There is some truth to generalizations made by the solution provider community that product sales margins are on a declining trend and that it’s too hard to sell product. But, I argue if you identify and drive out the hidden costs in the product sales process, you’ll notice an upward trend of your profitability. In addition, you will recognize an increased opportunity to sell more services and bolt on your managed service offerings.
When I ran my own IT services company, I remember feeling squeezed by the pressure to sell products—despite the high efforts and low profits—just to protect my account influence and business from competitors. I always wanted to be a pure service provider and have my clients buy products elsewhere, usually from someone I partnered with. But deep down, I knew we had to sell products – especially with our services. To become the one-stop shop for our clients, we needed to develop relationships with the manufacturers and distributors and tap into the resources they made available to help my business grow.
After identifying product sales as a primary tactic in our growth and retention strategy, I grappled with how to make it easy to buy and sell products, while remaining focused on selling profitable solutions and managed services to differentiate our business.
The typical product sales process has numerous touch points. Here are just a few:
- Logging into distributor and supplier websites, and calling into your account rep
- Searching for product across distributors, finding the best price and warehouse location
- Building a professional looking quote with profitable pricing, understanding market prices
- Getting the quote to clients and prospects, and following up
- Managing the opportunity and wining the deal
- Buying the product, managing the order, and getting the product where it needs to go
- Implementing and deploying the device
- Making sure you are integrated into the applications you use to run the business
- Collecting payment
One key to generating the most profit dollars is to understand your cost. Your total cost for a product is not simply what you pay to your distributor or supplier. The multitude of touch points in the process and the associated cost of your resource’s time and effort clearly reveal the many hidden costs in the process. Worse yet, these costs are typically difficult to control…and that makes profit planning seem almost impossible.
Take this hypothetical situation and kick-off to the product sales process: your client is hiring a new employee and he asks you to quote the purchase and deployment of a new desktop. You then log into a variety of distributor sites to find the best price and availability. You assemble a quote, and hopefully set it to expire in 15 days. After tracking your client down for the approval, you finally get notified to go ahead with the order, but not until the end of the expiration period.
So, you go through the same product search process again to find the best price, and the best warehouse location to buy the product for your client. After rebuilding the quote, you call and order it from your distributor account rep (or email it). Next, you setup the order and purchase order in your own systems and begin tracking it. You log into your account at the distributor, track the shipping and finally receive the order. Last, you complete your initial setup and deploy the new desktop.
If you are the typical product reseller, you moved this entire process using different tools and various time-intensive, costly resources. The final step is to collect the money, hopefully generating the profits you hoped for.
Automation is the Solution
Consolidating the many touch points of product sales through an automation process is going to reverse the equation, so you spend less effort and gain higher profits.
With automation, that same hypothetical solution might look like this:
- You confirm the best, real-time prices via an aggregated catalog of downloaded price lists from your distributors and other suppliers. Add in your own services and other products to build a complete catalog. Result: It’s easier for you to build a professional looking quote with an aggregated product catalog.
- Email that quote to your client or add it to your overall proposal. Better yet, send them a link to your online storefront to view the quote and approve on the spot. While online, your client can pay by credit card to reduce collection time and help you realize revenue and profit more quickly. Result: It’s easier for your clients to buy from you, and you don’t have to chase them for payment.
- After winning the deal, you source the product and buy it right—based on pricing and availability comparisons by looking at all of your possible distributors and calculating the best shipping price vs. time to deliver—all from a central dashboard. Result: Reduced selling costs become increased profitability.
- A streamlined procurement process has you convert the client’s quote into a sales order to hand off to your internal accounting system. Next, your sales order becomes a purchase order for your distributor. Your automated solution plants the order right into your distributor’s order entry system, or directly emails the order to your rep. Result: Increased productivity means more work completed.
- With your order placed, now easily track it from distribution through shipping in one dashboard application as it drop-ships to you or your client location. Result: More time to spend on higher priority issues in your business.
- Transfer the product and integration work to your service delivery team with a smooth handoff to your professional service automation platform. Result: Work does not fall through the cracks, and you build client loyalty by meeting expectations.
Product sales simplify when you automate the process, consolidate the different touch points into as few applications as possible and reduce the number of resources and the time spent. You reduce the once hidden costs in the process, start confidently selling more products and drive increased service revenue, while maximizing every opportunity to bolt managed services onto each product you sell. And what is the end result? Stickier, deeper and wider relationships with clients, vendors and distributors lead to a healthier, more stable and more profitable business.