The Best Time To Pitch New Products And Services

It used to be that companies thought about buying hardware and software only when they needed to solve a particular business problem, and that tended to happen at irregular intervals. Solving a business problem is still the reason companies purchase technology, but the process has become more regular thanks to a combination of better planning and the prevalence of support contracts.

The sell cycle starts when you make contact with the potential customer to begin selling your product. The buy cycle starts when the customer begins thinking about its needs. Often, the customer's buy cycle starts considerably sooner than the sell cycle as the customer evaluates possible choices. What's more, the buy cycle is frequently triggered by the life cycle.

For instance, a software application or piece of equipment becomes obsolete, or it's no longer supported by the manufacturer. Every time a customer has to spend money on the product, however, a life cycle event occurs. The most obvious example is when a customer is renewing a maintenance or support contract on hardware or software.

Solution providers that can effectively anticipate would-be customers' buy cycles by knowing their product life cycles have the opportunity to focus more on the people who need their products.

Old Approach, New Spin
At least for vendors, life cycle selling isn't exactly a new strategy. Bill Lundell, an analyst at Enterprise Strategy Group, a Milford, Mass.-based analyst firm, points out that the approach goes back to the days of IBM mainframes, when vendors of IBM-compatible equipment tried to time their product introductions to coincide with the life cycles of IBM products.

Today, life cycle selling is taking on a bigger role in VAR strategy because more and more small and midsize customers--prime VAR territory--are purchasing service contracts and maintenance agreements. This increases the opportunities for cycle-based selling because it provides a fixed point in time when the customer has to lay out more money.

"It has to do with sunk cost," says Mike Colesante, president of Terian Solutions, a backup-service solution provider based in Houston. "The status quo is our biggest competitor. Even though our solution is good, it's not good enough to convince [the customer] that the $7,000 they spent a few weeks ago on a new type of drive should be discarded. But when a pending event happens, they're writing a check for new money."

"These [situations] are very clearly low-hanging fruit," says Eran Farajun, executive vice president at Asigra, a vendor of remote backup products and services. "Anytime there's a change in the maintenance status, whether it's a contract up for renewal or a product that's no longer supported, a door is going to get opened. Salespeople love those sorts of things."

NEXT: The science behind refresh cycles.

One reason more companies are buying service contracts is that IT environments have become more complex. That encourages the use of maintenance agreements. It's not unusual for even a small business to have a low-end SAN with a RAID array. Most customers aren't comfortable with support on a per-incident basis for these systems and, encouraged by VARs and vendors that have recognized support and maintenance as major profit centers, they routinely buy contracts.

Also, almost all of a solution provider's sales today are upgrades or replacements. Unless the potential customer is a new business, it's rare to serve a company that doesn't have something already in place.

Increasingly, even small companies understand that computer equipment isn't a one-time purchase. It needs to be upgraded regularly, and that leads more of them to establish policies to replace equipment at regular intervals. According to the Michigan Department of Information Technology, 40 percent of businesses are on a four-year replacement cycle for desktop systems, 30 percent are on a three-year cycle, and the remainder either aren't on a formal cycle or have a cycle longer than four years.

Some organizations, especially government agencies, have formal standards for the life cycle of computer equipment. Most of these are in the range of three to four years, with some organizations establishing shorter life expectancies for equipment such as laptops and systems for power users. The state of Texas, for example, has set a life cycle of two to three years for laptops and four to five years for desktop systems.

Know Your Territory
Fundamentally, the traveling salesmen in "The Music Man" had it right. You've got to know the territory, including both potential customers and companies you're already serving.

"There's nothing rocket science-like about it," Colesante says of life cycle selling. "The key is being in front of customers, either when their solution breaks--which is kind of unpredictable--or when they reach a certain point in the life cycle."

The end of the cycle means that the customer is going to have to spend money. "It's a good time to approach them because the customer has to make a decision," Enterprise Strategy's Lundell says.

The key to a life cycle strategy is knowing a prospect's life cycle. That means knowing when each prospect's existing contract expires. "Is that information easy to get?" Colesante asks. "No. It takes a bunch of phone calls."

