Sales Guide Cisco Systems Technical Support Services for the Commercial Segment Selling Multiyear Service Agreements
Table of Contents Adding Value with Multiyear Service Agreements...................................1 Selling Services: Changing the Way You and Your Customers Think................2 Improving Your Sales and Margins..............................................3 Helping Your Customers Think Long Term.......................................6 Focusing on the Business Need.................................................7 Cisco Technical Support Services: A Complete Offering............................8 Cisco SMARTnet Services and SMARTnet Onsite...............................8 Cisco SMB Support Assistant...................................................9 Cisco Software Application Support Services..................................9 Cisco Unified Communications Essential Operate Service.....................10 Cisco Unified Communications Select Operate Service.......................10 Cisco Services for Intrusion Prevention Systems..............................10 Cisco Services for Integrated Services Routers...............................11 Discussing Financial Impact: Positioning Multiyear Solutions for Success..........11 Tailoring Your Approach to the Needs of Financial Decision Makers...........11 Calculating ROI................................................................12 Breaking Down the Upfront Investment........................................13 Demonstrating the Benefits of Improved Cash Flow...........................13 Offering Multiple Payment Options............................................14 Promoting the Benefits of Cisco Systems Capital Financing...................14 Best Practices for Selling Multiyear Service Agreements..........................14 Handling Objections................................................................16 Marketing Support.................................................................19
Adding Value with Multiyear Service Agreements The information in this guide can help distributors, resellers, and channel account managers boost revenues, increase margins, and build long-term customer loyalty through sales of multiyear service agreements of Cisco Systems Technical Support Services contracts to commercial customers. Cisco Services make networks, applications, and the people who use them work better together. Today, the network plays a more strategic role in a world that demands better integration between people, information, and ideas. The network works better when services, together with products, create solutions aligned with business needs and opportunities. The unique Cisco Lifecycle approach to services defines the requisite activities at each phase of the network lifecycle to help provide high-quality service. The Lifecycle approach helps identify a customer s service needs early in the sales cycle, allowing them to consider the costs of not only product, but also services, before attaining funding. Helping influence budget creation for services early in the sales cycle makes selling services an easier proposition. Using the Lifecycle Services approach to sell multiyear agreements will help you provide your customer with the full value that multiyear service agreements can provide. Increase your sales and margins with multiyear service sales. 1
Selling multiyear service agreements can help you: Increase customer loyalty Reduce administration costs Improve cash flow Increase revenue opportunities Enhance margins This guide focuses on selling multiyear service agreements and provides an overview of the services market, Cisco Technical Support Services, sales best practices, and objection handling tailored to the specific requirements of selling to commercial customers with up to 1500 employees. You will also find marketing resources to help start marketing campaigns quickly so that you can promote the value of services and generate demand. This sales guide is part of an ongoing Cisco effort to increase your service sales effectiveness by helping you sell Cisco services at the very first sales opportunity, secure additional revenue through targeting uncovered equipment, better capture opportunities to sell service renewal contracts, and add value through sales of multiyear agreements. For more information about selling services, please refer to our ongoing series of sales tools, which can be found at: www.cisco.com/web/partners/sell/promotions/services/arm/resources.html. Selling Services: Changing the Way You and Your Customers Think Multiyear service agreements are about adding value both for the partner and for the end customer. Including a multiyear agreement as a fundamental component of any solution will provide partners with improved profits and stronger customer relationships over a longer period. Multiyear service contracts also provide customers with important financial benefits, more efficient use of their time, and an easy route to helping to provide continuous coverage of their networking investment. Lead with multiyear service coverage at every opportunity as part of a complete solution. Selling multiyear service contracts should not be seen as a separate activity from selling at the point of first sale, securing a contract on uncovered equipment, or pursuing a renewal. The effort you have put into learning about selling service at these stages is compounded when you add a multiyear component to the solution. With just a small investment of your time, you should be able to improve your business performance significantly, as you improve your sales and margins. 2
