How to Promote Business Development Through Vendor Programs China Leasing Summit 2011 June 23,2011...

How to Promote Business Development Through Vendor Programs

China Leasing Summit 2011June 23,2011

Jonathan L. Fales, Senior Managing DirectorThe Alta Group

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Vendor Program Benefits

Why Do Vendor Programs Exist in the First Place?

Client Benefits Vendor Benefits

• Cash flow needs • One-stop shopping for customer

• Additional source of capital • Close larger transactions, faster

• Off-balance sheet financing • Client relationship management

• Avoid capital budgeting process • Higher gross profit per transaction

• Acquire more equipment • Competitive differentiation

• Acquire equipment faster • Facilitate follow-on business

• Prevent equipment obsolescence

• Gain access to key customer decision-makers

• Avoid used equipment disposition

• Better control of used equipment

The Alta Group – China Leasing Summit 2011

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Vendor Program Benefits

Why Do Vendor Programs Exist in the First Place?

Client Benefits Vendor Benefits

• Cash flow needs • One-stop shopping for customer

• Additional source of capital • Close larger transactions, faster

• Off-balance sheet financing • Account control

• Avoid capital budgeting process • Higher gross profit per transaction

• Acquire more equipment • Competitive differentiation

• Acquire equipment faster • Facilitate follow-on business

• Prevent equipment obsolescence

• Gain access to key customer decision-makers

• Avoid used equipment disposition

• Better control of used equipment


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Some Past Breakthroughs…

Office Equipment Manufacturer

•Client needs: Easy way to install and pay for numerous, small pieces of

“out of sight, out of mind” equipment Let vendor take care of maintenance, upgrades on a

regular basis

•Vendor needs: Make it as easy as for its customers to install its equipment Create barrier to entry for its competition Produce ongoing revenue stream


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Solution

Vendor: Pitney Bowes

Solution: Install all of its equipment on a very low-cost, monthly

rental plan Customer “can’t say no” because the price is so low Eliminate purchase as an option Results:

Dominant market share Annuity revenue stream Rentals paid for equipment within approximately 30 months;

average rental lasted in excess of six years Business model has been copied many others – for example,

credit card swipe machines


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Global Office Equipment Manufacturer

•Client needs: Ability to install equipment on a pay per use basis Let vendor take care of equipment maintenance, supplies,

upgrades and equipment cost via a single monthly payment

•Vendor needs: Extremely competitive market – needed differentiation Wanted to improve account control Wanted to control the used equipment market for its

products


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Solution

Vendor: Xerox

Solution Bundled offering included equipment rental, all supplies, all

product maintenance, and upgrades to newer technology as part of the rental agreement

Trained sales force to offer only leasing – wanted to minimize customer purchases

Results: Dominant market share for many years Lease penetration rates in excess of 80% Xerox corporate business model now built around leasing and

annuity income streams


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Vendor: Turf Maintenance Equipment Manufacturer

•Client needs: Inexpensive way to acquire equipment Match the timing of payment for equipment with seasonal

revenue streams

•Vendor needs: Be able to sell equipment 12 months/year – not just “in-

season” Reduce distributor inventories Smooth-out product manufacturing cycles


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Solution

Vendor: Toro

Solution: Promotional offering – “No Pay ‘Till May” Customer can acquire equipment starting December 1,

and make no lease payments until May Results:

Distributors can lower winter inventory levels Toro can produce equipment year-round, rather than shutting

down production lines in late fall and early winter Lease penetration rates increased, giving Toro benefits of

better account control (lock out its competitors) and better control of its used equipment market


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Vendor: Global IT Manufacturer

•Client needs: Stay selectively current with technology – be able to mix

user needs from leasing-edge to average to “trailing-edge” Help with asset management of massive enterprise-wide

