On the wall of my office hangs a graphic. On it are three words: Price, Quality, Service.

Beneath them, the phrase reads: “Pick Any 2.”

This graphic represents a simplified version of the total value proposition for businesses that consider themselves Value Added Resellers (VAR). I speak of these words to my team, our customers and others in the course of many conversations. Too often it is considered fundamental that you have to sacrifice something to get what you want.

I contend sacrifice is unnecessary. The graphic phrase should read: “Pick all 3.”

I have noticed a trend in our industry over the past several years: we are all a bit uncertain of our identity. I identify it as, “The Law of Diminishing Returns.”

Sell More, Profit Less, Be Happy
First of all, I didn’t make up this law and have no idea who did. I am aware this has become the standard in our business. Our customers want the same (or better) great service, the highest technology and product quality, and they want it CHEAP.

As an industry, we have not only accepted this as rhetoric, we have embraced it, perpetuated it and been obliterated by it.

Obliterated? Yes. Rather than choosing the best (yet often difficult route), we avoid conveying to our customer our total solution has value. We don’t help them understand that in order for them to truly benefit from their technology investment, the elements of price, service, and quality need to be in proportion.

Perhaps some companies have grasped this, but our industry has not. The seemingly ubiquitous reaction I’ve seen, is “let’s just lower our price.” Take the path of least resistance. Sell at extremely low margins (or even at a loss) and think to benefit through volume. This formula does not work in the business of being Value Added. Primarily, this is due to the reality that most of our companies are just not big enough to make up for lost profit by doing greater volume. Something is going to have to suffer.

Related: 7 Inventory Management Apps

Consider the following scenarios. As a VAR, we strive to deliver high-quality, timely and reliable service, at a very low price. Let’s look at each part of the equation.

High Quality: This is representative of best-of-class products, designed by highly-trained and certified design engineers and installed by seasoned installers.

Timely, Reliable Service: This requires a company to have a service department with two critical offerings: wide availability and highly knowledgeable technicians.

Lowest Price: Offering the entire solution at less than a reasonable blended margin (equipment and services).

Bottom line: it’s impossible to deliver this consistently.

The consequence of failing to meet these benchmarks is that the customer, the company, and the industry pay the price for what appeared to be an achievable goal.

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About the author

Daniel L. Newman

Daniel L. Newman, currently serves as CEO of EOS, a new company focused on offering cloud based management solutions for IT and A/V integrators. Newman has spent his entire career in various integration industry roles. Most recently, he was CEO of United Visual where he led all day to day operations for the 60-plus-year-old integrator.

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