How I beat an extradition order and fraud rap in Kentucky and learned how to develop business through the VAR channel.

Stan Rosenzweig, Director, www.salestipwebsite.com and President, Office Technology Consulting, Inc.

My name is Stan Rosenzweig. I do the business development for Office Technology Consulting, in Stamford Connecticut. We specialize in the technology part of moving companies into new space. And, we teach distributor dependent companies, like you, how to turn disappointing selling channels into higher performing assets and we'll have a little fun this morning, too.

About twelve years ago, I was giving a seminar at PC Expo at the Jacob Javits Convention Center in New York. I met a guy named Tom Farre who was editor of Reseller Management Magazine, and who asked me to write a column for his magazine. I did and I kept going for 120 consecutive months, and 120 columns, over the next ten years. I became "rich and famous," and put the columns into a series of sales and marketing books that you can buy at Barnes and Noble, or on line.

I'm going to talk to you about how I almost got arrested in Kentucky for two reasons. First, it's a very funny story, and secondly there's a terrific, terrific business development lesson that, if you fast forward all the way from 1980 to today, the lesson is about how you can function more effectively in the ASP market.

Back in 1980, there was no such thing as deregulation. Long-distance phone calls where from AT&T. Airline tickets were tariffed too. In fact, airline companies and long distance companies are both called carriers. One carries people and the other carries their ideas. Electricity was regulated and controlled, not like today in California. How many people who are here today live in California? Do any of you think your refrigerator is going to still work on Tuesday? (laughter) This is deregulation.

I read an interesting article about deregulation on the flight out here. It's from The New York Times and I would like to read you an excerpt. It's called "Feeling Powerless In a World of Greater Choice." And the analogy is about electric power here in California, where deregulation has caused a sense of intellectual trauma in all of us. For those of us who sell, if we empathize with this condition, we will profit from it. Here is the article.

"Over the last 20 years, a dogma has taken root in America that says people would be happier and better off, after all, continually shopping for the best deals."

(Audience chuckles) Right. And the basic thought is that on the internet, shopping businesses are going to be vastly successful because on-line analysts say we want to shop for the best deals. So, on the internet, are all the shopping services so vastly successful? (Audience answers "No") No, right. (reading goes on)

"So airlines were deregulated and telephone service and then the Internet arrived giving people the ability to choose from ten different sellers of the same merchandise. The bull market on Wall Street brought 5,000 mutual funds begging for attention. Having more choices became an end in itself.

"But for millions of people, especially in New York and California, the doctrine of the sovereign consumer has come into question the summer around a commodity that most to take completely for granted: electricity. A recently deregulated energy market, which was supposed to increase choices and reduce prices, has, for most residents, done nothing of the kind. Many community leaders and politicians are calling for investigations and caps on rising electricity bills and announced energy deregulation has a failure or fraud."

"Some social scientists say that the anxiety over energy is exposing something even deeper in the human wiring. At a time when protestors have rallied in Seattle in Washington against chain's stores and global branding and prominent social critics have announced the intrusion of endless choice into every corner of life -- a phenomenon that Barry Schwartz, a psychologist at Swathmore College, calls "the tyranny of freedom"…"

"… Perhaps, this alternative theory says, there's a point at which people no longer wish to be autonomous, rational consumers at all. Maybe they would just as soon delegate their decisions regarding some transactions as they did when con Ed was the only game in town and government was assigned to make sure that the company played by the rules."

So, all those libertarians among us, our days are numbered. (laughter) They're gonna take us back to the day of regulation, which, I suppose bodes well for those who worry about electricity. Back to my story in Kentucky, before deregulation.

Back in 1980, I was lobbying for deregulation of long-distance phone calls specifically for the hotel industry. When you leave here and go back to your hotel and you check out before you go home, and your bill shows $140.00 for the room and another $160 for the calls, I did it.

And the reason that I did it was simple. That's what they paid me do. That was my job. I went on to lobby before the FCC and Congress, and we pushed all the right buttons, and started making donations back in 1980. Now we are all talking about political donations, but this was back in 1980. We had one of the first PACs. As a result, we were able to get deregulation of long-distance phone calls so that hotels could then we sell those calls. And my company was one of the first companies to sell call accounting equipment to hotels.

So we sell sold infrastructure equipment to hotels, so they could charge for phone calls. Hotel became our VARs and we were their ASPs... in 1980.

