November 3, 2008 Vendor Agnostic -vs- Vendor Agency?Which approach is best for your business and your clients? The title or question of today's blog posting was submitted by Mark Peterson, a new member to TA's LinkedIn group. I spoke with Mark on the phone and visited his website to learn that as an auditor/consultant Mark is on the "vendor agnostic" side of the fence who receives no compensation from telecom vendors in order to remain completely neutral. He only gets paid through "shared savings" when he saves his business clients money on their phone bills or through established hourly or project based consulting fees. His model is roughly the same as many other truly vendor agnostic telecom consulting organizations like Abilita, Schooley Mitchell and the Society of Telecommunications Consultants ("STC"). Five Reasons Clients Choose "Agency" Over "Agnostic" While I respect the "vendor agnostic" approach and admit it is the "ideal" approach in a perfect world (I briefly tried it myself), following are the main reasons I choose vendor agency and believe vendor agency is the more sustainable approach. 1. Most clients prefer to not pay consulting fees "Agency" is a model that business owners and managers easily accept. I tell new prospects "we get paid just like a real estate agent or a stock broker" and they immediately understand. Prospects expect that like a real estate agent or a stock broker, if I keep my client's interest first they will reward me with repeat and/or ongoing business. The price for the business owner to "test the water" with a prospective telecom agent is pretty low. They ask you for a proposal and they get it for free. Most businesses that are successful enough to have sizable telecom bills are run by owners and managers that are savvy enough to evaluate the honesty (or at least check the references) of a telecom agent. That being said, most business owners I've met would prefer to simply find an honest person to do business with over paying consulting fees they feel they can avoid. 2. Clients get better rates through agents To get the best price for any product or service you need to know what the wholesale cost is. Knowing this you can then add in a reasonable margin to arrive at a fair price. Because agents know what their commission is they know what the "wholesale" price of any telecom product or service is. Agents can elect to take a lower commission or not depending on how much ongoing consulting service they expect a prospective client will require. Since agnostic consultants usually get their pricing from a provider's direct retail rep (who rarely knows what the wholesale price is), agnostic reps usually only get truly low pricing by pitting the different vendors against one another and chiseling the price down. This sort of price negotiation does not ingratiate the consultant to the vendor. By the time a vendor gets a new customer this way there is rarely enough margin left in the deal for the vendor to even like the new business customer they are getting. With access to the wholesale pricing structures of multiple vendors, agents can honestly tell clients, "this is the fairest and lowest price from three different vendors we send deals to and I recommend ____ because of ___." By not constantly chiseling the vendors, agents get better pricing and much better customer service for their clients. 3. Agents are better trained Most telecom vendors have official "channel programs" to bring in new business through agents. Telecom agents are trained by the vendors as rigorously as their direct reps, especially in the realm of order processing where most problems tend to occur. And because telecom agents live on repeat, long term business, telecom agents are more likely to do whatever it takes to make sure their customer's telecom service is delivered flawlessly. Retail telecom salespeople generally get paid the same whether the customer's service is installed flawlessly or the provisioning is a complete train wreck. Agnostic consultants that put their clients orders in through a direct retail rep will find that they have little control over the entire provisioning process. If consultants put the same order in through an agency they will find that the whole provisioning process is a lot more user friendly. 4. Agents are pretty "agnostic" already If a telecom agent is reasonably "established" (they have a web site, a couple years of experience and confirmable references), to assume that an agent will only recommend a vendor that pays the best in spite of a client's needs is simply incorrect. While each competing vendor an agent represents certainly has important differences, for the most part, all the vendors are "close enough" to where a successful agent does not really care which vendor of three recommended an agent's client chooses. When I give a business client or prospect a three-vendor proposal I say, "Here's what you have now with your current vendor and here are three competing vendors you can go with. A choice of any one of the three would be a fine choice. If you ask me which I recommend and why, I'd have to say _____." Customers simply want informed choices. Successful agents offer their clients objective choices both the client and agent can benefit from. 5. Commissions pay more mortgages than "shared savings" When push comes to shove, honest, long-term consulting isn't cheap and it's certainly not free. Successful telecom agents have families to feed and mortgage payments to make. To make sure they keep earning enough money to pay for both they need to calculate the highest and happiest return for any given investment in time. In the long run, a 10% agency commission pays more consistently than "shared savings" or time/project based consulting fees that a client has to write a check for. Because many "shared savings" prospects choose to "do nothing", an agnostic consultant can find he or she has many clients but no income. Most successful business owners know that that their vendors' performance is roughly equal to how much their vendors are getting paid by the business. Business owners that know their telecom agent is getting paid a 10% commission of every phone bill the business pays generally feel their agent is a business partner that has been paid and needs to perform. Agnostic + Agency = The Perfect Combination? I very much doubt the five points above will convert even one agnostic consultant to agency just as few successful agents would ever consider switching away from commissions to billable fee. Luckily neither agents nor agnostic consultants need to switch to benefit from each other's world. In my experience, the most perfect combination of teamwork results from agents and agnostic consultants working with each other. Because of the propensity of many "clients" to "do nothing", agnostic consultants living off of "shared savings" need to go through a lot of proposals to make a decent living. Instead of doing all the time consuming analysis themselves, many successful agnostic agents hand their prospect's phone bills over to a trusted telecom agent for a quick "three vendor" savings proposal. By working together, both the agent and the consultant can stick to what they're best at. Agnostic consultants focus on finding phone bills to analyze instead of analyzing phone bills. By already knowing the best vendors and best prices to match to any business prospect, agents can churn out client benefiting proposals much more quickly than consultants working with three different retail vendor contacts. Fellow TA Members:
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