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Five ways to build customer loyalty

Take advice from a channel expert on how value-added resellers (VARs) can build customer loyalty. From choosing the right manufacturers, to fixing mistakes, to offering managed services, this column will help you gain loyalty and keep it going strong.

The security channel continues to evolve, and like every life form that has come before us, you either adapt or you die. Unfortunately many security VARs will die because adapting is hard. But it doesn't have to be that way. Customers are your lifeblood -- treat them well and you'll prosper. Don't treat them well and you won't. Simple enough, right?

Simple to say, but hard to do. Why? Because there are always demands that drive us to do things that may not be in the best interest of our customers. In one way or another, many VARs opt to take the money that manufacturers throw their way, regardless of what's right for the customer.

Remember, most manufacturers don't care about your customers. They pay the requisite lip service, but then they hit and run. They try to sell some gear, get some lift and get acquired by Cisco or Symantec. It's scary, but that is a realistic business model nowadays. And guess who is left holding the bag? Right. You and your grumpy customer.

So how do you avoid this situation? Though these five tips are mostly common sense, it takes focus and commitment to make them part of your corporate culture and to live them every day. These ideals may result in short term pain, but will provide long term gain. Kind of like exercise.

  1. Walk away from deals
    A great way to gain credibility with your customers is to NOT sell them something. If they don't need it, don't sell it to them -- EVEN IF THEY WANT TO BUY IT. I don't care how attractive the sales performance incentive fund (SPIF) is, or how much pressure your channel rep is applying to move product. If you sell a product a customer doesn't need, you'd better enjoy that order -- it's probably the last one you'll get from that customer.

  2. Fire some manufacturers
    Manufacturers change, and so do you. In some cases, the two of you grow in different directions. If that's the case, fire them. There is nothing wrong with pruning your line card a couple of times a year. Make sure you are bringing the right products to market. Focus on those products, be experts on those products. Don't waste time with other products that don't add value to your customers.

  3. Make it right
    Everyone makes mistakes, so learn to expect them, and make it right when something goes haywire. Even if it means you eat some profit by giving away product or services to fix the situation, so be it. Remember: a grumpy customer can do significant damage because bad news travels fast.

  4. Leave the margin on the table
    The economics of the channel are changing. With rare exceptions, the days of 50% margins are gone. Channel folks are continually squeezed by manufacturers and distributors. And customers expect to pay less, not more. Loyal customers stay loyal because you help them achieve their goals. Leave your margin on the table and position yourself as a strategic advisor. Charge the customer a retainer for "advisory" services and do implementation work on a tightly-scoped project basis. Business is going in that direction anyway, so why not lead the pack instead of letting yourself be dragged kicking and screaming to this services-based model?

  5. Build annuities
    There is nothing like getting a check from all of your customers every month. You can't do that with products, but you can with managed services. Figure out what you can do for your customers every month and give it to them. Maybe you can consider reselling someone else's services, or buying some equipment to support the business yourself. Managed services are riskier because you have to deal with the customer every month, but it's better to stay fesh in their minds.

Of course, most of these just seem like "doing the right thing," which they are. Try to do the right thing every day, and the rest will work itself out. It's funny how that happens. But I'm not done yet, here is one more for good measure.

  1. Listen
    So many sales folks (in both the channel and manufacturer roles) don't listen. They talk, they sell, and they push their own agenda. Do yourself a favor and let your customers talk. You build loyalty by helping customers achieve their goals, and your customers have the answers about how you can help them achieve their goals, if only you would pay attention. You can't pay attention if you are always talking.

So that's it. Doesn't seem that hard, now does it?

About the author
Mike Rothman is president and principal analyst of Security Incite, an industry analyst firm in Atlanta, and the author of The Pragmatic CSO: 12 Steps to Being a Security Master. Get more information about the Pragmatic CSO at, read his blog at, or reach him via e-mail at mike.rothman (at) securityincite (dot) com.

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