Improving Your Sales and Margins Consider that when you sell a single-year service contract, you spend time preparing, selling, negotiating, and processing the contracts after you have closed the sale. When you offer a multiyear contract from the beginning, with the same amount of effort, your sales revenues and margins can improve dramatically. Selling multiyear service contracts can help partners in a number of powerful ways: Increase customer loyalty. Multiyear agreements lock customers into a longer commitment. A customer s willingness to enter into a multiyear agreement demonstrates a high degree of trust and confidence in the relationship, which means you are in a strong position to fend off competitive advances. Reduce administrative and operating expenses. Multiyear agreements help partners by simplifying the process to secure service revenues. Partners can avoid the administrative costs associated with processing annual renewals because they only have to sell, close, book, and register the contract once. In addition, partners can better use marketing budgets for first sale, uncovered equipment, and renewals campaigns to achieve a larger overall sale with a multiyear contract. In the end, partners will have more resources to support their existing customers and to recruit new customers. Improve cash flow. One of the benefits of selling a multiyear agreement is that partners are paid up front. This means that partners have more money to manage their own business, support a larger customer base, or invest. Increase revenue opportunities. Multiyear service agreements increase revenue opportunities by: Expanding the total revenue per customer Offering opportunities to up-sell and cross-sell Extending the overall relationship timeline 3
Furthermore, as you get better and better at locking in multiyear agreements, your overall revenue can increase significantly while your cash flow situation improves. Figure 1 provides a hypothetical scenario depicting how renewing service contracts every year can improve your revenue stream. As you can see, by year four revenues have quadrupled, and the partner has earned a total of $100,000 in service revenues. However, if every new service contract and every renewal were a multiyear contract, the chart would look like the hypothetical scenario depicted in Figure 2. Selling multiyear agreements has increased the value of each sale and created more opportunity to secure more new customers. The customer relationship timeline has been extended, and revenues have again multiplied. The result is that what was a revenue stream totaling $100,000 is now a revenue stream totaling $270,000. Enhance margins. The ability to increase total revenue for the same level of effort and operational expense helps partners to increase net margin. 4
Figure 1. Sales and Renewals of Single-Year Service Contracts 1 100 $100,000 90 New Service Contracts 80 Renewal Sales Cumulative Total Cumulative Total ($K) 70 60 50 40 30 $30,000 $10,000 $60,000 $10,000 $10,000 20 10 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 Year 1 Year 2 Year 3 Year 4 Figure 2. Sales and Renewals of Multiyear Service Contracts 2 270 New Multiyear Service Contracts $270,000 210 Renewal Multiyear Sales Cumulative Totals $210,000 Cumulative Total ($K) 150 90 $90,000 $150,000 $30,000 $30,000 $30,000 60 $60,000 $30,000 $30,000 $30,000 $30,000 30 $30,000 $30,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 1,2 Assumes 100-percent renewal rate. 5
Multiyear Coverage Helps Customers Lock in prices Receive continuous coverage Take advantage of discounts and incentives Better manage operating expenses Improve cash flow Reduce time spent renewing service contracts Helping Your Customers Think Long Term The first three editions of the Cisco services sales guides Making the First Sale, Selling Services on Uncovered Equipment, and Selling Service Contract Renewals emphasize organization and planning as important factors to success. This, of course, is true for selling multiyear agreements as well. However, to sell multiyear service contracts successfully, you will also need to help your customers think long term, understand the finance behind the benefits of a multiyear program, and be able to converse comfortably with both operations decision makers as well as finance decision makers at different size companies. Customers need service, and, if your previous sales and marketing activities have been successful, they see the value and are ready to make a purchase. But they are likely to think about service with a short-term perspective and focus on the larger upfront costs required for a multiyear agreement. If your customers focus too much on the larger upfront cost, they might miss an important opportunity to enhance the value of their networking investment, better manage their cash flow through financing, and more efficiently manage the service agreement renewals process. Multiyear agreements are an effective means for customer networks to have continuous coverage while at the same time allowing customers to lock in prices, take advantage of financial incentives, better manage their budget, and more. Always ask your customers how long they intend to have the equipment in use. Your opportunity is to help your customers change the way they think, to help them break away from their short-term perspective, and to get them thinking long term. The best way to accomplish this is through a solutions selling approach designed to help your customer focus on long-term needs. A solutions selling approach is about listening to your customers and asking the right kind of closed and open-ended questions to learn more about their needs, their objections, and the value that you can provide through your solutions (Figure 3). Figure 3. Ask Questions To Help Your Customer Start Thinking Long Term. Understand the Situation Uncover the Problems Draw out the Implications Demonstrate the Need 6
