Business for life, not just for Christmas
The festive season may boost profits, but engendering customer loyalty is the real key to success for VARs, writes Philip White
Retailers and suppliers of all kinds are understandably excitable at this time of year. New customers come out of the woodwork and into shops and online in a frenzy of seasonal spending. But then they go away again until next year. For some businesses – such as Christmas-tree growers or tinsel manufacturers – there is little hope of repeat business in the interim. But for others, customer retention and loyalty are vital for ongoing growth and sustainability.
The IT industry is, to a certain extent, less affected by seasonal peaks and troughs, but the underlying issue of disappearing customers remains the same at any time of year. It is certainly a universal truth that the businesses that fare best from new customers, seasonal or otherwise, are those that manage to convert that initial sale into a longer-term, loyal relationship: one that generates a consistent revenue over time and benefits both customer and supplier.
Looking after existing customers makes demonstrable sense. According to research, it is three times more efficient in terms of time and resources to source business from existing customers instead of new ones. And a customer’s lifetime value is far greater than that of their first purchase.
In the past, the IT industry has been rather liberal in its interpretation of customer loyalty, locking clients into long-term agreements that force, rather than encourage, ongoing relationships.
Fortunately, this strategy has largely fallen out of favour, not least among customers whose demands for more flexible agreements and payment terms have led them, quite rightly, to shy away from deals they perceive as too rigid. Resellers have also discovered the limitations of this approach, having effectively locked themselves into contracts that no longer offer the financial or business benefits that they once did.
These days, the situation is completely different. One of the things we should be increasingly aware of is just how hard resellers of all sizes are working to engender real loyalty among their customers. The finance industry is also doing what it can to help by offering VARs not just access to flexible finance solutions, but also the opportunity to engage customers in truly beneficial arrangements, with real business support, understanding, strategic advice and consultation. Resellers that choose to work with a finance partner in this way find that it really helps to build customer relationships that offer the opportunity for longevity, without either party feeling trapped.
Finance allows resellers to sell scalable solutions that can be upgraded based on evolving technologies and business demands. This avoids them feeling under pressure to sell the most expensive solution in a one-off big deal, or locking customers into a long-term agreement that doesn’t suit anyone. Customers can choose a finance option that allows these upgrades to take place often without the need for extra capital. The reseller still gets paid upfront for the solution, which helps to maintain a stable cashflow and ensure that customer loyalty remains well into the future.
Planning ahead offers customers the flexibility and predictability to grow their IT capacity without disrupting cashflow or demanding capital outlay. For VARs, customer loyalty can bring valuable repeat business, generating additional income and greater financial stability. This allows them to plan for their own growth and development, without having to rely on the Christmas rush.