Follow these three simple steps to begin profiting from service contract revenue—income that too many VARs leave on the table.
By Scott Herron
October 31, 2012
Nobody wants to leave money on the table, yet that’s exactly what many in the channel do by neglecting the growing opportunity to sell maintenance service contracts. In fact, data suggests that technology companies fail to collect up to 36 percent of the service revenue potentially available to them. Given that service contracts can be attached to nearly all IT products sold, and worldwide IT spending will reach $3.6 trillion in 2012, according to Gartner Inc., that’s a lot of overlooked revenue.
Recognizing the value of the service contract opportunity, more and more vendors and distributors are offering VARs comprehensive programs designed to fuel service sales with mutual customers. They may be onto something, too: Experts say that a properly implemented service contract management program can produce annual sales growth of 40 percent or more.
How can your business grow service sales by 40 percent a year? Here are three guidelines:
- First, communicate to your team that maintenance contracts are a priority, because they promote customer loyalty and can set the stage for more product sales down the road.
- Next, check if your key vendors and distributors offer service contract management programs, which can help you spot untapped service sales opportunities. Taking the time to understand the full mix of maintenance services available from your vendors will also arm you to recommend the most relevant options to your clients.
- Last, study your customers’ buying behavior. Understanding what they buy and when will help you develop product lifecycle management strategies that can lead to new service contract opportunities. For example, if you sold five laptops to a customer in 2009 along with a three-year service contract, you should approach them this year about renewing their contract and maybe buying replacement hardware as well. It all comes down to contacting each customer at the right time with the right information.
The more details you gather about customer transactions up front, the better your ability to capitalize on maintenance contract opportunities later. Collecting transaction data is an ongoing process that may involve integrating information from vendors and distributors with information from your own company’s internal business systems. Ultimately, the goal is to create complete and accurate customer records that can provide the basis for targeted email or phone campaigns designed to drive sales revenues.
Technology can help VARs collect and act on customer information in less time and with less effort. For example, AMS.NET, a solution provider in Livermore, Calif., used Comstor Click to revamp its service sales procedures. Comstor Click is a cloud-based platform that automates service renewals and automatically pushes out quotes for new service orders to customers when their contract approaches expiration. For resellers such as AMS.NET that sell thousands upon thousands of products each year, systems like Comstor Click are critical for eliminating the hassles of tracking expiring contracts and sending manufacturer-approved service renewal quotes in a timely manner.
Without question, service contract sales are a viable annuity stream. To miss out on them is to miss out on a potential windfall for your business. Now more than ever, there’s no reason to leave that money on the table.
SCOTT HERRON is CEO of MaintenanceNet Inc., a thought leader and innovator in channel-focused service contract management, and a pioneer in using cloud-based platforms and revenue automation to change the way manufacturers, distributors, and channel partners address warranty and maintenance sales.