Important questions to ask your customer include: How long do you think you will have a Cisco network? For at least the next three years? How would monthly payments for your service contracts benefit your business? How would locking in prices and improving cash flow affect your business? What projects would you pursue if you had additional budget? The sweet spot is at first sale. Get your customers thinking about continuous coverage for the life of their Cisco solution. The sweet spot for selling multiyear agreements is at the point of first sale. Another important opportunity occurs during renewals. When you begin working with a customer at first sale or at renewal stage determine overall business needs by asking questions that will help you evaluate not only your customers hardware and software requirements, but also their need for ongoing technical support services over the life of their networking solution. This is your opportunity to explore: Your customers questions about cost of ownership The effects of unexpected downtime Their need to show a return on technology investments What a reliable network solution means to the long-term success of their business As you discuss these issues with your customers, you will discover the complete solution that will best fit their overall needs hardware, software, service, and financing and you will create a compelling case for continuous coverage over the life of their Cisco networking solution. Focusing on the Business Need The Making the First Sale, Selling Services on Uncovered Equipment, and Selling Service Contract Renewals sales guides provide overviews of some business factors that can influence your customer s need for Cisco Technical Support Services. These factors also affect your customer s need to consider a multiyear service contract. Customers need their networks up and running. Today, businesses of every size are highly dependent on their networks, and these networks need to stay up and running to enhance productivity, revenue, and business credibility. The cost of downtime can be substantial and can be measured in terms of productivity or revenue loss, damaged reputation, impaired financial performance, and other costs such as overtime and travel expenses. By including service when they invest in Cisco technology, customers can protect their investments and increase the contribution that their networks make to their businesses. 7
Customers need to increase return on investment (ROI). Technology evolves at a phenomenal rate. When the solution is maintained and updated on a regular basis, it continues to support the business by operating at a high level for the duration of its working life. Customers need to manage total cost of ownership. Planned and budgeted service and maintenance costs are considerably less expensive and less difficult to manage than emergency repairs or impromptu service calls. The cost of a service contract is rapidly outweighed by the costs to the business of any downtime, not only in terms of cash, but also in terms of credibility and lost business. Customers need to maintain a competitive advantage. Keeping network elements current with the latest features and enhancements aids businesses in quickly and efficiently implementing new applications that can lower costs, improve customer service, reduce delivery times, and expand the business into new markets. Customers need to maintain business credibility and continuity. Service contracts can help customers improve availability of company Websites and access to e-mail services critical to day-to-day operations and successful customer and partner relationships. Cisco Technical Support Services: A Complete Offering Cisco offers services to meet the needs of different types of commercial customers: Cisco SMARTnet services and SMARTnet Onsite Cisco SMB Support Assistant Cisco Software Application Support Services Cisco Software Application Support plus Upgrades (SASU) Cisco Software Application Support (SAS) Cisco Unified Communications Essential Operate Service Cisco Unified Communications Select Operate Service Cisco Services for Intrusion Prevention Systems (IPS) Cisco Services for Integrated Services Routers Cisco SMARTnet Services and SMARTnet Onsite Cisco SMARTnet services and SMARTnet Onsite can help commercial customers accelerate their business success and protect their investment in Cisco hardware and Cisco OS Software with support tailored precisely to the needs of their business. 8
