The Hard Way To Software Sales

In 1966, when Paul Woetzel founded Capitol Cash Register, Inc., now CCR Data Systems, Inc. (CCR), point of sale (POS) hardware was very hard indeed. In most workstations, it consisted of a single piece of "technology" - a bulky, decidedly nonelectronic machine otherwise known as the mechanical cash register. In those days, you could build a business on cash register service, and that's what Woetzel did. Yet, unlike many cash register resellers from that era, CCR has survived and thrived, adapting to each subsequent generation of POS hardware and software - from mechanical cash registers to Windows-based touch screen terminals.

However, CCR's longevity doesn't stem simply from its ability to learn new technology. If it did, then more of CCR's competitors from the early days would have evolved into today's POS systems integrators. What distinguishes CCR is that, in the early 1990s, it made the hard choice to go soft. That is, it decided to develop its own software. "Early on in the open technology era, we saw the wisdom in investing in our own software development resources," said Dave Woetzel, Paul's son, who took over as CCR's president and CEO in 1994. "Today it's commonplace for VARs to write their own applications. But, a lot of our peers stuck to being just resellers."

Of course, restructuring to bring in software developers doesn't guarantee success. To maximize the return on its software development costs - in fact, to see a return at all - CCR discovered that it would have to redirect its market penetration strategies and overhaul its sales force.

Getting Development Costs Under Control
By the late 1980s, CCR had been regularly integrating POS software in the systems it sold. In 1990, CCR searched for a satisfactory back office application to offer its specialty retail customers. Dissatisfied with the products then on the market, CCR initiated a software development effort and brought in an experienced product manager to spearhead the work on what became its Retail Information Management System (RIMS) product.

Dave Woetzel would love to claim that CCR's initial wisdom in designing RIMS led to immediate success in selling it. However, he admits that CCR struggled to realize ROI on software development. "We did a lot of dumb things, earned our stripes, and finally figured out what we should do with our software," Woetzel said.

Relying on its traditional sales strategies, CCR initially tried to peddle its software to numerous types and sizes of retailers. But that approach forced CCR to pump more money into development nearly every time RIMS came out of the box. "We couldn't make money with the thing," Woetzel confessed. "We were trying to take this product and make it broad enough to sell up and down the street. We tried liquor stores. We tried hardware stores. We'd get it working for a pet store, then we'd try a woman's clothing store, then switch to a biking store."

With each new contract, CCR ended up adding features and spending too much time ironing out bugs during the installation. For a clothing store, the product had to have features for managing color, size, and style. For a bike shop, it had to accommodate parts and repair services. "We realized that we needed to parlay the software enhancements we made for one store into sales for the next 20 or 100 stores," Woetzel said.

Eventually, CCR had some success selling RIMS to specialty news and gift shops and suddenly found itself with a core competency to market. If it could find a way to sell to larger accounts, including regional and national chains, CCR would eliminate much of the seemingly endless software revisions draining its resources.

Knowing When Not To Make A Sale
In order to generate revenue in a niche market, CCR had to suffer some painful reshaping of its approach to landing contracts. It was no longer profitable for CCR's sales reps to sell hardware to a dozen or so small accounts. "Our reps would come to us and say, 'I can pick up a $30,000 order today selling some terminals,' and we would have to tell them, 'Don't make that sale. We're not making money doing that,'" Woetzel said. In addition, reps' sales quotas needed to be increased. "Only half of a sales rep's $300,000 quota might be coming from selling systems that included RIMS. And most of that $150,000 would be from reselling hardware and peripherals. So, a rep might be selling only $10,000 or $20,000 of our RIMS package. That wasn't coming close to covering the development costs. We needed volume - million dollar annual quotas and larger rollouts. So we had to let some of those up-and-down-the-street guys go and bring in people who understood the dynamics of major account sales."

That decision led to yet another lesson from the school of hard knocks. "Initially, we hired sales reps who had worked for some of the major hardware manufacturers. That was a mistake," Woetzel said. "They were used to having a regional sales territory to try to sell in. They were also used to having a suite of products with a broad range of features that accommodated different types of retailers. But we had developed a specific product for a niche that we wanted to sell nationally."

CCR finally hit its stride as a software-developing VAR when it brought in reps with proven experience in selling to regional and national chains. "We found them through referrals from customers and vendors," Woetzel said. "For a company our size, it really takes only a couple of sales reps like that to get you started. If they can each get you a large account in a niche, you can ride those contracts and be profitable quickly."

Deliberately Limiting Your Markets
CCR has recently developed a second application, SpeedCheck, a product designed specifically for cafeteria food service. "One of our successful sales hires looked into that market and realized the potential of applying our software and retail experience there," Woetzel said. CCR also continues to resell other companies' software in two additional verticals - grocery and hospitality.

In contemplating any next generation software development, Woetzel doesn't rule out the possibility of identifying additional niche POS needs CCR could profitably target. However, clearly recalling the rough ride of the company's early days as a software developer, Woetzel seems content to work on expanding CCR's share in markets it already serves. "To this point, we have deliberately limited our development efforts to products for only two verticals," Woetzel said. "It might not sound like much, but remember that entire companies have been built on applications for just one market."