Supplement Your Portfolio (And Your Revenue) With Service And Support
Providing service and support to your customers could be critical to the future of your business, but don't expect to become an expert overnight.
In April 2001, integrator MTM, Inc. (Madison, WI) received a call from its content management software vendor to announce it was going out of business. As a result, the reseller spent the next year evaluating replacement vendors, training staff to sell and install the new products, and converting customers to the new solution, which they did at no cost. So how did MTM manage to survive to see 2002? According to Jack Arnston, MTM's VP, it was the steady revenue stream it realized from 16 years of emphasizing the value of service and support.
Vendors offering service and support programs or training for their VARs agree with Arnston that service and support generates revenue and provides a competitive edge for resellers. Achieving these goals, however, often requires an investment on the part of the integrator, and building a service and support base isn't going to be accomplished overnight.
Service Generates Revenue Beyond Initial Sale
Obviously the more a VAR offers, the more opportunity it has to generate revenue, and Linda Kolios, service product manager for Bell & Howell Scanners (Lincolnwood, IL), points out that the margin is higher for services than it is for products. Building on that success, a savvy VAR can use that purchase as a starting point for continued revenue opportunities with a customer.
"Service and support offer an ongoing annuity for VARs," agrees Joanne Boyd, director of worldwide marketing, Kodak Service and Support (Rochester, NY). "In addition to that reliable revenue stream, each time a reseller enters a client site is an opportunity to sell some additional product or service." In fact, MTM pays a commission to service people who bring in leads stemming from customer engagements.
Just as many hardware and software vendors help VARs increase sales through marketing materials and end user leads, service and support partners often do the same. "A good service and support partner offers marketing functions such as demand creation through advertising and collateral," advises Boyd. Others list resellers offering their services on corporate Web sites.
As with any sale, the goal is always return business. "The single biggest advantage of offering service and support is fostering long-term relationships and loyalty with customer care to drive more strategic business," says Craig Wallace, VP of Versitec and Cranel Imaging (Columbus, OH). Like any relationship, things won't always go smoothly, but how a VAR handles those challenges is what's important. "Any time a customer experiences problems, those are tough times, but when a VAR stands by the customer, holds his hand, and even gets his own hands dirty, that elevates the relationship to a whole different level."
For the reseller, holding up its end of the relationship isn't profitable every day. In fact, sometimes it can be downright expensive. For example, one of MTM's customers purchased a $30,000 server that quit after several months. There were some difficulties with the manufacturer that slowed repair/replacement of the server, which halted operations at the customer site. MTM bought a new server and moved the customer's operations to that server until the original one was fixed. When everything was said and done, the customer was satisfied, but MTM still had a slightly used server on its hands. "It was well out of the range of anything we had to do," admits Arnston. "But the customer had been working with us for 12 or 13 years. It was our responsibility because it was the right thing to do, and they had been loyal to us."
Still Looking For That Competitive Edge?
"VARs should position service as a main differentiator," advises Boyd. "It gives them the opportunity to put a more unique solution together. A product is a product is a product. Offering service and support as part of the solution makes it unique." So instead of pitching a service contract after the sale as an add-on, integrators should present that expertise from the beginning. "A VAR should present that value-add as early in the sales process as possible to differentiate from competitors," says Boyd.
While service and support can be a strong card to play against other integrators, it is even more important when the competitor is an e-tailer focused on price. "VARs are often brought into deals where they give consultation at the front end, and they don't get the hardware sale," notes Mandy Chubin, VP of marketing for Bell & Howell. "If you're trying to make money in the transactional game, you won't win."
Offering service and support may also help VARs continue to hit their numbers even in organizations that are tightening their belts. "There's a clear correlation between the economy and selling hardware and services," says Chubin. "When there's an economic recession, customers will spend less on installing new equipment, but they will spend money on making sure that what they have is up and running."
Can Your Business Fulfill The Commitment To Service?
As MTM's experience with a defective server illustrates, providing first-rate service can sometimes be expensive. MTM spent $60,000 earlier this year just to upgrade its tracking system. It routinely carries thousands of dollars in parts inventory both in the warehouse and in company vehicles and spends thousands more on training. Then there's the people cost. The average length of employment at MTM is seven years, and finding and keeping good techs is a high priority. Arnston admits that doing so means paying higher than average wages and offering outstanding benefits.
MTM is what vendors refer to as a "self-maintainer," which means it provides everything from answering the first support call to making on-site and off-site repairs. Chubin supports this model, as it provides a stronger revenue stream than partnering with third parties and encourages the customer to view the VAR as an expert. However, that level of commitment requires a capital investment in infrastructure, dispatching, and help desk capabilities, as well as a time commitment in working out the process for providing the services themselves.
But there is a wide continuum between being a self-maintainer and not offering any services at all. For many VARs who are trying to establish a nationwide customer base, partnering may be the only option. "Service and support is only good as long as you're doing it right," warns Wallace. "If you blow it, you will do even more harm to the relationship. It's impossible to do all things well, and many VARs focus on software and consulting to drive those higher rate of return areas and be more profitable. But they still see the value of service, and outsourcing allows them to do that without necessarily having to be there to answer the call."
When choosing a service and support partner, rules of engagement are crucial. "There can be no question that the VAR owns that relationship," emphasizes Boyd. "It's imperative to find someone who complements your business and whom you can trust in managing your client relationships. Service is a complex business infrastructure, but it can be the best investment a VAR will never have to make."
While a VAR can outsource to eliminate the costs associated with that infrastructure or to build a service base while easing into the market, price alone can't be the only factor. "You can always find a cheaper alternative," says Wallace. "The question is whether your customer will be satisfied with it. The few dollars you save could cost you the entire relationship." Wallace points to a situation one Versitec reseller encountered in which the end user was running a catalog order entry operation for faxed or mailed documents. Because of financial implications of potential downtime, that customer insisted on a customized service and support agreement as opposed to a standard one. Just as with products, going home with the sale may require flexible solutions in service, as opposed to a one-size-fits-all contract.
Implementing a service and support strategy and building a reputation takes a tremendous amount of planning, and it won't happen quickly. VARs like MTM, which credits return business for 75% to 80% of its revenue, will attest that supplementing document management solutions with customer care is the best decision they ever made.