When Terian reps call customers, they ask for information on their storage and backup systems, such as what kind of backup system they're using and how much data they're protecting, as well as when the current contracts will expire, Colesante says. "We're always trying to capture what point of the technology cycle they're in," he explains. "We're trying to get those pieces of information. What software are you using? When is your maintenance renewal date? Our goal is to populate our CRM database so we can be in front of them when they're ready to make a buying decision."

Oddly enough, Colesante says, the information is often easier to get from someone other than the decision-makers.

"A lot of times, we get the best information when speaking to a receptionist or systems administrator," he says. "In the case of systems administrators and other technical people, part of the reason is that the decision-makers often don't know the information offhand. The lower-level people who deal directly with the product are more likely to know."

Another potential source of life cycle information is a VAR's Web site. In addition to providing information about the company's products, the site can be a valuable tool for gathering information about the prospects themselves.

Sometimes an information exchange is the best way for a solution provider to go into this situation.

"We're experimenting with giving away a free report as a way of getting more of this [life cycle] information," Colesante says. To get the report, the prospect fills out a simple Web form that gives Terian the information it wants.

NEXT: More ways to tell when an end-of-a-life cycle is approaching.

Of course, the kind of information the prospect is looking at on the VAR's Web site can be telling in and of itself. Someone who's checking out an ROI calculator online, for example, is at least thinking about buying the product.

Other sources of data on customer product life cycles should be explored as well. One place to look is at previous requests for proposals. An RFP often lists the time frame the purchase is supposed to cover, and that's especially true with hardware.

Another fruitful source of information are vendor announcements of increasing support costs for existing product lines or dropping support for old products altogether. Typically, vendors will use support price increases to encourage customers to move up to new products, and that provides savvy resellers with an opportunity.

Farajun says that part of the key to implementing a life cycle strategy is to begin working with the prospect well in advance of the actual expiration date.

For one thing, an early approach helps to build name recognition and facilitates sales contacts. For another, the earlier the VAR makes contact during the buy cycle, the greater the VAR's influence on the buying process. Early contact makes it easier to establish value and influence buying criteria. Since that influence can include in the deal such things as upgrading the customer's requirements, and auxiliary products and services, it can result in a more profitable transaction for the VAR and better meet the customer's needs.

Terian uses a series of direct mailings to keep its name in front of prospective customers during this period. "We try to do three letters within a month," Colesante says. "The goal is to get customers to go to our Web site or accept our call."

The other reason for early contact, Farajun says, is that many customers need to plan upgrades and evaluate new products before reaching a decision. This can take several weeks or several months, and VARs need to plan accordingly.

Making Life Cycle Selling Work For You
Even more than with most sales strategies, life cycle selling depends on information. The VAR has to track customers' and prospects' contract cycles to know when to make the effort. That means not just collecting information but storing it in a useful form as well.

"Get a good CRM system," Farajun advises.

One of the most important things about managing life cycles is to get everyone using the CRM software to store customer and prospect information. "It's important to have them [the sales staff] actually using it," Colesante says. "Having all that information in one place is really one of our most valuable assets."

Even though sales reps may have their own systems, often built around spreadsheets, it's important to get them to enter the information into the VAR's CRM system.

Of course, if you're the one with the existing sales and maintenance contract, you want to protect your customer base from life cycle selling by others. "In Chinese, the word 'crisis' is written with the characters for 'danger' and 'opportunity,'" Farajun says. "There's a danger to the incumbent VAR to lose business. Or there's an opportunity to sell something else."

One defense against cycle-oriented selling by other solution providers is to try to get customers to purchase multiyear agreements. Not only are they usually cheaper on an annual basis, Farajun notes, but they also reduce vulnerability to competitors.

NEXT: 4 quick ways to make the most of life cycle selling.

Four ways to make the most of life cycle selling:

1 Learn your prospect's buying cycle.

2 Use events such as vendor product changes or changes in support conditions to trigger customer contact.

3 Encourage multiyear service and maintenance contracts as a defensive measure to protect your customer base.

4 Consider offering managed service contracts for old customer equipment being repurposed for lower priority uses.