least one call a year to each customer. "The primary purpose of the calls is to ensure that the customer's needs are being taken care of," explains Fishbeck. The follow-up to these calls is done free of charge. However, she reveals that these calls also serve the purpose of generating new business. Frequently, customers are in need of upgrades or services and are either unaware or haven't had the time to call. "For every 20 courtesy calls we make to existing POS customers, one will yield some form of software or hardware upgrade," says Fishbeck. The result equals $33,500 a year in additional sales. "By simply calling our retail POS customers once a year, we're able to make enough money to pay for one of my employees," she adds.
Aggressive Marketing Leads To Increased Retail POS Sales
In addition to making money from support contracts and training sessions, the ISV actively runs marketing and lead generation campaigns. One of the ISV's marketing strategies is to purchase advertisements in magazines with readership matching its target market. "We advertise in the Bookstore Journal [$3,200 per year], the Christian Retailer [$4,600 per year], College Executive magazine [$5,600 per year], and College Store [$3,600 per year]," says Fishbeck. Computerworks runs ads in each of the magazines a couple times a year. "When we were new to the collegiate market, we had to do additional advertising to establish that we were a player. A full-page ad in a magazine makes people know that you're a competitor," says Fishbeck. "In addition, even if you are established, if your competition advertises, you need to advertise to avoid the perception by your target that you've either closed shop or aren't as capable as your competition."
In addition to print advertising, Computerworks' other primary marketing method is direct mailings. The ISV has found success in purchasing lists from associations. For instance, the American Booksellers Association (ABA) sells Computerworks a list of 2,000 contacts for $400. The Christian Booksellers Association (CBA) charges $350 for 1,370 contacts. Interestingly, Computerworks isn't interested in getting the names of the association members. "The retailer members of associations usually have heard about us, seen us at shows, or seen our ad in one of the association magazines," says Fishbeck. It's the people who aren't members, don't go to shows, and probably haven't heard of Computerworks that the ISV targets. "By sending promotional postcard mailings to the purchased lists, we've seen a 40% increase in retail POS systems sold during promotional periods."
When the ISV decided to begin targeting college bookstores for its POS solution, it jumped at the opportunity to sponsor an Internet cafÃ© at CAMEX, the national collegiate retailing show. "Before the show, no one knew who we were," explains Fishbeck. "After the show, most people knew who we were and saw us as a big player, despite the fact that we are a small company. At a cost of $6,000 to sponsor the cafÃ©, we achieved instant credibility." Computerworks went on to sponsor an Internet cafÃ© at the American Booksellers Association (ABA) conference as well. "If you're looking to quickly make a name for yourself, you definitely want to take a look at sponsorship opportunities at events your target market will be attending," says Fishbeck. The ISV also has found great success in buying booth space at trade shows. The ISV attends five national and six regional shows throughout the year. It's at these shows that Computerworks has an opportunity to educate potential customers on its solutions. The investment has paid off. To have booth space at the ABA show this past year cost Computerworks $5,000. "The leads generated from that one show have generated nearly $100,000 in new POS sales," concludes Fishbeck.
It's been a long road for the company that began in 1983 out of Fishbeck's dining room. The ISV seems to have found a formula that works, and its efforts are paying off. Recurring support income and wise marketing investments are aiding in 25% revenue growth; the company expects to reach $3.5 million in sales in 2008.