Lease-based cost-per-page contracts provide the answer when customers slash capital spending.
Three Key Leasing Advantages
Although the time may be right for lease-based MPS engagements, some solution providers have been slow to seize the opportunity. “Even a lot of managed-services providers don’t pick up on the potential that exists on the printing side. Printing is an unmanaged piece of many infrastructures,” Gall says.
VARs that do understand the benefits of leasing and MPS have a lot to gain:
- Locking down the client
First, contracts that lock down customers for three to five years help stave off competitors hungry for business during a downturn. Solution providers can also build on this close relationship by gathering information about future customer needs. “You’re in the driver’s seat when it comes to replacing hardware,” Gall points out.
- Stead cash flow
Steady cash flow is another advantage. Solution providers may be finding it difficult to collect receivables on time, with payments often stretching beyond 30 days. By contrast, leasing arrangements often include payment terms for five to seven days, which means VARs can avoid tying money up in invoices and inventory. “A lot of solution providers aren’t living on months and months of cash. The need to get paid is a critical part of their business,” Gall says. “If you can improve the payment cycle, it certainly helps in a tenuous economy. And if you extrapolate that out into hundreds of thousands of dollars, that’s real cash in [VARs'] pockets that they can invest in their business.”
- Upselling
Finally, lease arrangements can be parlayed into upselling opportunities. A tight capital budget might induce a customer to shop for low price and choose a modest printer versus a better design costing hundreds of dollars more. But when payments are spread out over years, a relatively low monthly charge can help a solution provider sell a high-end machine, which delivers better performance for only an additional $15 or so per month.”There’s more profitability for the partner and customer satisfaction is going to go up because of the better hardware,” Gall says.
Chain reaction in benefits
Although promising, leasing can also be challenging for solution providers that only know traditional sales models. One of the most fundamental changes VARs face when introducing leasing to customers is how to meet with decision makers with the authority to approve a leasing proposal. Traditional contacts, such as a CIO or facilities manager, typically can’t sign off on these contracts. Abruptly knocking on the door of someone who can—the CFO for example—may not be met with a hearty welcome. Gall advises solution providers to use established IT and facilities contacts to provide the necessary introductions. “Getting into the CFO’s office can be hard so you have to build advocates where you can and then move up the chain,” he explains.
Offering free printing-environment assessments can also open doors. The exercise gives customers a chance to identify new efficiency and cost-savings improvements. The resulting information about print volumes, duty cycles, and redundant or overused equipment can be a gold mine for helping VARs craft sales proposals built with real-world data. “You can say to a customer, ‘This is what you are currently spending and this is how I can save you money,” Gall says. “And by the way, here’s what happens when we use a leasing and cost-per-print structure.”
And during challenging economic times, that’s a message that can grab get the attention of the even the crustiest CFO.
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