Cisco SMARTnet coverage includes software maintenance (Cisco OS updates), advanced replacement (of hardware), technical support (access to the world-class Cisco Technical Assistance Center [TAC]), and Internet access to an online suite of technology-specific tools to help customers support their networks. With Cisco SMARTnet, customers reduce risk and increase ROI. The Cisco SMARTnet Onsite option provides a Cisco field engineer to install replacement parts at a customer site. For more information about Cisco SMARTnet services and Cisco SMARTnet Onsite, visit: www.cisco.com/en/us/partner/products/svcs/ps3034/ps2827/ps2978/serv_home.htm Cisco SMB Support Assistant Cisco SMB Support Assistant is a service option that provides technical support to small and medium-sized businesses (SMBs) using select SMB-class products targeted to organizations of up to 250 employees. Cisco SMB Support Assistant includes access to the SMB Support Portal and Client, which includes setup, configuration, and troubleshooting of devices, password recovery, and access to basic health checks and network troubleshooting tools. Cisco SMB Support Assistant provides 8x5 access to the SMB TAC, advanced hardware replacement, and minor software updates. For more information about Cisco SMB Support Assistant, please visit: www.cisco.com/en/us/partner/products/ps6193/serv_home.html. Cisco Software Application Support Services Cisco SASU Cisco SAS Cisco SASU and Cisco SAS help to keep mission-critical software applications (for example, network management and voice over IP) current with application updates to strengthen application functionality and to increase the ROI. Software Application Services (SAS) and Software Application Services plus Upgrades (SASU) strengthen application availability, functionality, and reliability with aroundthe-clock access to technical support and minor updates and, with SASU, major software upgrades. For more information about Cisco SASU, please visit: www.cisco.com/en/us/partner/products/svcs/ps3034/ps2827/ps2993/serv_home.html. 9
Cisco Unified Communications Essential Operate Service The Cisco Unified Communications Essential Operate Service combines all of Cisco Unified Communications system support requirements under one contract. This eliminates the need for multiple contracts for each application and server. Service contracts are simplified with reduced administrative overhead, resulting in faster time to problem resolution. With one simple phone call, customers can reach a team of engineers certified to work through problems and resolve issues quickly. The Cisco Essential Operate Service includes capabilities similar to those of Cisco SMARTnet and SAS offerings. Unified Communications software-only application support includes: Full-time telephone and remote technical and maintenance support services Maintenance and minor release updates Cisco.com knowledge base, including access to Software Advisor, Technical Assistance Center (TAC) Case Collection, My Tech Support, Output Interpreter, peer-to-peer online forums, and the TAC newsletter Unified Communications software application and server support includes all of the preceding features plus: Advanced hardware replacement (with the option of an onsite field engineer) Cisco Unified Communications Select Operate Service The Cisco Unified Communications Select Operate Service provides the same software application and server support as Essential Operate Service plus a simple-to-install monitoring solution designed for the Cisco Unified Communications family of products. The Cisco Select Operate Service remotely monitors important environmental, performance, and availability leading indicators for Cisco Unified Communications systems based on leading practices. The monitoring solution, hosted by Cisco Systems, helps you to proactively manage your Unified Communications system by providing critical event notification and performance reports using a Web portal. To learn more about Cisco Unified Communications Services, go to: www.cisco.com/go/ipcservices. Cisco Services for Intrusion Prevention Systems It pays to keep all your network assets protected and safe, ready for the next step in your network evolution. Cisco Services for Intrusion Prevention Systems helps to ensure your business can always meet the ever-changing threats to your infrastructure and your key data assets, as well as keeping all your networking applications up to date and protected against all known threats. To learn more about Cisco Services for IPS, please visit: www.cisco.com/en/us/products/ps6076/serv_home.html 10
Cisco Services for Integrated Services Routers Realize maximum potential from your investment in IP Communications with Cisco Services. The service offering especially tailored to Cisco Integrated Services Routers + Voice gives you fast access to specialists who can help you with every step of your move into the front line of powerful new technologies, sharing their knowledge and expertise whenever you need it. To learn more about Cisco Services for ISR, please visit: www.cisco.com/en/us/products/ps6779/serv_home.html. Discussing Financial Impact: Positioning Multiyear Solutions for Success After your customers are open to thinking long term, your next step is to help them see the long-term financial benefits of an investment in a multiyear agreement. You can accomplish this by: Tailoring your discussions to operations compared to financial decision makers Calculating ROI Breaking down the upfront investment Demonstrating the benefits of improved cash flow Offering multiple payment options Promoting the benefits