Distribution Can Make a Huge Difference – Are You?

I’m always shocked at the number of IT distribution companies that have not got a dedicated “renewal business unit” with an appropriate high level executive responsible to help their VARs manage renewals.

If managed well, these teams can add significant revenue and ultimately easily attainable profit to their bottom line. I like to call it “free money”, you just have to know how to ask!

In my 30 years’ experience, there are 3 types of distributors in the world:

1. World Class Distributors backed by systems and people (iasset.com customers of course!)
2. Distributors that know the problem exists but are using systems built for other purposes (eg Spreadsheets, ERP Systems, CRM Systems or as we have seen even a re-badged debt collection system!) to try and “force” them to work on renewals
3. The ones that just don’t care or have abdicated responsibility for it to their vendors

Which one are you?

Regardless of whether you have an existing team in place or you are thinking about creating one, here’s some compelling reasons why you need one and how you can maximize the value they will deliver.

1. Provides focus for a critical revenue stream

Traditionally, renewals has played a smaller role in the overall product profile mix of any company, however with historic economic downturns and the impact of cloud computing, companies are no longer spending at the same rate on new technology and have reverted to extending warranties and renewing maintenance contracts instead.

With a focused renewals team you can build an extremely reliable source of revenue, achieve more 40% of your total revenue and contribute to securing your revenue targets at the beginning of a new financial year or quarter.

2. Uncovers new opportunities for upsell and cross-sell

A critical component of any renewal program is to use “renewal events” to identify and uncover other opportunities for promoting new products and services. These can be straightforward upsell or (Expand) opportunities within the same vendor portfolio and cross-sell (Extend) opportunities which may be across other vendor lines, but would overall be complementary to the existing system-in-use. They may also include your own value-added services, such as training or education seminars. 

3. Ensures you provide a better level of service and support

Standing out against the crowd is critical for distributors which can be achieved by providing exceptional service and support. The very process of driving a renewal to closure indicates you are providing better support since the customer’s product or service contract is always active, which means they can always access technical help when required. In addition, renewals provide an additional avenue to elicit customer feedback as well as a checkpoint on whether you are meeting their service and support expectations.

4. Helps with managing channel relationships and demonstrating value of the distributor

It doesn’t take a rocket scientist to know that renewal opportunities will get lost in most VARs! By providing a frequent need for connecting with them, it helps maintain a healthy relationships, and demonstrates that you value not only your vendors products but also your VAR.

5. Removes distractions from your Sales team

If you’re relying on your front end sales organisation to follow up, it can be a huge distraction for them. Our studies have shown there can be up to 22 steps to complete one renewal through a channel and if the renewal carries only a small margin, you could be wasting your gun sales people on what is largely an administrative function.

Renewal opportunities can also involve complexities with several line items, each one requiring different treatment. As a result, they can be extremely time-consuming to complete.

So in conclusion, which distributor do you want you be?

I thought so. So go build your team, they WILL improve your bottom line by increasing revenue, strengthening your customer relationships and reducing cost.

If you’re interested in reading more, you may like our blog on 5 elements of successful renewals programs.