Slam Dunking Sales To Corporate End Users
Storage VAR explains how concentrating on customer relationships have led his company to $12 million in gross sales in 1997.
Business Solutions, April 1998
However, there was a time when the Los Angeles-based company's future was not so auspicious. Zaharoni left a promising civil litigation law career to join MaX Enhancement Group, the company his family had founded, midway through 1995. He and his partner/brother, Gil, saw gross sales that year balloon to a company-high $35 million. By the end of 1996, they watched the company post $18 million in gross sales.
As a memory module manufacturer, MaX Enhancement Group was riding high in the early 1990s. Computer use exploded throughout the world and every market required computer memory. "Everybody needed memory," recalls Zaharoni. "A salesperson could call a wrong number and still sell memory to the person on the other end."
By 1996, with large manufacturers in the memory market, more computer memory was being produced than was being used. The market was flooded. "The supply became so enormous that it actually outstripped demand. This had never happened," states Zaharoni. "The price of memory has continued to fall from 1995 until this very day - dropping almost 96%."
In the face of declining sales numbers, Zaharoni realized MaX Enhancement Group needed to diversify from being strictly a manufacturer. Midway through 1995, he proposed the company start a more profitable integration division and become a storage VAR by the first quarter of 1996. The company was already selling memory to corporate customers like Chevron and AT&T. Zaharoni now wanted those same customers to buy integrated storage systems from MaX Enhancement Group.
Trading Low Margins For Future Sales
Calling his company a VAR did not necessarily make it so. Zaharoni made several business decisions to position his company as a VAR. He hired technical support personnel and salespeople that were proficient in storage systems. MaX Enhancement Group also had its salespeople market the company as a VAR to its corporate customers. "In addition to selling our customers memory, we told them we wanted to start selling them storage equipment, PCs, and networking products. It was a learn-as-you-go process because we did not know a whole lot about selling these products," says Zaharoni. "Some customers would question us, but we tried to learn from every sales call."
MaX Enhancement Group started slowly as a VAR by offering hard drives and tape drives. These storage products required little technical ability to sell, but offered the company low margins. To make money selling these commodity products, MaX Enhancement Group had to work on volume. The company priced its limited inventory very aggressively and started pitching hardware sales to its corporate customers. "We went with low margins. Our real goal was to establish our company as a VAR with these customers and make higher-margin integration sales in the future," says Zaharoni.
Reseller Authorizations: Key To VAR Success
The integration division of MaX Enhancement Group recorded about $3 million in gross sales in 1996 and quadrupled that mark in 1997. Sales exploded to $12 million after Zaharoni earned authorization to resell products from Compaq, Hewlett-Packard, IBM, Toshiba, and Microsoft. "Once we had those key vendor relationships in place, we were able to sell some type of computer equipment to virtually every customer we had. There wasn't one of our customers that wasn't buying the products we were selling in the computer systems and networking lines," comments Zaharoni. "Prior to receiving these authorizations, our customers were simply buying from some other VAR. We were confident we could secure business by establishing strong relationships with these customers."
To secure authorizations from major vendors, MaX Enhancement Group had to prove the company was technically sound and, more importantly, could resell the vendor's products. Zaharoni had his technical support personnel fill out the reseller authorization applications for each vendor. His company then demonstrated why it should be an authorized reseller for a particular product. For example, MaX Enhancement Group was selling a product from Luminex Software, Inc. which was used in networking CD-ROM drives. "At this point, we could call Compaq and tell them we had a particular area of knowledge in CD-ROM networking solutions. This knowledge, combined with our customer database, made us a good VAR to be aligned with," states Zaharoni.
Form A Friendship To Sell Products
Selling memory modules to large corporations meant MaX Enhancement Group had a substantial customer database. Selling as a reseller, as opposed to a manufacturer, required Zaharoni to call upon the relationships he had built with these customers. He says, "Selling to corporate end users is based more on relationships than on real technical know-how. You have to know what you are doing technically, but it is more important that they trust you, that they believe what you say, and that you deliver what you promise."
"A business relationship with customers will work as long as every product works, is shipped on time, the customer pays within 90 days, and there is never a problem," says Zaharoni. "However, when you create a friendship with customers, they will do almost anything for you. They will tell you what other companies are bidding on a project. They will tell you what is necessary to close a deal. They will even throw away another company's literature."
To befriend customers, MaX Enhancement Group salespeople have a monthly entertainment budget and are encouraged to use the entire amount. Customers in the region are routinely taken out to dinner or lunch by a salesperson. The company also has season tickets to the Los Angeles Lakers, Los Angeles Kings, and Anaheim Mighty Ducks for entertaining its clients. In the past, MaX Enhancement Group has purchased sports tickets through a broker and sent them to customers in Chicago and Boston.
Sometimes a seemingly trivial detail can be used to form a relationship. During a cold call to a potential customer, Zaharoni found himself making small talk with the secretary of the procurement division. In passing, she innocently mentioned that she was fond of sunflowers. When a MaX Enhancement Group representative visited the company in person, he was sure to stop at a florist and purchase a sunflower arrangement for the secretary. The flowers paid off. "Before, she didn't know anything about our company, but you can bet - from that point on - all of my calls went through to the buyer in charge," recalls Zaharoni.
Get Your Customer Out Of The Office
Corporate end users have an image of what they want their VAR to look like and Zaharoni admits that image does not include jeans and t-shirts. His company employees are as adaptable as chameleons. "You have to be what your customer wants you to be," states Zaharoni. "You can stick to a certain mentality, but if that is the wrong one for a customer, you lose out in the long run."
For first meetings with large corporations, Zaharoni and his employees don suits and provide a professional marketing presentation. To secure an account, Zaharoni always tries to get the customer out of the office and into a more social setting. He tries to avoid talking about business when eating lunch or dinner with a client and encourages his employees to do the same. "I try to find out about their family life, hobbies, and other interests," says Zaharoni. "If you understand what makes a people tick, it is easier to become a friend to them." During one dinner with a customer, he realized the client had a passion for fishing. When Zaharoni returned to the office, he ordered a fishing rod from a local sports store and had it sent to the customer. "Participating in activities outside of the corporate office allows you to become friends with your customers. It completely changes the business environment in which you sell," comments Zaharoni.
Know Thy Customer
In the process of forming friendships with customers, there have been times when Zaharoni has gone too far. He believes that most customers want to be taken out of the corporate setting to meet informally. However, when doing this, it is important to read the customer accurately.
He recently met with a corporate customer's information technology (IT) director to discuss future potential sales. They met on a Friday afternoon for lunch at a Los Angeles restaurant. After a spirited two-hour lunch, Zaharoni felt the two had formed a bond. "We were about the same age and we really hit it off. If I would have stopped right there, I probably would have won the account," says Zaharoni. Instead, Zaharoni felt he would seal the deal by taking the IT director out for a few drinks at a local gentleman's club. As the two pulled into the parking lot of the club, the IT director's face turned white. To his shock, Zaharoni discovered that the IT director was also a minister.
"I couldn't have been more wrong in how I read this customer. I drove him back to his car and he told me never to call him again," recalls Zaharoni.
It Is All About Relationships
MaX Enhancement Group has experienced success in a short period of time as a VAR and it is primarily a result of the emphasis it places on forming relationships with corporate customers, contends Zaharoni. "A lot of companies confuse technical proficiency with being a good company," explains Zaharoni. "A company should stress relationships to the point where your customers like you and trust you. Computer companies go out of business every day, so the ability to form relationships with customers is something special. It is not a characteristic that every company has."
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