The VAR and the Vendor – why are the relationships often strained?

• Brand tension: The reseller (VAR) brand is usually some type of solution provider and the manufacturer (vendor) has some type of unique technology. To the reseller, the technology is a commodity worth 10%, to the manufacturer the services carry no compensation. Thus, the reseller calls the manufacturer the “vendor” and the manufacturer somehow perceives the term "VAR" as complementary. So back to vendors and VARs.

• Margin tension: VARs are paid on gross profit – all the rep cares about is margin. The average margin on hardware runs around 10%, on software maybe as much as 30%. Acceptable margin on services starts at 50%, perhaps 30% on managed contracts. Great services margin might be 100% or better. Sadly for the vendor, there is no distinction.

• Value Tension: Closely related to the first point, the VAR’s value is wrapped up in quality people, methodology, and unique intellectual capital (at least they claim this is true). The vendor believes their product line is the highlight of the deal. The VAR recognizes there are thousands of “like” VARs – the product offers them no unique differentiation.

• Profit Tension: The VAR makes money on their unique ability to put together a complex solution, the vendor profits when the larger markets adopt their technology broadly across many verticals. The latter requires commoditizing the product – and so the profit is stripped out just as the VAR masters the install process.

• Training Tension: Sales people require ongoing training to compete. Vendors think their products sell themselves making product feature training the ultimate target for all training dollars. The vendors are wrong. On the other hand, some vendors are moving toward solution selling programs and most are just that; programs. They offer little value because they are mass-produced and don’t actually provide sales people with the individualized attention they need to compete.

• Sales tension: VAR sales reps are always complaining about "box pushing" vendor reps. Vendor reps murmur about the inability of the VAR sale force to create new opportunities. The reality is, the business model used by VARs is just the opposite of that used by vendors. Value differentiation, profits, goals, etc. Understanding the two models can make all the difference in the word as you work together.

Don't miss the early registration discount on this...sign up by the end of this week!

Sign up at: http://www.stelzl.us/sales_development_valueprop.asp

Pick the right vendor/VAR partners

If you fall under the VAR category:

• Technology is not the only criteria; in fact it’s not even the first. Don’t let your technical team choose who you represent. It’s a business decision first, then a technical decision.

• Related to the first point – the technology does have to work.

• Make sure they will fund marketing events you design – if not, move on. Marketing events designed by the vendor generally fall short. Don't partner with vendors that won't fund marketing.

• Same as above for sales training. While the vendor may offer more product training than your people have time for, training is only worth doing when it leads to more business.

• Make sure your vendor is focusing their marketing efforts and developments on products that work well and price well in the market you serve. Vendors with a half-hearted interest in SMB should be avoided if you are an SMB player. If you call on the enterprise, don’t bother trying to create inroads for your vendor, who may be trying to get there on your dime.

• Fire Vendors who take deals out from under you.

• Don’t bother with vendors who insist on taking recurring revenue, such as support and renewals, directly.

• If your vendor of choice is passing all of their leads to a nearby competitor, move on. You’ll have greater success with a competitive line of products.

• Pick your vendors based on your solution strategy rather than creating your strategy around your vendor’s needs.

If you are on the Manufacturer side:

No matter how hard you try to be nice, some prospects just won't behave. In my most recent “Mastering Boardroom Presentations" class, I was faced with a rep that called on me 20 years ago. At first I was happy to reconnect, but then it struck me how I had treated him as a vendor (before I moved to this side of the business – about 18 years ago). I had been brainwashed by my peers into believing that somehow sales people were just vendors, and mistreating them was part of our job. Waste their time, make them look stupid and try to squeeze their price down to nothing. Then get them to buy lunch and a round of golf, whether you intend to buy or not. It was part of the corporate culture and we called it "vendor bashing". I’ve since gone back and apologized to just about every sales person that called on me, but this person had been missed. So, I began my workshop with a public confession and apology. I still don’t understand why we did it, but we did, and I sincerely apologized. Next time you are faced with such a customer, assume they don’t know better – it has nothing to do with you personally.

More Opportunities:

Find new episodes of "Raising Entrepreneurs" - that will help you grow your business: http://www.davidstelzl.com - completely updated and now you can also get my House & the Cloud in electronic form for free!

LAST CALL : THE VALUE PROPOSITION WORKSHOP
http://www.stelzl.us/sales_development_valueprop.asp
DATES: Richmond, VA - May 5, 2010
Join a small group of no more than ten to create a winning value proposition message. This workshop has been provided the foundation for many sales people as they position themselves at the top. Sales training methods don't work with a great message - so get on!

SALES MENTOR PROGRAM
http://www.stelzl.us/sales_development_mentor.asp
Schedule on demand
This month only - sign up and get the Teleseminar Series FREE! The first session starts next month, with 9 more productive sessions through the year. Note: there is now a waiting list for the full structured mentored program, call for availability.

TELESEMINAR SERIES: APRIL- HIRING GREAT PEOPLE
http://www.stelzl.us/business_strategy_TeleS.asp
Monthly at 11:30 East Coast Time.
In April we will cover the principles of hiring great people - the biggest investment you make is in people you hire, so find out how to hire great people the first time! If you don't manage people, you'll still want to attend - I show you what you need to be hired or promoted...or to make your self indispensable to your company.

NEW: THE MARKETING STRATEGY WORKSHOP
TBA
NEW DATES: Fall 2010
Learn to market your company and actually build a demand generation program that works. We will do it right here in this workshop - something that takes companies months to learn, you'll build in just 1 1/2 days...let me know if you're interested as we set dates.

Visit us at www.davidstelzl.com

for more information on offerings and workshops: www.stelzl.us

Please pass this on to anyone you know who is working to build a profitable solutions business today. Consider having David Stelzl speak at your next quarterly meeting or customer event. Create a value proposition that positions you as the expert and attracts new clients. Consider hiring a professional coach to accelerate the process.