of Cisco Systems Capital financing CFOs Evaluate Decisions by Addressing: Major changes in the business climate How those changes can influence the business Delivering measurable results Tailoring Your Approach to the Needs of Financial Decision Makers If you have been selling service at the point of first sale, on uncovered equipment, and at renewal time, then it is likely that most of your discussions have been with operational decision makers. Operations staff are responsible for the effectiveness of the network and are focused on the quality of the service and the details of the program. However, you should expect that the larger upfront costs, payment options, and cash flow implications associated with a multiyear service solution will bring a finance decision maker and possibly the CFO into the sales process. Be prepared to tailor your approach to the needs of the financially minded decision maker. CFOs and other financial decision makers care about the following issues: Effective cost and benefit management: avoiding significant investment spikes, improving the ROI/payback period, reducing expenses Budget stability and planning: fixing costs for contract duration and hedging against inflation and interest rates Conserving budgets: enabling alternative uses of budget Tax advantages Budget allocated versus business need and priorities 11
Calculating ROI An ROI analysis can be a powerful tool to help your customers start thinking long term, but it requires a salesperson to have some expertise and a willingness to customize the analysis using data specific to each customer. For an ROI discussion to be effective, you should thoroughly understand the elements of the analysis and confidently be able to answer questions about the results. If you have any doubts, have your finance group review your analysis before you share it with a customer. If you are prepared, an ROI discussion can help you learn more about how your customers calculate their rate of return and help you position multiyear agreements effectively. Cisco and Cisco Systems Capital offer tools to help you calculate your customer s ROI. For more information, go to: www.cisco.com/go/ciscocapital. CFOs often use ROI to measure IT investment. Let s look at three different scenarios that compare the cost savings between three customers purchasing a three-year multiyear service contract. The ROI scenarios shown here are hypothetical examples of how a customer can save money and improve cash flow by purchasing a multiyear service agreement. Please be aware of the following when creating your own ROI calculations for your customers: Multiyear discounts are subject to change, are specific to service programs, and vary according to geographic region and length of the multiyear agreement. Multiyear agreements require deal support automation (DSA) approval. Financing through Cisco Systems Capital is subject to credit approval. Customers are eligible for the discount for prepaying or for financing, but not both. Please contact your Cisco representative for more information about multiyear discounts. Scenario 1: Customer with <250 employees $10,000 service contract financed through Cisco Systems Capital In this scenario, the customer purchases a three-year agreement that would normally cost $9458 per year or $28,374 over the course of 3 years. By purchasing a three-year contract and paying up front for all three years, the customer pays $26,388 today, rather than $9458 now and $18,916 over the next two years. Paying up front results in a savings of $1986, or a 7 percent savings over the three-year price. If the customer chooses to finance the purchase of this three-year service agreement, the customer does not receive the prepay discount, but is able to make monthly payments of $788 at no interest. Additionally, the customer is able to avoid price increases by purchasing a multiyear agreement whether prepaying or financing. 12
Scenario 2: Customer with 250 750 employees $25,000 service contract financed through Cisco Systems Capital In this scenario, the customer purchases a three-year agreement that would normally cost $23,643 per year or $70,929 over the course of 3 years. By purchasing a threeyear contract and paying up front for all three years, the customer pays $65,964 today, rather than $23,643 now and $47,287 over the next two years. Paying up front results in a savings of $4,965 or a 7 percent savings over the three-year price. If the customer chooses to finance the purchase of this three-year service agreement, the customer does not receive the prepay discount, but is able to make monthly payments of $1,970 at no interest. Additionally, the customer is able to avoid price increases by purchasing a multiyear agreement whether prepaying or financing. Scenario 3: Customer with 750 1500 employees $100,000 service contract financed through Cisco Systems Capital In this scenario, the customer purchases a three-year agreement that would normally cost $94,575 per year or $283,725 over the course of 3 years. By purchasing a three-year contract and paying up front for all three years, the customer pays $263,864 today, rather than $94,575 now and $189,150 over the next two years. Paying up front results in a savings of $19,860, or a 7 percent savings over the three-year price. If the customer chooses to finance the purchase of this three-year service agreement, the customer does not receive