Published In March 2001
Technology is sure to change in the data communications industry. And with that change obviously comes new products, solutions, and installation techniques. However, often overlooked but equally important are the major changes that continue to occur within the realm of contractor-manufacturer relationships. Ever-evolving market dynamics have created an environment in which installer and vendor success depends more than ever before on a close and continuous association. Over the past decade, value-added reseller (VAR) programs (often called extended warranty programs) offered by manufacturers have become increasingly popular, suggesting that when the “right” contractor finds the “right” manufacturer, the two can effectively create a “relationship” for success. What are VAR programs? Typically, VAR programs are customer loyalty programs where designated contractors who are selected by a manufacturer are given special privileges in return for loyal purchasing decisions. The design and function of VAR programs offered today are numerous and varied. Some programs are completely vendor product focused, giving members a vast library of product information and training to secure brand commitment by the member for a specific product. Other programs also offer marketing and sales support, engineering services, training opportunities, industry insight, and even significant cost savings, giving the contractor company the opportunity to build its level of expertise and ultimately its business. Most VAR programs are part of a manufacturer’s warranty program where the VAR member can offer the end-user customer the security that the manufacturer will protect the installed product or solution for a period of time. These warranty programs can be product, solution, application, and/or performance warranties and can vary from just one year to a lifetime, with the typical warranty lasting between 15 to 20 years. These warranty programs have a range of requirements that must be met in order to receive a warranty, some of which include extensive training prerequisites, on-site supervision, and testing and reporting back to the manufacturer in a systematic fashion. While installation training and quality are key components of some VAR programs, in others, sales volume is more critical and watched closely by the manufacturer. Those programs that require training range from a few hours to 10 days per year, and often include both hands-on installation courses and theoretical classes. Volume-based programs require members to meet certain dollar goals with membership benefits directly related to those goals. Membership qualifications run the spectrum as well, with some programs allowing only limited membership by invitation only (primarily to control geographical saturation and to keep memberships to a functional level) and others open to the masses with simple membership criteria. How do VAR programs benefit contractors? Training—The most popular VAR programs revolve around training and certification. In these programs, training is often intensive and ongoing, with updated materials often provided between training sessions. A typical comprehensive training curriculum will cover applications, products, engineering and systems design, as well as installation and maintenance. Sales and marketing support—Sales and marketing tools and expertise are critical to a contractor’s need to promote services and abilities, develop name recognition, and build relationships with clients. Some VAR programs may include a comprehensive joint sales and marketing plan with members including joint press releases, Web site exposure, and special promotions. Engineering support—With rapidly-changing customer environments, a manufacturer may provide expert support in the form of field engineers to assist with individual planning, designing, and installing systems as part of the VAR program. Some programs provide a 24-hour support line to help resolve on-the-job installation problems with little loss of time. Cost incentives—Contractors may receive cost savings or rebates on systems installed in some VAR programs. Other programs offer discounts designed to make the contractor’s job easier, such as discounts on training courses and equipment rentals. How do VAR programs benefit the manufacturer? There is no doubt that VAR programs are equally beneficial for the manufacturer. In addition to creating brand-loyal installation personnel, the contractor will serve as an extension or representative of the manufacturer. There are technical benefits as well. By collecting information in the field, covering a wide variety of installation situations, the contractor can channel viable product-related feedback to the manufacturer. Lyn McCrory, secretary/treasurer of McCrory Electric in Memphis, Tenn., is a VAR contract member and said he is pleased with what he has seen as a result. “Being involved in the VAR program has given us that extra edge that we need,” McCrory said. “The company has grown steadily over the past years, and we have seen numerous benefits from being a VAR contract member, including product information and unlimited technical support.” Another VAR participant, Geoff Newman, president of All Systems Installation, cited many benefits associated with his VAR membership, including reduced training costs, better refresher training, new business referrals, and regular product updates among them. Newman elaborated by saying, “All of the benefits I just mentioned are great, but they hinge on the relationship with the local rep. Good rapport, good service, bad rapport...you get the picture. It can be a challenge sometimes to maintain a relationship with multiple vendors; they all want you to be exclusive. “Our biggest fear is being excluded from responding to an RFQ. As these vendors become active trying to sell to end-user customers, if you don’t have the right certification, you do not get invited to the party. Your focus goes from account control to vendor control.” A third VAR contractor, Paul Silliman, sales manager, NetVersant Solutions, explained, “The VAR programs are business partner relationships between the manufacturers and contractors. The manufacturers forward leads to the contractor and also recommend the contractor to end users. The contractor partners appear on the manufacturers’ Web sites, so we get inquiries from end users and other contractors in other parts of the country that we could not otherwise see. The contractor is part of a network of other contractor/partner VARs across the country, so we can contact other VARs in other parts of the country for installation of a specific manufacturer’s products and know they are qualified to do the installation work properly. With regard to his VAR membership’s specific impact on his business, Silliman explained, “When working with a particular manufacturer on a specific project, with whom we have a VAR relationship, we often receive preferential pricing for that project from the manufacturer. We can also offer the manufacturer’s warranty to the customer that a non-VAR could not offer. If a specific manufacturer’s warranty is specified for a given project, only approved VARs can bid that work. Most manufacturers offer incentives to their VARs based on the purchase of their products. The manufacturers’ training programs offered to the VARs help keep the contractors abreast of the latest technology and standards for our industry.” Shopping and comparing are the contractor’s first steps in the VAR process, and the best places to begin are the manufacturer’s Web sites and local representatives. The “right” VAR program should build strong, lasting relationships between manufacturers, contractors, designers, engineers, and end-users by providing much more than products and installation. The program’s joint efforts will provide overall job quality and customer satisfaction in every aspect of the solution and keep both contractor and manufacturer equally visible to the end-user customer. WATSON is manager of private networks marketing programs and promotions at Corning Cable Systems in Hickory, N.C. For more information, contact Heather McCollough at (828) 323-6905.