I had to go out and rattle my saber and beat the bushes and get people to do this. I had to get ' distribution". I was consultant to the American Hotel and Motel Association and I wrote a book for them called "Hotel Telecommunications: Opportunities Through Deregulation." I went around the country three times a month, and I went to different state association meetings . They staggered them so that, over the course of a year, I got to attend 35 of them. I went around talking to these people and I beat the mantra of a "continuing revenue stream." Anyone hear anything about a "continuing revenue stream" around here over the past couple of days? (audience chuckles agreement). Right? I spoke of "no big investment." Anybody hear about "no big investment" in the last couple of days? (Audience agreement)

So, what's new today? We were doing this 20 years ago… and we're still doing it. It worked then. It works now. But there were problems. My problems had nothing to do with the problems that you face. My problem was that I was giving a seminar for the American Hotel and Motel Association for their annual meeting , I wrote the book and I was representing them before Congress. So everywhere I went they put a big spread in the local paper telling everyone that they were having a big conference and that I was coming.

(Looking at name tags in audience, stopping at one) Scott Connolly. Scott, do you think there is someone else with the name Scott Connolly? (Scott nods no) Walter Kinish. Do you think there is someone else with the name Walter Kinish? (Walter says there is)There is? Now you would think that a name like Scott Connelly is more common and that he would know someone else with the same name, but with the name Kinish, you wouldn't expect that.

(To audience) Do you think there is another Stan Rosenzweig around? You think there is another Stan Rosenzweig around who is in the technology industry? Do you think there is another Stan Rosenzweig around who is in the technology industry that sells services and gets himself published.

There is. That guy gets people to invest in his fictitious companies. What do you think he does with the money? Anybody have a guess? (several answers from audience out of mic range) Yes. He spends it. That's what he does with other peoples money. He's a master at it. So, when it was in the Kentucky Examiner that Stan Rosenzweig was giving a talk in Cave City, Kentucky, to the Kentucky Hotel Association on voice-data integration, in 1980, the district attorney said (slaps hand in the air and shouts) YES! And he immediately called a press conference.

And he said " Well, we found that no good S O Whatever, Rosenzweig. He lives in New York and we are going to go ahead and extradite his butt back to Kentucky and he's going to pay for what he's done to the good Southern people of Kentucky.

And the people of the Kentucky Hotel and Motel Association were horrified. And so what they did was they phoned me… this was back before deregulation when it cost 60 cents for the first three minutes and 30 cents a minute for each minute thereafter. Now we pay, what, 4 ½ cents? And they called to tell me that the law was on my tail, and I was on the lam (audience laughter).

Well, a very interesting thing happened. I laughed. My partner was horrified. He was a Harvard law school graduate and former Assistant Controller of New York City. He knew all the ins and outs of government. His best friend was one of Rudy Guiliani's assistants. He knew all the bad things that a prosecutor could do to you. He said."We've got to hire a lawyer. We've got to hire a lawyer."

(Someone enters the seminar room) I'd like to introduce to you, Wendy Petty, Senior Vice President of Opus 360.com, a very good person to know. (She says thank you and sits).

Anyway, so my partner was very concerned. I wasn't because I knew that I didn't do anything wrong and I knew, in 1980, that nobody who was innocent was ever found guilty of anything. (audience laughter).

So I picked up the phone and made a call to the district attorney. And when they heard it was me they rushed to find him and bring him to the phone and he answered, "Uh, hello?"

I said "this is Stan Rosenzweig." "Uh, hello?" "You don't know me from Adam. Why are you saying such bad things about me?"

"Uh, well this Stan Rosenzweig has done some really bad things down here. Are you him?" (laughter)

I said, "Hey, I gotta tell you, I don't know much about the legal business, and I don't know much about police business, but if I was a police guy, and I had an idea as to where a low down lousy scoundrel was, I would put the cuffs on him before I called a press conference. If I was the guy you were after, I'd be on my way to Brazil saying ta-ta." I said, "But I ain't him."

"Well, that's just the kind of thing that Rosenzweig would say. He's a con man." (laughter)

"Well, if I'm him, I'm outta here, Dave."

