What Exactly Is a Value-Added Reseller?
A value-added reseller (VAR) is a sales firm that amplifies the value of third-party products by adding customized features or services tailored for the end-user. This approach is particularly prevalent in the information technology (IT) sector, where VARs offer additional hardware, installation services, consulting, and troubleshooting alongside the core product.
Grasping the Importance of Value-Added Resellers
Value-added resellers serve as a crucial distribution channel for manufacturers, especially in the IT arena. They take core hardware or software products and customize complete packages with supplementary add-ons specific to customer needs. While they aren’t the manufacturers themselves, VARs must possess in-depth knowledge of the product to tailor, install, test, and maintain it effectively for end-users.
To incentivize VARs and boost sales through this channel, tech enterprises usually offer discounts on their products. Although some VARs partner exclusively with a single brand, most work with multiple brands to provide customers with a broader range of choices.
Key Insights
- Value Enhancement: Adding customized services or features to a core product boosts its value for resale.
- Customer Relationship: The added value enhances customer retention and repeat business potential.
- Cost Control Challenges: VARs often can’t control the base product costs.
Example: How Cisco Engages VARs
Leading tech companies like Cisco have cultivated extensive reseller programs that include authorization, certification, training, and regular audits. To get authorized, a reseller needs to demonstrate capable staff and infrastructure. Cisco assigns certifications ranging from ‘select’ to ‘gold’ based on the reseller’s level of service and proficiency.
Cisco provides specialized training in areas like enterprise networks, cybersecurity, IoT, and data centers to enhance the skills of their resellers. Continuous audits by Cisco ensure that these resellers maintain quality and adherence to Cisco’s standards.
Benefits of Engaging Value-Added Resellers
Properly leveraged, a value-added reseller can significantly enhance customer satisfaction and loyalty by providing a one-stop shop for products and comprehensive support. By understanding customer challenges better, VARs can offer relevant solutions and therefore increase their own margins through added services rather than basic products.
Challenges Faced by Value-Added Resellers
Despite the benefits, there are challenges. VARs often don’t have control over product cost and must rely on manufacturers to manage pricing and quality. This reliance can introduce unpredictability in meeting evolving customer needs. Discounts from manufacturers can help, giving resellers some latitude in setting customer prices, but a lack of transparency can sometimes persist in the distribution process.
Conclusion
Value-added resellers play an instrumental role in adding customized value to core IT products, fostering customer loyalty and satisfaction. Despite inherent challenges like cost control and transparency, VARs serve as vital partners in the IT distribution channel, significantly enhancing the products they resell.
Related Terms: Hardware, Software, End-user, Distribution Channel, Consulting.
