Back when I started selling copiers for Lanier I'll never forget when the VP of Sales came into our district office and practically bragged about how we actually loose money by selling hardware and that service is where we make all of our money.
I was fairly young and naive at the time and just figured, well they must know what they're doing since there is this big business built on this idea.
As I've stayed around the industry for a longer period of time it seems to be one of the more universal beliefs...you're going to loose money selling the box and make your money servicing it.
What I couldn't understand back at Lanier, and still think is ridiculous, is why otherwise successful business would intentionally choose to continue a wholly unprofitable line of business! Let me get this straight - you're making 50% margin on your service but losing 10% on your hardware and you believe that this is a solid business model?!?
I've asked the question within my own company (which is hardware driven), and it seems to be something no one has ever considered. It is just accepted that you have to sell the box to be able to service it.
Well, as we all move toward MPS hopefully we can throw that garbage out the door.
How about a new idea? Let your competitors sell the hardware (and lose money in the process) while you service it (and make all the profit).
Can't be done, you say??
Sure it can. Just go call 3 copier dealerships telling them all you want to do is buy a copier without service and watch the rabid dogs come running at you with quotes.
Sooooo, tell me again why I want to sell hardware...
P.S. This was written on Sunday morning. If you see my resume as the next post you will know that this message was not received well by my own organization.
Shawn:
ReplyDeleteNice post, I've been in the business 30 years and don't believe the hype about hardware not making money. It does, however most of it goes towards, support, marketing, salaries and commissions (lol).
I'm not sold on MPS either, I'm running a poll on my blog that tells a story that 50% of MPS providers are either not happy with the profits or wish they would have never gotten into it. That's a big number!
Take a trip to my blog if you can www.mfpsolutions.blogspot.com and maybe even become a member here www.p4photel.com/eve
-=good selling=-
Art
LOL!...well, hopefully your organization remember what the First Amendment is all about.
ReplyDeleteAlso - an interesting but little known fact is how much "back-end rebates" figure.
If the rep sells below stated "cost" - his commissions are effected, but, some manufacturers kick down money based on units moved, on a quarterly basis.
So even though the reps get hosed for touting and towing the company line, and selling below cost, the house remains whole.
Huh.
Art -
ReplyDeleteI don't really buy it, but it always amuses me to hear the BS that management will throw out to their reps.
I would agree with the results of your poll. I would say that MPS has great potential for those who understand how to execute it profitably.
If you just take the copier model and use it for printers you miss most of the potential.
Thanks for reading and commenting. Keep coming back.
ser
Greg -
ReplyDeleteI remember a time when we would get paid spiffs for throwing in a free printer where the spiff was more than the cost of the printer...if you worked your comp plan right.
What is interesting is that on the few deals where I've had a client buy hardware from another source I've maintained greater overall profitability within that deal.
But hey, I don't want to be the one to overturn the applecart. I wouldn't want to take the opportunity away from you.