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Pax8 Execs: Solution Providers That Reduce Customer Acquisition Cost Will Boost Valuation, Be More Efficient

Solution providers should look to spend less than $24 for every $1 of new recurring revenue, say executives from the cloud distributor during a session at XChange 2017.

Solution providers can spend less money getting new customers and boost their valuation by embracing modern marketing techniques and driving cross-sell opportunities, according to Pax8 executives.

Rayn Walsh, senior vice president of partners solutions at the Greenwood Village, Colo.-based cloud distributor, said solution providers should look to spend less than $24 for every $1 of new recurring revenue. Leveraging sales and marketing more effectively will enable solution providers to get a better return on their investment, Walsh said.

"If you can get that under $24, the rest of that is gravy," Walsh said during a solution track session Monday at The Channel Company's XChange 2017 conference. "It goes to the bottom line."

[Related: Pax8 Executive: Solution Providers Must Lower Customer Onboarding Costs, Bundle Products To Win In The Cloud]

Reducing customer acquisition cost will enable solution providers to increase their valuation and run a more efficient shop, Walsh said. One of the best ways to do this is by owning a niche, he said, meaning the company must be one of the top three providers in a particular geography, technology or vertical area of focus.

"Long are the days where you can just broadly shoot," Walsh said. "You've got to own something."

Solution providers that don't find themselves in the top three of any category need to rethink their strategy and make it specific enough to own a certain segment of the market, Walsh said.

When it comes to marketing, Walsh said no one is reading long emails anymore that describe a company in great detail. Instead, solution providers should communicate with prospective customers using short blurbs and a call to action.

"That requires that you capture what your secret sauce is in the shortest amount of space," Walsh said. "Be very proscriptive about what it is."

Modern marketing techniques also require that solution providers examine conversion rates, ad tracking and search engine optimization to assess what's working and what's not, Walsh said. The channel should examine how prospects are coming to their company as well, according to Walsh.

"We have a lot of new developments, which means you need to be able to know what's effective and what's not," Walsh said.


Another way solution providers can maximize their return of marketing dollars is having someone dedicated to social media, according to Nick Heddy, Pax8's vice president of sales.

"More are more people are doing research and already have buying decisions made before they look for a resource to get that solution from," Heddy said during the solutions track session.

Once solution providers land a prospect, Heddy recommended having stack design and complementary products ready so that upsell and cross-sell opportunities can be examined at the time of the initial buying decision.

"Once you have already spent the money to acquire that customer, the easiest way to then reduce customer acquisition costs is to sell them something else," Heddy said.

Walsh said it's much easier to sell additional products and services to existing customers that trust you than it is to convince a prospective customer to make its first purchase.

"It's not to be dismissed," Walsh said. "If you're not doing it proactively, you should."

Recurring revenue transactions give solution providers the best path for exponentially grow their business. Walsh said a solution provider selling an additional $1,000 of recurring revenue each month will have brought in $78,000 by the end of the year.

"If you start that recurring revenue stream, the value starts to kick in right away," Walsh said. "If you can repeat this performance, you're increasing the value of your firm."

LinuxCertified has been attempting to expand its line card beyond hardware and services, but has found its customers are hesitant to move data into the cloud due to perceived security risk, according to company President Rajesh Goyal.

The Sunnyvale, Calif.-based company said it needs distribution to help with persuading its customers to move to the cloud and eventually with handling the mechanics of migrating workloads off-premise. Goyal said he's interested in boosting LinuxCertified's valuation by driving more recurring revenue transactions.

"We need to convince customers that cloud is as secure as data in-house," Goyal said.

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