Dave didn't let go, so I called the local newspapers. One paper wouldn't print a retraction. They said that they had a good story from the DA and they stood by it. But the other one, had a young cub reporter who had written the assignment and she took the time to learn that I had a different social security number, that I had belonged to a New York yacht club, took down my address where I had lived for 20 years and verified that I had never, ever been to Kentucky before that weekend. And she wrote an expose that DA Armstrong nailed the wrong Rosenzweig. (audience laughter)

So the result of the story is that I think that Armstrong ran for Governor and lost and, became Mayor of Louisville, proving that you can make mistakes and it doesn't hurt over the long term,. Although, I guess he'd rather be governor of Kentucky than mayor of Louisville. You know governors can run for president and we've had lots of people do that. Our current president was a governor and an aspiring president who is a governor. So I guess Dave Armstrong's rush to judgment, shooting from the lip and making a press announcement before he had the goods, something he didn't really have, could have cost him the presidency.

And that's what people do today when they try to sell through the channel without having exactly what they have ready for prime time.

And another funny thing happened, you know when I wanted to send -- I wrote this in a column about eight years ago and then I put it in one of my books -- and I had to get this out to the magazine back before ubiquitous e-mail and they wanted to send me some material, so they sent me an overnight package. And the next day I called to say I didn't get it. And they called back to say that it was delivered. I said "It didn't get here". And they said "We got a signature". So I asked them to tell me who the signature was and they gave me a name I didn't know. So I said "Why don't you fax me the signature" and they did. It showed that the package was not sent to my address. It went to a big local company that gets lots of overnight packages and they sign for all of them at once. And so the big overnight company, I don't know, DHL, or somebody, brings in a whole carton of packages and somebody just signs for the bunch of them.

And so they didn't manage the details, which results in a incorrect database. It's really kind of a simple thing.

We find in sales that sales people, and sales managers and sales trainers, and senior management people like Wendy, but not Wendy (laughter), go out and build a model as to how they are going to capture the channel. And the model looks great on paper, and they take it to the executive committee and they think it looks fine. And they put sales people out in the field and they come back at the end of the month and they all say "We did it! We signed up 60 new VARs this month. Value Added Resellers. We signed up 40 new systems integrators this month. We signed up 40 new ISPs this month. Boy, we're good.

And three months later we look at the numbers and the numbers say, what? (Audience chuckles) Big sales? (Audience says no). Very little sales. (To audience) Big sales? (Audience says no) Why not? Ronnie (Audience member), why not, why would I not have big sales from all those new dealers? (Audience member answers, "You don't have anything to back it up with.")

You don't have anything to back it up with. Well what if I have the greatest thing since sliced bread. By the way, does anybody think that sliced bread is so great? (laughter). OK let's say this thing is so good it's the greatest thing since something that is so good that we can't mention it.

(Audience member says that he read that the best invention in the last 100 years is matches and goes on about how it is better than microwave, cell phones, etc.)

The best thing in 100 years is matches. I love it. Well, I don't get it, but what the heck.

(Audience member goes on about how it keeps fire alive all day long, almost out of mic range, etc.)

OK (Audience laughter).

So, let's say you have a great product. We have a great product and we signed up all these dealers. The question is why won't I, three months from now, have tremendous sales?

I'd like to go back to my Kentucky story. I got off the hook with Dave Armstrong. He went on to be mayor and I went on to start a company called Inn-Tech - The Source For Inn Technology. What we were going to sell was call accounting systems to hotels across the country and in the first couple of months we were selling like crazy all over the country but the trouble is we didn't have internet stuff back then. You had to go and see people and it was hard, so we began to look for distribution through the channel. We thought the ideal distribution channel would be telephone interconnect because they're out there selling phone systems. What could be greater add-on than to be able to say to somebody we'll put this call accounting system in for you and you will be able to earn more money than the phone system costs. You get a a free phone system.

What a great thing. And every time we suggested that, customers bought it, so we knew it was really working. So we get all these interconnect companies to sign up and the first month we signed up 60 VARs - Telephone Interconnect Resellers. So we said we're done now. We're made.

So three months later we looked at our numbers. How many did they sell through the channel? One system. 60 VARs. One system. And then, in 1981, I learned the truth that has paid my way and fed me, and as you can see, I eat, has fed me for 20 years, and that is…

How many here are VARs? One, two, three. Ok. Here's the fundamental truth and I apologize if I am offending, but I am not going to take it back: VARs don't know how to sell. They absolutely do not know how to sell. The know how to design things. They put the value in value added. And they know how to make relationships with people who need what they sell.