the prepay discount, but is able to make monthly payments of $7,881 at no interest. Additionally, the customer is able to avoid price increases by purchasing a multiyear agreement whether prepaying or financing. Breaking Down the Upfront Investment As you can see, larger service contracts provide greater savings with a multiyear agreement. This, however, presents a challenge in that the upfront investment required can be daunting to a customer. Help your customer get over this hurdle by breaking down the multiyear expense into smaller, more palatable amounts. If we look at scenario three, the upfront expense of $283,725 can be broken down as just $7881 per month, or $1818 per week, or $259 per day. Demonstrating the Benefits of Improved Cash Flow Nothing is more critical to the success of an SMB than effectively managing cash flow. Your effort to sell a multiyear service agreement should always address cash flow benefits. Make sure your customer knows that buying a multiyear agreement can: Improve profits by reducing overall costs Provide predictable monthly expense budgeting Free up cash to invest in other projects or in expanding the customer base Provide an opportunity for the service agreement to be accounted for as an operating expense rather than a capital expense 13
Offering Multiple Payment Options After you have your customer thinking long term and seeing the financial benefits of a multiyear agreement, you can begin discussing the various options for payment and their effect on cash flow management. Proper control of cash flows has a dramatic effect on the overall success of a company. You can help your customers understand that taking advantage of special payment options allows them to put their cash to other uses. Prepay option. The prepay option requires that the entire contract term amount be paid in advance. By choosing this option, customers receive multiyear discounts and lock in prices for the life of the contract. Finance option. Customers can also choose to finance their multiyear agreement. In this way, customers receive the multiyear discounts, lock in prices, and spread out their cash expenditures with predictable monthly payments. Promoting the Benefits of Cisco Systems Capital Financing Taking advantage of a multiyear option or simply making a significant investment in Cisco technology, your SMB customers might feel unable to finance this level of purchase out of their yearly budget. Offering customers a financing solution that spreads the capital outlay over a number of years can enable them to deploy state-of-the-art network solutions to help enable more productive, collaborative business environments, without having to worry about how they are going to pay for it. Cisco Systems Capital financing solutions provide straightforward, flexible leasing options; competitive rates; and fast credit approval, documentation, and funding turnarounds. This can help your customers acquire the solutions they need to be successful. At the same time, financing solutions from Cisco Systems Capital can help partners and end customers preserve working capital and accelerate deals by timing lease payments with the period in which they are realizing the benefits of the equipment and service. To determine availability of Cisco Systems Capital services in your region and to learn more about the finance packages that Cisco can offer, please visit: www.cisco.com/go/ciscocapital. Best Practices for Selling Multiyear Service Agreements An effective sales strategy will help you increase your opportunities to sell multiyear agreements. The most successful Cisco service resellers are those that have a system in place and use it to promote sales. In previous sales guides, we discussed the value of setting up a database to help manage your sales opportunities and marketing activities. This database will be invaluable in your multiyear sales activities. Cisco provided working templates to help you set up this database in the Uncovered and Renewals sales guides. You can find the guides on the Cisco Website at: www.cisco.com/web/partners/sell/promotions/services/arm/resources.html. Begin sales and marketing activities at least three months in advance. 14
A powerful sales approach requires that you: Sell multiyear service agreements at every opportunity. Sell at first sale, on uncovered equipment, and at renewal time. Prepare your customer for the larger upfront expense by positioning multiyear as a fundamental component of a complete Cisco networking solution rather than as an afterthought. Do your homework. Use your database to track contract renewal dates for each customer and time your sales and marketing activities appropriately. Be sure to validate service availability, service levels, and service types so you can set your customer s expectations appropriately. Create price comparisons for one-year versus multiyear agreements in advance of any sales or telesales discussions. Factor in any discount percentages that your customer might be eligible for and do the math to break down the larger upfront expense into smaller increments by day, week, or month. Create ROI calculations that show the long-term cost savings and cash flow improvements specific to your customer. Have a finance specialist review your ROI calculations to help ensure their accuracy. Check with Cisco Systems Capital to ensure that financing services are available in your customer