Thursday, December 20, 2007

Strategic Planning - Where is the "Value" in VAR?

Every so often, when speaking about strategic planning, I meet folks who describe their business by telling me they are "Value Added Resellers". Now, for people outside of the IT world, a Value Added Reseller (or "VAR" for short) is a company that re-sells equipment, most typically computer and communications equipment. The "value added" part can come from many different sources, although most seem to have to do with installation and technical support.

Value can take on a lot of different forms from being certified with a prestigious vendor, to rapid response, deep inventory or highly trained professionals. The key thing to remember about value is that it should match up with a primary decision making factor for a significant part of your market. Also, remember that some value items - rapid response, for example - may be more valuable to front-line employees at your customer than to their supervisors. This implies that some value sources may make you prone to succeed when selling at one level in an organization - but prone to fail at other levels.

Here's an interesting question for people in the VAR world: can you identify your company's value added? How much of it is simply labor, or specific skills? How hard would it be to replace what you do by going to a competitor? If it's easy, you are in for a tough time, strategically. One of the biggest challenges for any company in business sevice markets is to develop truly distinguishing strategic competecies, and make sure that those competencies are front and center in your customers’ minds.

If your main value added items are common or easily copied, you can bet that you will sooner or later face stiff price competition. The only real remedy is to find ways to set yourself apart from the pack. Unfortunately, actually having better knowledge about how to serve your customers might be the hardest way to compete, because your customers might not have the technical expertise to recognize this value directly. So be sure that – whatever value you do use as a basis of competition – you make the value extremely visible and understandable to your customers. If you fail to do this, you can be sure that someone who isn’t as good as you are can take those customers away simply by having a lower price.

1 comment:

Computer Consulting Kit said...

I would agree that “value” for the clients of good VARs is definitely about benefits. I see a lot of people forgetting that – even though they may be reselling “products” – they are not commodities and need to provide real services as part of anything they are offering that can offer real business solutions to their clients. No matter what, you don’t want to get clients that will be looking for the lowest price – you want those that will be willing to pay the high rates you should command as a provider of professional services! Thanks for the helpful blog entry!