Would You Like Maintenance with That?

French fries

Distributors

What Distributors and VARs can learn from McDonald’s

This famous quote (or should I say question) in the McDonald's context is forever instilled in our brains as an example of how the company would strive (and succeed!) to sell us more.

Through the implementation of rigorous processes and standards McDonald's is the case study in consistency. While Ray Kroc is attributed as the visionary of the McDonald's corporateion, in fact it was Fred Turner who instituted the processes and rigour that we've come to associate with the company. As a result of Turner's legacy, regardless of where you are in the world, you can expect that every time you walk into a McDonald's today and you've ordered a hamburger, you'll hear "Would you like fries with that?"

It’s no secret that the adage is a classic case of upsell and an attempt to maximize each and every transaction with a customer.

So, how does this apply to distribution or reselling?

Well, in much the same way McDonald’s applied consistency across its franchises with a standard upsell practice, distributors and VARs can do the same regarding any new product quotes.

In my years of running channel businesses, I have consistently reinforced with my team that regardless of where a new product quote has been sourced, it should not be given to the customer without initial maintenance. Although it’s not always the responsibility of the distributor or VAR to ensure maintenance is quoted, it’s definitely a great way both channel partners can add value to vendors as well as increase their own revenue in the process.

Why is the initial maintenance so important?  

It’s the fries to the burger

There can be more margin in maintenances contract than a new product as maintenance is typically not negotiated as hard as the product. Also consider that based on some analysis we've done, over the Life Time Value (LTV) of the product, maintenance and add-ons can add 15x the initial deal value.  So from a financial point of view, it’s where you’re going to make increased profit.

Lock in future revenue

Another reason it’s so important is that it helps lock in the future maintenance contracts. Since some are purchased with two or three year contracts, locking it in during the initial product sale means you’ve secured the maintenance revenue for the a longer period and reduced the cost of sale as no effort is required to chase the renewal in the extended initial term.

The customer is fully supported

By securing the maintenance upfront, you are helping avoid any issues down the track when the customer requires support. If something goes wrong with the product, at least the customer will be able to phone up the vendor’s support line and receive real-time assistance.

There are countless examples I’ve seen, where the vendor won’t provide support until a contract is issued, which only delays resolution of the issue, and can cause unnecessary drama for both the customer and the vendor.

So, next time you’re preparing that quote for your reseller or end customer, channel your inner Fred Turner and ask “would you like maintenance with that?

Reference: Business Insider

 

Deploying a Renewals Program

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