s region. Capitalize on the renewals opportunity. Every annual renewal is an opportunity to increase the sales and margins for that particular sale by selling a multiyear agreement. Your sales and marketing activities need to start at least three months before contract expiration. Lead with financing. Offer the option of monthly payments, but wait to offer additional adjustments for multiyear prepay until you have confirmed that the customer will absolutely prepay. Measure your performance. The most successful Cisco resellers use a mix of marketing communications methods: e-mailers, phone calls, and postal mailers. It is important to track the response to these different media. Cisco resellers state that different approaches work for different customers. For example, an e-mailer might produce a response of 10 percent, and a mailer might produce a response of 10 percent but it will be a different 10 percent. Eventually, you will discover which customers respond to phone calls, which prefer e-mail, and so on. What is important is to keep tracking, recording every little variable until you have a highly refined strategy for each customer based on techniques that have been proven to work. This is the point at which you start reaping the biggest rewards for the least effort. Be ready to offer customers specific details about how much they can save with a multiyear agreement. 15
Handling Objections As you pursue selling multiyear service agreements at the point of first sale, on uncovered equipment, and at renewals, you will need to be prepared to handle the standard objections that a customer might have to buying service, as well as additional objections specific to the dynamics of selling multiyear agreements. Some of the objections related to multiyear agreements are likely to be about finance issues related to the larger upfront expense required for a multiyear contract: budget, ROI, and financing. Be prepared to address the following objections to keep your customer focused on the long-term value that a multiyear service contract can provide. Objection I did not budget for a multiyear agreement. I only budgeted for a one-year service agreement. Response This is a good opportunity for introducing Cisco Systems Capital financing as a means of paying for the larger multiyear costs. Ask your customers if they would be interested in a multiyear agreement, at today s Cisco Technical Support Service prices, while making monthly or quarterly payments. Customers can take advantage of several lease and financing packages from Cisco Systems Capital, enabling services to be included together with equipment on a lease or financed on a standalone agreement. Their financial experts will work with your customer to provide the best rates and structures available, which can include zero-percent financing options. What customer would reject free financing, while making monthly payments? Financing can provide your customer an opportunity to free up additional capital budget, in order to add or make upgrades to their current network. Customers will appreciate this value incentive. Objection I do not want to make a long-term commitment until I know we will get value out of a service agreement. Response This is a good opportunity to reinforce the benefits of Cisco award-winning service programs. These are the primary points to keep in mind when speaking to your customers about Cisco service contracts: Service contracts provide rapid response to problems that can affect both network availability and your customer s business. Service contracts provide unlimited access to OS upgrades and provide software product support. Service contracts provide investment protection, because they give enhanced support for your customers equipment and software. 16
Without a service contract, your customer has no access to resources to help rapidly resolve network problems and keep software up to date. Objection I don t see the benefit of prepaying for the multiyear service agreement. Response Tell your customers that prepaying for a multiyear agreement can help them lock in prices, avoiding service price increases. Prepaying saves substantially over the cost of a pay as you go approach and saves interest charges for financing. Objection I do not see the benefit of financing the multiyear service agreement. Response Financing is becoming increasingly important as businesses strategically invest in their operations. Many businesses now realize that how they acquire technology is just as critical as the technology decision itself. Using financing eases the uncertainty of future technological developments and their effects on business planning. Tell your customers that financing a multiyear service contract can help them by: Providing a total solution Improving cash flow by preserving cash and helping them avoid use of bank credit lines Enabling predictable monthly expense budgeting Maintaining service coverage, extending life and maximizing benefit of equipment Locking in today s services pricing and avoid price increases Freeing up more cash to invest in hardware or other projects Enabling maintenance to be treated as an operating expense versus a capital expense Objection Buying a multiyear service agreement eliminates my ability to negotiate during the renewal process (because I will not be renewing annually). Response Tell your customers that a multiyear agreement will eliminate their need to negotiate for better deals because they will be saving money substantially over the cost of a oneyear agreement, taking advantage of discounts and incentives, and locking in prices. In fact, the multiyear discount is likely to be larger than any renegotiated price. At the same time, they will be freeing up valuable time that would otherwise be spent on the annual renewal process. Objection I cannot make an expense commitment beyond the current fiscal year because I do not know what my budget will be after this year (whether I will have budget in the future). 17
