How To Beat Direct Sellers At Their Own Game

Using resources that are readily available, savvy resellers can duplicate the direct model to beat direct sellers at their own game. At the end of this seminar, you will know how to:
* Use your distributors' build-to-order programs.
* Finetune your own sales effort to "sell direct."
* Determine customer needs to deliver more for less.

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Copyright 1999 The KLA Group. All rights reserved.

A large part of the success of the direct model is its "build-to-order" approach. Customers can call up Dell, or perhaps IBM or Compaq or others who increasingly sell direct, order a computer with a specified list of components, and get a custom-built computer at an off-the-shelf price. But, using resources that are readily available, resellers can duplicate the process to beat direct sellers at their own game. First we will look at how to do that, and secondly, we will discuss the importance of letting customers know you have a competitive build-to-order service.

Resellers can not always build computers to order on their own, but they can use programs offered by distributors like TechData and Ingram. Many resellers either do not know much about these programs or simply do not take advantage of them fully. It is a mistake. Successful resellers interviewed for this article all emphasized the power of these programs.

"We are executing on the same model as Dell only doing it better," says Bob Madden of TimeTrends.

Your first step is to contact distributors and learn everything you can about their build-to-order programs. Once you have the facts about how the program operates, minimum order requirements, quality of product, price, etc, you are ready to "sell direct." Here is an example.

Suppose a customer contacts you with the following requirements and tells you they are considering buying direct from Dell or directly from some other manufacturer to get the best price. They want a number of systems with a configuration including: 500 MHz Pentium III, 128 MB memory, 13 GB hard drive, CD ROM, 56K modem, Iomega internal zip drive, sound card, video card, speakers, 17-inch monitor & keyboard.

First, find out how much flexibility you have in the order. Ask the customer if these are the only acceptable minimum requirements or if a slightly larger configuration (more disk, faster chip, etc.) would be acceptable. Next, discuss the time frame for desired delivery. Finally, contact your distributors and see what they can do to help fill the order. If your distributor can't match the request exactly, but can meet each minimum requirement, you will have a good package to take back to the customer that, perhaps, is even better than the original request. For instance, the distributor might be able to provide a 700 MHz Pentium 3 that is in stock instead of the 500 MHz Pentium 3 at no extra cost. In this way you can please the customer by offering more at the same price. And you use the direct model methodology to do it.

Customer satisfaction with your build-to-order process will depend on three factors - quality of the product, delivery, and competitive price.

Deliver a quality product.
A real frustration for customers of direct sellers can be substitute components. Substitutions don't always bother customers, but here's an example of how it can go badly. A customer who has been happy with a particular computer model orders several more on-line, only to find, upon delivery, that the fax-modems don't work. After hours on the phone with tech support, he learns the manufacturer recently substituted a new fax-modem that is causing software interface problems. Tech support isn't sure what the solution is and has the customer troubleshooting the problem for them. Irritants like this cause Dell, Gateway and other direct model customers to return to the reseller. The customer cannot afford the time to solve the hardware manufacturer%EDs integration problems. To beat the direct model, you must provide a product that works. Point out to customers that not only can you build-to-order, too, but you can test the system when it comes in to make sure all the components work. And you will be there, on-site, if something goes wrong. Other direct model sellers may say they will be there, but you can make sure it happens. That's the value you bring.

Deliver the product within a reasonable time frame.
A customer may need his systems tomorrow or next month. Make sure you know your distributors' requirements so you can deliver the finished product on time. Use your distributor to avoid including back ordered components. Understand your customer's minimum requirements so you know where you may change the configuration. Remember, it's not just the configuration that you want to question regarding minimum requirements. Sometimes even the brand name isn't important. Frequently customers will have two to three top manufacturer choices. Question to be sure and use this to your build-to-order advantage.

Deliver the product for a reasonable price, as defined by the customer. Increased channel efficiencies between the manufacturer, distributor and reseller are helping resellers closely compete on price with the direct model, so you may be able to match or come close to the direct seller's price. While price remains important to customers, it is not the only decision factor. You must be competitive in your price, but matching the direct model is not always necessary.

That said, resellers may wonder if customers care about relationships anymore. The answer is yes, but only if you first meet the above requirements. People like to buy from people they know and trust, but only if they feel they are getting a good value in terms of quality, delivery time and price.

The second part of selling build-to-order is letting customers know, in no uncertain terms, that you offer the program. Resellers tend to use jargon, like "AAP" (Authorized Assembler Program), or "BFT-Authorized" (Build-From-Parts). Rest assured, your customer doesn't know what that means, nor does he generally care. The key to success in build-to-order is to sell the customer on your ability to provide it. He doesn't care what programs you use to do it, only that you can do it.

Tell customers plainly and frequently in all your ads and conversations that you can build their computer to order from parts just as Dell does. If you can match or beat the direct seller's price and delivery timeframe, be aggressive in letting the customer know. Tell them: "If I can give you the same computer at the same or very nearly the same price, wouldn't you rather buy from me--your local representative--who can test it and make it work if you have any problems?"

Emphasize Service
Local resellers thrive on providing service, so sell that to your advantage. Now you know how to beat Dell at their game, don't let them beat you at your game, which is service! Make sure customers get their new systems up and running in good time.

Many unhappy customers of direct sellers will come back to resellers if they can get better service at the same price. Whatever you do, do not burn bridges with price-shopping customers who buy from someone else. If you lose a bid, lose with dignity. Tell the customer you look forward to working together another time. Keep in touch. That customer may very well be back to experience your build-to-order offering.

How do you compete against Dell? Tell Kendra Lee. Take her survey about how VARs are meeting the challenges posed by direct sellers. Your stories could appear as examples in future How To Sell Against Dell seminars in VBU. Click here for the survey.