Working with the sales channel — is price everything?
Economically speaking, we are in a state of some confusion. While the the global recession seems to be easing, we are facing tough cuts in public spending which are bound to ripple through the whole of the UK business world. Technology is seen as the enabler of more efficient operations, but CFOs are reluctant to authorise capital investments.
So it is not surprising that if you talk to the IT distribution channel in the UK you will hear a lot about aggressive pricing. The temptation is to adopt a pile it high and flog it cheap strategy. I would suggest that is a bad idea.
Long-term business over price deals
There will always be customers looking for volume deals at the best price: that has always been the case and always will. But competing on price is always a risky business: you might win this order but you start again when you pitch for the next, and there is no guarantee down the line you will recover the margin you slashed on this deal.
Perhaps more important, it means that there is no real relationship between the vendor and the customer. Building long-term relationships is the way to secure long-term business, not least because everyone – vendor, distributor and customer – understands the difference between price and value, and sees what that means for the deal.
There is much talk of a seismic shift away from buying point products to system solutions designed around business challenges. I see some evidence of that, but in the main business customers are not yet ready to release their hold on system design and implementation. That means that a good, proactive reseller needs to find other ways of providing advice and service that will be valued.
Demonstrating cost of ownership
Total cost of ownership is a major concern for most buyers, and this is one area where a reseller can provide valuable advice. To take an example, an LG monitor with intelligent adaptive LED backlighting will use perhaps 10 watts less than another screen. The good reseller will develop that argument, showing that if the business has 100 monitors, or 1000, the heat generated by the 10 extra watts consumed by each monitor has to be reduced by the air conditioning, so the potential for significant savings in the energy bill is very real.
Reduced energy consumption is good for green concerns, too. Consumers care about good environmental stewardship, and smart businesses who show the same respect are looked on favourably. Public companies are expected to report on their progress towards better environmental policies, and government bodies should lead by example.
Busy purchasers cannot possibly be expected to keep up with every development in technology, whether it is something as simple as energy saving or as big as a completely new way to tackle a business challenge. If the reseller invests its own time in that knowledge it can move from being a box shifter to becoming a trusted advisor, then the customer will have a reliable source of information on the latest solutions.
Close relationships
For the reseller, a close relationship means not just the opportunity to introduce alternative technologies. It greatly increases the chances of repeat business, without the risk of the customer shopping around for the lowest box price. All it needs is for the reseller to develop a complete understanding of the benefits of its vendors’ products, an appreciation of lifecycle costs rather than sticker pricing, and a desire to get to know the customers and their real business requirements.
As even the government acknowledges that the economy is not going to improve any time soon, manufacturers and the channel have to find new ways of staying profitable. I would suggest that they too ensure that they understand the needs of the customer and the right products and innovative solutions are available, then focus on building relationships. Cost concerns will never go away, but with the rest of the framework in place price need not be everything.