They are not value added resellers. They are value added relationship builders. VAR is value added relationship builders, not resellers. A reseller is the guy who sells you the newspaper in the morning. A value added relationship builder builds something for you, walks you through it, feels your pain - Clinton was a reseller - solves your problems, and establishes a long term relationship. Right?

But what he or she doesn't do is resell other people's stuff very well. If you integrate your new product ore service into what the value added reseller needs to provide, then that person will integrate it into his product, but that product is HIS product. If it's your product, he'll sign up to sell for you but it won't go anywhere. Our company was the 26th company to become data certified with Sprint. We're Sprint engineers. We don't give them much business, because, you know what, it's not our business. If you need us to engineer a circuit, we can engineer a circuit, but our purpose is not to sell them. Our purpose is to sell us. Alright? So, we don't need to sell other people's stuff unless it's intrinsic to our business.

I built a marketing-sales plan for a company up in Boston and they came to me and said how can we redirect - you know you learn this in brand-building - how can we redirect the reseller's perception of our product from something that is external, that sits on the shelf, to something that is intrinsic and internal to their very fiber to their very being?

And those guys in Boston are smart, because that is exactly what this is all about - redirecting the VARs fabric, er, feeling, as to what the product is, from being something that you own to something that they own, so that they can take ownership, so that when they build their relationship, your product becomes their product, becomes the customer's product.

So we've been building programs to do that and it's really not rocket science. It's a fundamental truth about dealing with people in the channel. If it weren't, you could go to a car dealership and have them sell your application with their cars, because they need new product. Nobody wants to buy cars from car dealers anymore. They're going on the internet to get pricing. They need new product.

How many people here love car dealers? (No hands) How many people here still deal with car dealers? (no hands)

Now, you're all lying. But you have such a low opinion of car dealers that you won't admit it. I want to give you another little thing. I read this, also in the NY Times, this weekend. They run a photo every Sunday called "What Were They Thinking" (Holds paper up to audience showing picture of car salesman talking to older couple sitting in black Cadillac convertible with white leather interior) Now here's a guy selling a car to a couple.

Here's is what he says he was thinking when the photo was taken. " Most people think car salesmen have plaid jackets, white shoes and Elvis hairdos and that they lie. But I talk to customers and find out what's going on and show a little empathy. The Quillans were Christian people, so I let them know that I attribute my success to a higher power. You need to find a common ground. In the car business you have to build a rapport before you go for the jugular." (laughter)

He talks about a higher power before he (puts hand to throat and makes strangulation sounds). So, you don't want those people to be your channel people (looks out over audience) or do you? Maybe you do.

You want people who have relationships with end users. And you have to find out about those people and show them how you sell and show them why they need what you have.

Anybody have a channel in place right now? You do? How many channel partners you have? Three? What's the oldest channel partner relationship you have? 19 months. Do you think they can sell? No. (can't hear answer) Why do you think that they all are not selling? (unintelligible response)

So the main thing is, what can you do to help them? (Answer: Better sales training and joint calls with them in the field) That is the key. Back in 1981 when we were selling to those hotels, we learned that when you sell to a reseller who is basically selling other things, you have to overcome, first, inertia.

If I'm selling NT networks and last month I billed enough from networks to pay my rent and pay my people and, hopefully have something left over in the bank, a number that has at least a comma or two in it, and next month you say I want you to divert some of your effort to something else, all I can think of is last month I paid the rent and, this month, the first thing I am going to do is pay the rent. And then I can take a foray into something else. Right?

Now, the first thing is I am going to pay the rent. What continues to have a strong hold on me is the thing I have been doing BEFORE I become visionary. The only way to become visionary is to go out and become public and bring in a lot of other people's money and you know you have a time track and Forbes will let you know how many months you have to extinction. (laughter) And you have a time line to get up to profitability. But if you don't do that, if you're a small company, and you are dealing with channel partners who are owner-operators, they don't have the luxury of 28 million dollars to burn through. They have to make every month the month that covers the nut.

So the first thing you have to overcome is inertia. The second thing you have to overcome is the recognition that they're sales people: no, and deal makers: yes. If they understand, intrinsically, the value of the deal to themselves and they understand, intrinsically, the value of the deal to their customers, because they have the lifelong relationship that pays the rent, that will help.

