IT and Business Insights for SMB Solution Providers

The Formula for Service Sales Success

Service revenues provide a steady, high-margin annuity stream. Shouldn't you be registering your service contracts more effectively? By Scott Herron By Admin

What is the formula for service sales success? For most VARs, success equates to a simple annual revenue increase of 5 to 10 percent. This costly miscalculation not only leads to sales complacency, but also causes VARs to miss out on the extraordinary potential that exists in service sales today.

In fact, experts say that warranty and service businesses, if they are properly implemented and managed, should grow exponentially--well beyond 10 percent per year. And, unlike product sales, service revenues provide a steady, high-margin annuity stream.

The road to increased service revenues begins at the initial point of a sale. During the sales transaction process, the most important step any sales organization can take is to ensure that proper registration occurs for both products and their associated service contracts.

Effective registration sets the stage for improved management of service contracts as time passes--up until they are due to expire and ready to be renewed. It also enables VARs to gain insight into the most opportune points in an asset's lifecycle for engaging in technology refresh sales. And, good registration practices will ensure that end customers' IT assets are adequately covered and that notice of impending contract expirations is given in a timely manner. Most important, effective registration makes it possible for the supply chain to be proactive about ensuring that customers' needs are always being met.

With so many advantages to effective registration, it's a surprising fact that, according to our data and experience, only 60 percent of service contracts sold are appropriately registered. As a result of manual data entry and inconsistent and incompliant registration records, there is also a lack of data quality within most registration systems. That amounts to further losses in actionable service renewal and technology refresh opportunities. The result is money left on the table--money that can total hundreds of millions of dollars in lost revenues for some VARs.

Fortunately, a new supply chain movement is now addressing the service management lifecycle challenge. Technology vendors and distributors are teaming up to create Web-based portals that provide VARs with easy access to valuable business intelligence on customer assets and their associated service contracts. How can you take part in this new movement? First, ask your technology vendors and distributors about the types of service contract management initiatives they have in place. Then take action by doing the following:

  • Start measuring your service revenue losses to recognize the opportunity.
  • Measure your current registration rates and gauge where you'd like them to be.
  • Evaluate the quality of your registration data and your processes for capturing that data.
  • Consider your service renewal opportunities. How easy is it for you to renew a contract when it expires?
  • How well are you tracking sales? What else could you sell to existing customers if you knew more about their product and service lifecycles?

If you're a VAR, it's time to start rethinking your formula for service sales success. You owe it to your customers to get a better handle on product and service contract lifecycles, and you owe it to your business. Every chance to effectively reengage with an existing customer creates new sales opportunities. And new sales opportunities always translate into increased revenues.

SCOTT HERRON co-founded MaintenanceNet Inc., a provider of maintenance contract management services, in 2001. He brings 20 years of technology consulting and business management expertise to his position as president and CEO of the company.

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