Article

Geek Squad Santa beats VARs at their own game

Kevin Fogarty, News Director

So how big a role should Santa Claus have in the marketing of information technology? What about in the opening of a brand new market for value-added resellers (VARs)?

Not enough, according to Best Buy, which is hooking up its Geek Squad home-networking and support service with Santa on a five-city tour designed to promote the need for IT services to consumers whose hookups at home can be more complex than any they work with at the office.

The promotion itself has little in the way of technology to go with it.

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An announcement from Best Buy claims Geek Squad had nailed down Santa's holiday IT support business at the North Pole. A slightly southerly group of Geeks will also go out on a tour of shopping malls in Chicago, Los Angeles, New York, San Francisco and Tampa, taking notes on PDAs about the toy requests of the kids who come to see the Santa they're supporting.

Not the kind of thing a reputable and serious VAR would do?

"I don't know," said Jonathan Gaw, an analyst who follows the consumer and home IT market for IDC. "I always through that Best Buy

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was rolling over the VARs."

It's not that the promotion is such a brilliant idea, but it does get Geek Squad out in front of consumers during the season they tend to buy high-definition TVs, home-theater setups, PC and networking equipment that they might need help installing, Gaw said.

"This is a good way to get in front of consumers, but Best Buy doesn't just use Geek Squad to sell services. They use it to sell more boxes as well. If they get somebody to hire Geek Squad to set up a simple home network, it gives them a chance to sell a media center as well," he said.

A recent IDC survey of home Voice over IP use concluded that consumers who buy one network service are likely to buy others, such as data backup, multi-room streaming media, and secure remote access and remote monitoring connections that let homeowners reach their data or security equipment from work.

Traditional VARs have great technology skills and a business acumen demonstrated by "their ability to keep their heads above water despite shrinking margins in a business where they get that continuous pressure, quarter after quarter," according to Roland Graham, co-founder of AVDMedia, Inc. a home-automation and network systems integrator in Chewelah, Wash.

"Coming from the consumer electronics side, where we also have a healthy community of systems integrators and enjoy a healthy product margin for a variety of products, you feel you get a little spoiled by comparison," he said. Graham – who said he has watched several hundred VARs go through classes he offered jointly with Intel Corp. to teach them how to migrate into the consumer market – started out "highly skeptical" of the whole idea, given most VARs' lack of experience mixing tech integration and the intimate environment of the home

"I was pleasantly surprised. Typically they do very well at it once they learn the core differences," he said. "Really the big difference is the customer. In the IT space, oftentimes we're not nearly as used to dealing with the whole house: what the husband or wife wants, the way the kids use [the products]. It can be a challenge because they're very fickle and they change their minds quickly. It can be a headache."

Graham continues to offer one-day classes -- a calendar for which he posts on his blog -- that cover how to adjust a sales pitch, how to avoid pitfalls, and how to find customers through referral networks that might include builders, architects, electricians or landscape architects.

"The homeowner is not picking up the Yellow Pages to pick an integrator to install a home theater system," Graham said. "They're going to go down to Best Buy and get it from the 18-year old salesperson, or they're going to get it the same way they get a doctor or an electrician -- by asking around to see who can make a recommendation."

As consumer electronics and traditional IT products merge, so will the markets for service and support, which will almost certainly have fatter margins than sale of the hardware alone, or even hardware plus simple installation services.

"It's like with Roto Rooter," Gaw said. "They do the simple stuff and make a lot of money at it. But plumbers make a killing."


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