According to the 2007 CRN Profitability Study, average gross margins for the segment are 18.1 percent, the sixth highest for the 13 areas studied. The average deal size was $14,900, while the category's services-to-product sales ratio remained steady at $2:$1.
"Getting a service/maintenance contract [is key]—and it's not just the hardware, it's the software, too," said Jill Miller, executive vice president at The Digital Signage Group, a Poulsbo, Wash.-based distributor, noting the "lion's share of our opportunities are sold through integrators."
"There are so many managed services we can provide for digital signage—that's where the bulk of the money comes in," said Rich Perry, sales director for the U.S. and Mexico at Mississauga, Ontario-based BTV+.
The survey found the median sales cycle for digital signage was three months. Yet many solution providers experience something different anecdotally and report that they see cycles of 12 months or more.
Contributing to this lengthy time frame is what many resellers cite as the biggest challenge in implementing digital signage: getting the new customer to trust, understand and then transition to this burgeoning technology and form of advertising.
"The retail sector ... they're not used to advertising in the store," Perry said. "I think the overall part, because digital signage involves so many departments within an enterprise—it involves IT, merchandising, finance, a few others probably—getting everyone on the same boat is a time-consuming process. Not that it doesn't happen, it just takes longer."
Miller agrees and acknowledges an average sales cycle of more than eight months. "It really depends on what the [reseller] is going after," she said, adding that some retailers have the tendency to go direct with manufacturers but if they don't, the implementations generally take longer.
Next: Profitability numbers for digital display/signage
According to 52 percent of the solution providers polled for the 2007 CRN Profitability Survey, digital signage has at least a moderate level of importance to their customers' businesses. So what to do when the retail red tape coexists with customer reticence? First and foremost, the solution must involve education before the sale. Perry advises resellers to inform and train the salespeople. Have them explain to the clients what digital signage can do for them because the unknowns create a lot of apprehension.
"Advertising agencies are very comfortable in the [traditional] arena of mass media and print advertising, [and] the media buyers don't necessarily know what their commission will be with digital signage—the CPMs [cost per thousands] have not been defined," Perry said.
In fact, Phil Ferranti, president of The Technology Group, Penfield, N.Y., said he no longer refers to the presales consulting process as a sales cycle.
"I'm calling them education cycles now. It's more educating the customer, talking about ROI [because] nobody has budgets for digital signage ... It's not like you're walking into an IT department that has a budget—it's a whole new medium."
Roadblocks such as these are prompting resellers to seek environments other than retail in which to deploy their solutions.
"Digital signage isn't just customer-facing, it can be employee-facing," Miller said, explaining that the convergence of digital signage with kiosks and POS is leading to more infrastructure adoptions, especially with larger companies.
Webpavement, a software manufacturer for digital signage solutions, sells mostly into education, government, financial and corporate communication verticals.
"We're software developers. We just wanted to develop a system and this is the market [digital signage] that has come to fruition down the road," said Brian Unold, cofounder and head of direct sales at the Alpharetta, Ga.-based company, which also offers installation, maintenance and technical support and averages a sales cycle of only four weeks.
The Technology Group has seen similar growth in these verticals.
"We've had some success in colleges, high schools, corporate messaging and a couple of pilots in [regional] retails," Ferranti said, but contests that it hasn't been a bump-free ride. "If we started doing digital signage only, we wouldn't have made it. Now it's becoming a decent market."
|•Sales Cycle ^||3 months|
|•Services-To-Product Sales Ratio ^||$2:$1|
|•Strategic Importance To Customer*||52%|
|•Time To Recoup Training Investment||4 months|
|Source: 2007 CRN Profitability Surveys
Base: 322 solution providers
*Percentage of solution providers reporting more than moderate level of importance to their customers' businesses (scores of 5-7 on a scale of 1-7)