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Breaking the Code: Maximizing Services Sales Through the Channel

Industry analysts suggest that 50% or more of the potential revenue from service contracts is left on the table through inefficient processes. A key reason is that the resellers' cost of sales for such contracts discourages them from pursuing any but the largest contracts. The manufacturer is left with a tough choice: forego the services revenue which typically brings their highest margins or utilize precious internal resources to boost services sales directly.

Cisco Systems successfully confronted this channel growth paradox head-on in the late 1990s. Determined to help its partners sell service contracts more effectively, Cisco built an online Service Contract Center to streamline the process and capture more services revenue for everyone. Contract revenue increased 60% within the first two years.

Companies looking to solve this challenge today must address three core issues with process and technology:

Managing the installed base. After the initial hardware sales, the sheer number of moves, adds, and changes, and the associated lack of accurate data, inhibit manufacturers and resellers from pursuing renewals effectively. Resellers, typically focused on new deals, are rarely incented to maintain or share updated information on the installed base. Yet manufacturers need updated information to market new services offerings and drive contract renewals through the channel.
Clarifying the range of service offerings. "Complete" service configurations are typically the most cumbersome for resellers to market and sell. Configuring possible permutations—the number of products multiplied by service level, duration, and location—quickly becomes a daunting task. It is also extremely difficult to deliver marketing tools that can help resellers (never mind customers) make sense of the complexity.
Managing contract renewal processes. Resellers cycle endlessly via phone, fax, and e-mail to sort out customer assets, pricing rules, and availability. The most complex tasks are still done manually: contract co-termination, pro-ration of pricing, and approvals for special terms and conditions.

By addressing your resellers' marketing and sales needs, you create a win/win scenario:

Improve visibility. Increase your own visibility into the installed base by providing the ability and incentives to engage resellers and customers in managing installed base information. Offer a simplified, self-service system that makes it easy for both groups to participate. The result is enhanced customer service, improved reseller competitiveness, and increased revenue and profits for the manufacturers and their channel partners.
Simplify service offerings and delivery. Elaborate service offerings may seem attractive from a marketing perspective but can quickly reduce business if your salespeople and channel partners can't internalize and sell them. Make it easy for resellers to quote service. Give them the ability to do "what if" analysis across their installed products. Streamline and automate the quoting process to eliminate multiple iterations.
Automate the most complex processes. Manufacturers have already automated their internal processes; it's time to automate collaborative processes as well. By automating the most complex parts of the service management process (e.g. renewal notification, quote revision, and special approvals), you can lower the cost of sales, help resellers engage customers more effectively, and increase the volume of service contracts renewed. Becoming "easy to do business with" reinforces brand strength with both resellers and customers.

Overcoming the channel growth paradox for services contracts requires thinking from the outside in. Discover the critical pain points for your resellers, and proactively provide solutions. With the right focus, services contract revenue can be a powerful way to capture and retain your resellers' attention and drive substantial, sustainable, and profitable growth for your entire business ecosystem.

—Michael Minard, mminard@encover.com

Michael Minard, an authority on marketing products and services to and through the channel, is vice president of corporate development at Encover, Inc., a provider of software and services that help manufacturers collaborate with their channel partners to maximize revenue from service contracts.

ITSMA E-ZINE readers can order a free copy of Encover's Reseller Snapshot which captures reseller trends and attitudes. Send your name, company name, and title to: info@encover.com and include "ITSMA" in the subject line.

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