And the third thing that you pointed out is that they can't do it (make the sale) by themselves. The greatest companies that market through the channel send a regional sales manager with their channel partners for the first eight, or ten, or fifteen sales. They constantly work with their sales people and train their sales teams and upgrade them and are always there. If you're not big enough to have regional sales management who can work with channel partners, bringing them along; and the model we're talking about of just signing up channel partners is not going to be the one that provides the success that your pro-forma P and L and balance sheet suggests.

When we were able to, then, raise a little money and put on a couple of sales managers and go out and work with partners, we started to get sales. Because our guys had numbers they had to make. With our channel partners, we could write down the numbers they had to make, but they didn't work for us. Right? We worked for them. They're our customers.

Which brings me to the fourth thing you should always remember, and that is, and I believe that you should always remember, you may or may not, but I believe that you should always remember, that it's not ever about you. It's always about your customer. It's never about the deal. It's never about your product. It's never about your CFO. It's always about the customer. Always.

So when we say it's always about the customer, what does that little phrase mean? It means that we always see it from the point of view of the guy we want to convince. If it's a VAR, if it's an ISV, then the thing is you have to look at is the fact that he had to pay last month's rent and he has to pay next month's rent. We are going to go out there and help him to make a sale and we are going to go out there and help him increase cash flow starting with day one.

Day one we help him to increase his cash flow. Day two we have his attention. Day one he increases his numbers. Day two you've got his attention. Day one he doesn't have to sweat payroll this month. Day two you've got his attention. Basic. Basic. Basic. It's really very simple. Once we got past that, truly it was simple.

Who is the most successful company dealing through the channel today? Anybody got a guess? (Answer: Microsoft) Yessssss! Microsoft. You know Microsoft, every month, has at least 100, and sometimes as many as 200, at least 100 seminars with an attendance of this size or larger, in different parts of the country.

Every single month they bring in their channel. Every single month they bring in the channel for sales training, product training, how to handle their personnel training, forms to fill out training, evaluation of beta testing of new software training, you're big and we love you and we're going to give you a hat training, here's a tee shirt training, but they're always giving training that partners want to attend.

The absolute best, best, best give away I ever saw, was when I was at a Comdex in Las Vegas, which, you know, holds a hundred thousand people, and there were vendors giving away the newest everything. There were tee shirts, tee shirts, tee shirts. I came home with not one shirt because I couldn't stand it. Every booth was giving away tee shirts excerpt Microsoft.

Microsoft was giving away a little piece of white fur with a tail on the bottom and two dots for eyes and they called them Microsoft mice. And people were lined up around the corner to get a Microsoft mouse, a little furry toy, a little animal, furry animal, Microsoft mice. They always had a way of gathering a relationship and then to get a mouse you had to go into a room like this and sit through another seminar. Because Microsoft will never stop communicating with the channel.

How many people here think Microsoft makes the best software? Nobody. How many people think Microsoft KNOWS who its customer is? (Several hands). Microsoft knows the customer. Microsoft thinks the customer. Microsoft knows the fundamental truth that it's not about Microsoft. It's always about the customer.

How many people think they know who Microsoft's customer is? Nobody here knows? Who is Microsoft's customer? (Answer: Everybody) Everybody? No? Who thinks he knows who Microsoft's customer is? Tell you what. I'm going to do a Microsoft thing.

(Holds up a Sprint pre-paid calling card) This is Sprint. See Sprint? This is a card. It's worth free long distance calls. Whomever tells me accurately who Microsoft thinks its customer is gets this card right now. Ahh! A volunteer. Yes.

(Answer: Any computer maker and seller) Any computer maker and seller. Anybody got a better answer?

(Answer: The VAR channel) The VAR channel. . Anybody got a better answer?

(Answer: The developer Anybody who owns a computer) .OK. Anybody got a better answer?

(Answer: Anybody who buys Microsoft products) OK. He says anybody who buys Microsoft products, Microsoft thinks is Microsoft's customer.

NO. Because, if that was true, they would work to get all the bugs out before they ship stuff. Well? Is that right? It's not the customer. Is it the channel? YES! It is the channel, because the channel moves the product and Microsoft gives away stuff to the channel.

(Looking to person who answered "The VAR channel") Are you the channel?

(Answer: Yes) I'm Microsoft (Hands Sprint pre-paid card to person) That's exactly what it's all about.

