Product Mix and VARs

Product Mix and VARs (Value-Added Resellers) was a topic on an expert platform I'm a member of. We haven't discussed product mix before, so let's do that now.

Product mix is generally a topic for larger organizations, like VARs, chain storefronts, and big box retailers, who have different kinds of customers walking through their doors.

So it's a question of Market Segmentation.

witches brew product mix

Product Mix and Storefront Retailers

You have different kinds of customers within the overall market. Say for example a retail outlet that provides mechanical items (nuts, bolts, screws, plastic electronics housing boxes, power tools, and the like.) They get different kinds of customers:

1 > general contractors with large projects, who come in with requests for bids on say $50K+ worth of goods; maybe they won a project for building a school

2 > subcontractor builders who have been assigned part of that large project, and will buy say $500 - $5000 worth of stuff at at time


3 > ancillary subcontractors such as metal fab or woodworking shops who are doing a part of a piece of the project (say a fab shop is doing some big steel ironwork support, making bolt-together I-beams for structure), and they come in once in awhile when they realize they need something; it's a $10 - $1000 purchase.

The retailer has to be prepared for all of these possibilities. They can charge a premium because the customer wants it TODAY--not having the item holds up the project.

So they track what sells with an inventory management system, and divide the items up into A, B, and C items. A is the highest volume, highest price, biggest markup; C is the stuff they don't sell much of and don't make a lot of money on, but have to have because occasionally one of the segments needs it and they're catering to that.

Now after awhile you have some decisions to make.

Such a retailer in my home town entirely rid themselves of B and C items, and even stopped accepting cash as payment. Everyone had a credit account and was billed monthly. No more side trips to the bank for change, managing floats, worrying if someone was skimming the till...you can see the upside.

That's a product mix decision.

Product Mix and IT VARs

Another example:

An IT VAR is mid-channel; they buy white label hardware and software from manufacturers and developers up the chain who do NOT want to be bothered with retailing to the unwashed masses, and add their own branding to the final product.

Consider all those ~$100 tablets that came out last year. They all have the same chip in them. The manufacturers are mid-channel; they add value by completing the packaging job with screen, battery, sound, memory, etc, and put their own label on it. But then they have to SELL this thing somewhere...

They have relationships with chain retail sellers, small but highly trusted influencer organizations (eg. an accounting firm that also sells accounting software), IT shops who fix and install networks, and Managed Services providers who go around to different companies and maintain their IT equipment.

Each segment has its own needs and mix.

Now imagine you are the executive in charge of the sales and inventory managers of that VAR.

You need enough items in stock to feed the need (demand) from those different market segments.

You also want to avoid over-investing in inventory, because that ties up working capital.

Also, your sales staff are asking for direction. What should they "push"? Are the developers from the top pressuring you to move their product, or they'll consider giving the distribution rights to another VAR?

All this and more goes into the product mix decision. You have to see the future, watch your Planned vs Actual like a hawk, ensure inventory is on hand Just In Time, and a number of other crazy things.

Supporting this, ideally, is a robust integrated CRM, accounting, and inventory management system.

>> Jason Kanigan is a business strategist with operations management skills & experience. To discuss your product mix, book a call with Jason.<<


How SaaS Vendors Get It Wrong

saas vebdirsSaaS vendors habitually have a critical problem.

And it leads them to do unproductive things in their sales and marketing process.

We'll be looking at these timewasters and sales losers over the next few posts. Here's a surprise: the same issues plaguing the field in 2007 remain today. For now, though, let's concentrate on the seminal issue.

A lot of SaaS vendors built something nobody wants.

The founder thought it was a cool idea. They went ahead and dumped the few, precious resources they had into their "baby."

What's the issue? They made it in isolation.

Look at that list of SaaS sales problems from 2007:

  • I don’t have enough leads
  • My customers want to customize my application
  • Getting new customers up and running is too long and hard
  • My prospects aren’t Internet savvy
  • My sales cycle is too slow and takes too much effort
  • My prospects always seems to want that one thing we don’t have
  • My prospects don’t have enough time or interest to talk to my sales staff.

These apply to ERP, accounting software and CRM tools as well, many of which are sold as SaaS solutions.

Why do you think these things happen? Does it sound like the SaaS solution matches up with the buyers' problem?

The Key Issue of Struggling SaaS Vendors

They didn't solve a problem a buyer said they'd pay to have fixed.

If you're one of the SaaS vendors, now you've got a real problem.

You've got a solution in search of a problem.

See, it's not what you say that gets people to buy. It's what they say.

Their problems. Their situations. Their specific language.

Yes, the terminology they use.

When you don't use the language your buyers use to describe the problematic situation they're in which your solution will get them out of, you miss your target.

What do SaaS vendors who don't know this do?

Run to features.

We'll be looking at this in more detail later, but nobody ever bought because of features.

That's why demos don't work.

Cranking Up the Number of Demos Is NOT the Right Solution for SaaS Vendors

Occasionally, if you run enough of them, a demo is going to accidentally match up a problem with your solution.

But this is an accident.

You won't really know why they buy.

And it's obviously incredibly inefficient.

SaaS vendors run into a couple business-killing issues when this happens:

1 - Not Invented Here syndrome, which makes them believe the only possible solution is to do more demos

2 - Burnout of tech staff forced to do unending demos and becoming increasingly frustrated with the results.

We'll look at each of these in greater detail in upcoming posts.

For now, though, if you're one of the crowd of struggling SaaS vendors, ask yourself...

"Did I build something buyers actually want enough to pay for?"