Response Emphasize that a multiyear service contract can help the customer place the entire expense in the current fiscal year. If the upfront cost is prohibitive, financing solutions can break the expense down into manageable monthly amounts that will fit within the customer s budget constraints. Objection Financing a service agreement seems complicated. Response Including services in an agreement from Cisco Systems Capital does not significantly affect the transaction cycle. After the services contract has been agreed upon, the customer enters a financing agreement through Cisco Systems Capital. Cisco Systems Capital will step in and place the services order, receive and pay the partner invoices upfront, and invoice the customer for monthly lease payments. The financing transaction is done at the same time the service contract is being finalized. Objection Buying a multiyear service agreement seems like it costs more in the short term. Response Acknowledge this larger upfront expense right away. But remind your customers that they will be saving substantially over the cost of a one-year agreement. This is also a good time to show your customers how this larger upfront expense breaks down by day, week, or month to show that it is a small amount to pay for such value. If customers choose to finance the solution, they can spread out the cost of a multiyear agreement over a longer period and free up cash for other projects. Objection I am worried that if I finance the service agreement, I will have monthly payments that are beyond my current budget. Response Cisco Systems Capital can provide flexible payment structures to accommodate customer budgets and allow them to pay for the services during the period they are receiving the benefits of the services. This frees up cash for use in other higher yield opportunities such as investing in new projects, R&D, or securing new customers. Objection I am concerned about locking up my budget for three years. Is there an out clause? Response This is one of the most difficult objections you will need to be able to handle when selling a multiyear agreement. It is true that there is no cancellation option, nor are service contracts transferable. This is a good time to remind your customers that a multiyear service agreement is the best way to protect the investment they have made in their networking solution. Revisit the solutions selling approach to help your customers think long term and re-explore how long the customer intends to keep the equipment in service. 18
Although a financing arrangement with Cisco Systems Capital is a noncancelable agreement, the customer does have flexibility to add or upgrade the services during the term of the agreement. Objection I am not able to commit beyond one year because budgets in the public sector are defined on an annual basis. Response Special government and education solutions are available from Cisco Systems Capital; these might make a multiyear service contract possible. A Cisco Systems Capital leasing expert can help you determine if this is possible. For more information, contact: www.cisco.com/go/ciscocapital. Marketing Support Marketing multiyear service solutions should not be seen as a separate activity from those targeting the first sale, uncovered equipment, or renewals. All of the marketing campaigns and materials that Cisco has provided for the various stages are still useful in marketing multiyear agreements. Successful marketing activities will assume that all service sales involve a multiyear agreement. Critical times for getting the message out about the value of multiyear agreements will focus around the point of first sale and renewals. Marketing campaigns can help you generate new business and reinforce the reason for buying services. Campaign Builder from Cisco can help you create customizable e-mail blasts, postcards, ads, flyers, and more to build customer awareness, while reducing time to market and overall costs. Campaign Builder is for Cisco Registered, Certified, and Specialized Partners in Australia, Canada, France, Germany, Italy, Latin America, New Zealand, the United Kingdom, and the United States. To access Campaign Builder from Cisco, please visit: www.cisco.com/go/campaignbuilder. We have provided samples of materials from first sale, uncovered, and renewals campaigns that can be used to help you sell multiyear service agreements. More resources can be found in the Campaign Builder tool. You can find extensive sales, marketing, and training materials for all Cisco service offerings by visiting the Cisco Technical Support Services Portfolio page at: www.cisco.com/en/us/partner/products/svcs/ps3034/ps2827/serv_group_home.html. First sale and renewals are critical times to pursue multiyear service agreements. 19
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