If you look at Microsoft products, you will find that all of their products are designed for Fortune 200 companies, and the rest of us just try to tag along. You look at all the networking features and everything. A lot of that stuff, who needs. The truth is the guys who buy the most get the information to their channel partners as to what they need and they transfer that to Microsoft and Microsoft designs for those people. And that is why Bill Gates is worth 60 billion dollars. He had 100 billion before Janet Reno, but I have full confidence he will get back up to speed soon.

That, basically, is what the channel partnership is all about. I didn't mean to be preachy. But it really is kind of basic and simple.

Back in the '60's, most companies did their accounting by hand. Then the big, big, giant companies hired enormous IT staffs, and the smaller, teeny companies did it by hand-written ledgers. And the guys in the middle, how did they process their information? This is important.

(Audience answer out of range) Hmmm? Yes. Good. I didn't think we'd get that answer. That's very good. They used processing centers. They called them service bureaus. Right? And data was processed in data service bureaus. And what was a data service bureau?

A data service bureau was a company that came to you and said, instead of you buying an IBM 370 mainframe and buying another million dollars worth of software and then hiring a whole IT staff, why don't you give us all your data and we'll process it for you and we'll give you the information you need and we'll charge you a monthly fee.

Anybody hear that In the last two days? Anybody? (several comments from audience) What do we call those people? (Answer: ASPs). ASPs? Did we have an ASP in 1960? Did we have any other Three letter acronyms in 1960? I like to call them TLAs. How many TLAs do we have today? Too many to count, right? We have VARs SLAs, too many to count. In 1960, we had only one TLA of worth. I

(Audience: B M)

B M.

(Audience question: What is a TLA) Three letter acronym.

(Audience member: "Oh." Then General laughter)

So how did IBM become the first ASP? IBM's model was, we sell nothing, nothing. We rent everything. And at that time, there was a young guy. Younger than you (pointing) who came to IBM and said (mimicking high fast speech with Texas drawl) "Hell, some of these people want to buy outright. We ought to be selling this stuff." And IBM said "No, Ross, we don't think so."

And young Mr. Perot said, again, "I really think you ought to be selling this stuff. Some of them want to buy. They don't want to rent it. They want to take ownership of this stuff." Again, IBM said "No, Ross." So Mr. Perot formed his own company and started to sell because IBM wouldn't sell and that's how Ross Perot got rich. Not because he went against the ASP model, but because he went against the then current thinking.

The current thinking was, we know best what's good for the customer. And Ross Perot, who we know is a genius because we've seen him on Larry King and he spend millions to run for President (laughter). Don't laugh. When you can afford to spend that much money on advertising you can laugh at Ross Perot. I do not laugh at Ross Perot. I don't want him as President, but I don't laugh at Ross Perot.

Ross Perot said, it's not about us, it's about the customer, and he was right. If the customer wants to buy, let him write a check. If he wants to rent, let him write a smaller check. So the only thing that I've seen this past two days that's started to bother me about the ASP model is the pricing model.

I believe that the concept of outsourcing to a central location and having one company take all the responsibility 24 by 7, having an in-house team, a trained team, upgrading on the fly, so your customer doesn't have to have major upgrades, having the very latest in server equipment so the customer doesn't have to constantly be buying expensive new things, having a heterogeneous environment so the customer doesn't have to worry about how the whole thing will mesh, that's all perfect. All those things are perfect.

But, when we get to the point of saying we won't take your money if it's all at once (laughter), it's not about the customer then. It's about you. And if you're dealing with a VAR and you say to the VAR we're going to be giving you an ongoing revenue stream and we want you to sign this up and the VAR says to you great, but our model is we bundle everything up front . We give the guy a three year service warranty, we bundle it into the price , we get the cash up front. It's like magazine subscriptions. We like to take the money up front and allocate it over the next 25 or 36 months, or whatever, and this way we know that we're going to get it.

So the ASP says, "Well, we really want to do business with you, but, I'm sorry, we really don't it that way." Then the VAR says, "OK, we'll still sign up."

Three months later, how many orders? How many orders? Because it's not about you. It's about them. OK. It's kind of a simple, simple philosophy that we share.

So, In 1984, after we withstood the onslaught of Kentucky District Attorney Dave Armstrong and he rescinded the extradition order. I don't know what would have happened if I had to go to Kentucky to stand trial. I think the thing that won Dave over was that the other Stan had a full head of hair.(Laughter).