PC inventories

•Vendor needs: Differentiate product in a commodity market Make it easy for customers to acquire new technology

when needed Improve gross profit and account control


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Solution

Vendor: IBM

Solution: Promotional offering - “Fleetlease” 3-year lease with right to swap out up to 50% of PCs for

newer technology after 18 months at no penalty Replacement PCs would be put on new lease – “virtuous

circle” IBM handled asset management for client as part of

Fleetlease – asset tracking, customized billing, end of lease notification, assistance with remarketing customer-owned PCs

Results: Several significant competitive wins Increased market share Opened the door for new client opportunities


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Vendor: Large IT Value Added Reseller

•Client needs: Many clients wanted to upgrade to new release of reseller

software, but needed larger servers to do so Industry was in a downturn – most clients had significant

budget issues

•Vendor needs: Upgrade as many clients as possible to new software –

critical to generation of additional revenues Reduce /eliminate support requirements for older software


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Solution

Vendor: Jack Henry (reseller for the trucking industry)

Solution: Developed a customized lease program with vendor partner Vendor had new-generation servers to be announced in 60 days Jack Henry worked with captive lessor to get credit pre-

approvals for 36-48 months leases for over 300 of its largest clients

On announcement day, each of Jack Henry’s pre-approved was given a proposal for a lease which included new equipment and the disposition of its currently-installed equipment (either a buyback or a lease buyout) with disposition costs rolled into the new lease payments

Results: Most successful new product launch ever for Jack Henry Generated then-record revenues for the company


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Making Vendor Programs Work


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Making Vendor Program Work

• What keeps vendor financing programs from working more effectively?


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1. Lack of executive commitment from the vendor


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1. Lack of executive commitment from the vendor2. Lack of understanding and commitment from the vendor

sales executive and team


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sales executive and team3. Poor sales execution: selling leasing at the back-end,

instead of in the beginning as an integrated part of the vendor’s go-to-market model


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4. Poor execution: credit approvals too slow/too few, slow documentation process


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5. Boring offerings


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• Making vendor programs work1. Lack of executive commitment from the vendor

Have an executive sponsor who is committed to the success of the program – will not work without one

Set program goals and review regularly with the sponsor

2. Lack of understanding and commitment from the vendor sales executive and team

3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model


5. Boring offerings


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• Making vendor programs work1. Lack of executive commitment from the vendor2. Lack of understanding and commitment from the vendor

sales executive and team Vendor sales team must sell and support financing They don’t need to become experts – just know enough

to bring in the experts Vendor sales training is important – not 20 minutes at

the end of a sales meeting Sales reps are coin operated – they’ll need some type of

incentive

3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model


5. Boring offeringsThe Alta Group – China Leasing Summit 2011

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instead of in the beginning as an integrated part of the vendor’s go-to-market model Usually done as last recourse, after full purchase

discount has already been given away Reps need to learn how to wrap financing into the way

they sell – can do this through vendor sales training Results: higher gross margins, ongoing revenues,

account control


5. Boring offerings


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4. Poor execution: credit approvals too slow/too few, slow documentation process Vendor programs should have service level agreements

in place Regular reviews – monthly, annually – and closed-loop

process for fixing problems

5. Boring offerings


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• Making vendor programs work1. Lack of executive commitment from the vendor2. Lack of understanding and commitment from the vendor sales

executive and team3. Poor sales execution: selling leasing at the back-end, instead

of in the beginning as an integrated part of the vendor’s go-to-market model


5. Boring offerings Core offerings are an important base – full payout, etc.

But… Sexy offerings sell – 0% financing, “No Pay ‘Till May”,

Fleetlease Be creative!! Use financial engineering to construct an

offering that matches your client’s needs with a unique financing structure

Sexy offerings mean success and…The Alta Group – China Leasing Summit 2011

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Thank you!谢谢 !

Jonathan L. FalesPrincipal, The Alta Group

[email protected]


How to Promote Business Development Through Vendor Programs China Leasing Summit 2011 June 23,2011...

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