So in 1984 we were selling well and a big Wall Street company named JWP came in and said "We want to buy you". So we said, "OK" and we were able to sell because we learned that it's all about the customer. And the VAR is your customer. I took off a couple of years and then started Office Technology. I have replicated the channel process for me and for others several times since then.

The model is a simple one and to summarize, let me say that, number one, hardly anything you've heard in the past two days is new. IBM was an ASP. Ross Perot said ASPs were stupid and he went out and did it the other way and got rich doing it. Because there is more than one pricing model and there always should be more than one pricing model.

And your customer is king and you are not. The pricing model has to be based on what the customer decides, not what you decide. The amount is your decision. If you have a product that can show somebody how to make more money than they're now making, you can set the fee…. So long as it doesn't come out to be more than the more they will make.

You can set the amount, but you must be able to prove to the end user and prove to the VAR that whomever ultimately gets what you have will end up making more money.

Or, and let's face it, not everything saves people money and not everything makes people money. When we were selling to the hotel business, we were into small computer billing systems and we went to small hotels that have one owner who would say I don't see the need to pay more money for this. And we would say you're right. And the owner would say then why should I buy it? And we would say because it will enable you to get the night audit done two hours earlier and go home and be with your family. And they would say where do I sign.

Because, suddenly, I had something that he needed. He needed to have something that would give him a benefit of enormous value, and if I didn't have a benefit that would save him money and I didn't have a benefit that would make him money, I gave him a benefit that would improve the quality of his life.

Improve the quality of my life and I'll sign the check. And then you get to set the price.

So the pricing model is not going to be "make it cheaper". The pricing model is going to find something to make the owner of the business better. And if you can do that and if you can show the VAR how to do that, than the pricing method ceases to be an issue.

How many people here run into pricing objections when they sell? You always run into pricing objections because most people are afraid to talk about price and they start off by offering the lowest price. But I think you have to offer the best value. And sometimes the best value is the lowest price. And sometimes the best value is the greatest security.

If I can offer an ASP service that does all the company's accounting, billing payroll and all their functions, and I can't guarantee five nines, and I can't guarantee 24 by 7, but I can save him half the cost of administration, how many sales do I get? How many? None.

If I can show him that I will give him 100% total assurance and quality and viability and show that it always works, all the time , I will get the business.

But when you deal with VARs, through the channel, the VAR has to know that. Here another problem with VARs, ISPs, technology people. They are all engineers. Anybody here an engineer? Anybody married to an engineer? Anybody sorry they know an engineer?

The problem with engineers are they are precisionists. Not perfectionists. They sometimes get it wrong. But precisionists, which is to say that, unless they know everything 100% and they understand everything down to the last fifth decimal point, they won't pitch it. They need to know it, really know it, before they pitch it. And the problem with that is, you never ever know it that much. Right? So when you deal with people, you have to move them from engineering precision to artistic emotions. You have to make them artsy, left side, right side? You have to get them artsy.

How do we do that? Anybody? Wendy. OK. Wendy is going to build a relationship.

The way you do that is to bring in, as you said, your sales team person to help them make the sale. Give them the comfort. Give them the feeling of comfort. And then everybody can sign the order. You get the order, they get the sales and the relationship transcends and builds.

REMINDER OF SOME KEY POINTS DISCUSSED

Deregulation is a two way sword you can benefit from.

VARs can't sell without lots of support, but that support is rewarding and very much worth the trouble.

If you cannot commit sufficient resources, the channel effort will not succeed.

It's never about you. It's always about the customer. Your customer is King and you are not.

Inertia is your worst enemy when building a new sales channel. When it's you versus the VAR doing same old / same old to pay the rent, the rent always wins. But build a fast track to sales volume and the channel partner will produce.

Learn from Microsoft and train, train, train. Never ease up on support to the Channel

IBM was an ASP in 1960. Old, successful ideas are new again.

Don't get stuck in somebody elses pricing model. Ross Perot didn't and it made him rich.

If you can't save them money, make their quality of life better and you still win the sale.

(Question and Answers out of mic range).

If you would like to contact us by phone or surface mail:

Stan Rosenzweig
C/O Salestipwebsite.com
3661 Macintosh Lane
Salt lake City, UT 84121
1(801)733-0603