by West McDonald, via ENXMagazine
Anybody that knows me well knows that I am a big proponent of SBB (Seat Based Billing) for Managed Print.
I’ve talked at various events on the topic over the years and you may have been in one of those sessions. For better or for worse I’m actually now referred to as “that SBB guy.” That’s fine by me because SBB is no longer just an academic discussion. In 2015 we moved from “talk” to “planning.” This was the year I chaired the SBB Executive Council, a 29-member group of business owners and OEMs who spent 12 weeks building a viable SBB model. This exercise in planning must have worked, because 2016 marks the first year where I’ve actually had conversations with dealers, distributors and OEMs who are starting to offer SBB. You heard me correctly: SBB for MPS is now starting to become an actual offering. Most are in the beta phase working with a select number of customers to refine and test the model. It has begun.
You might have your skeptical hat on right now. Good. It’s what has helped you to become successful over the years. You were around when toner cartridges were only “sold” as a line item. Over the years, however, that changed. Somebody came to you with the crazy concept of CPP billing and eventually you adopted it. Now CPP could represent anywhere from 30% to 90% of how you make money. Don’t forget, however, that you took an educated leap of faith to adopt CPP in the first place.
Nothing is forever, including CPP billing. It has become what commodity based cartridge sales was 15 years ago: a downward spiral of margin reduction and increased competition. We all know these facts from first-hand experience so I’ll leave the facts and statistics alone.
It’s not just that CPP is long in the tooth. Customers are demanding new ways of being billed for most everything else they consume and “As A Service” models are proliferating. According to the Economist, “80% of companies are seeing a change in how their customers want to access and pay for goods and services and 50% of these same companies are changing their pricing models as a result.” A case in point: a couple of weeks ago I met a sales rep from Vestas (the windmill company) at a hotel where we were both attending different conferences. He shared with me that they now charge “by rotation” in many cases. So, the giant wind towers are never owned, the energy client simply pays for rotations. Imagine.
If we agree that customers are looking for new ways to be billed for services, how can we adapt? SBB (Seat Based Billing) is one unified billing model that has a ton of advantages:
1. Deepen Dealership/Customer Relationships
As traditional CPP has become more commonplace as an offering in the last few years it has led to a dramatic increase in competition. Customers are being inundated with alternative bids come contract renewal and the typical response is to offer a lower CPP rate to hold onto the business. Customers don’t appreciate the value we’ve brought them because when we deliver exceptional service it makes managed print seem easy. We need to deliver even more value and SBB could be exactly what the doctor ordered. By being able to layer additional services such as digitization and document management we can deepen the customer’s reliance on our expertise. The more things we can do to deepen the levels of service the more likely we are to demand a stronger price come contract renewal. In addition, low-cost providers will have a harder time competing as their simplistic offering won’t hold up to scrutiny.
2. Make Selling More to Existing Customers Easier
The cable industry, like the imaging industry, has had some difficult choices to make in recent years thanks to the advent of the internet and specialty providers like Netflix and HBO. But trust me, they aren’t taking it lying down. Cable providers now offer home phone, Internet and cell service in a bundled package. Three different things that all show up on one monthly bill. These bundles allow them to become much stickier with their customers and gain more wallet share.
An even greater example is Google. There was a time when you paid individually for your email, web sharing utilities, and online document storage. Google offers all of these services as a single user based bundle. Just like the cable companies they are bundling and charging by user to increase wallet-share, stickiness, and customer loyalty.
SBB for MPS can do the same for us in the imaging channel. The model allows us to easily layer on additional products and services onto the same bill. CPP doesn’t allow for this as the very model itself is page specific. With SBB or user based billing we can offer rules-based control software like Print Audit, Document Management software, Managed IT Services, heck, even Telephony and Cloud services. We can add all of these things simply by adding an addendum to the existing MPS contract. Unless your contract is CPP. Then you’re out of luck. Now you’ve got an entirely unique sales cycle ahead of you. The moral: Start moving to SBB and start layering additional high-margin products and services to the same contract.
3. Simplify Billing Administration
Billing by page is a complicated business. We have to collect meters, either manually or with a data collection tool (local devices anybody?), and then compile a bill that may consist of hundreds of individual monochrome and color charge items depending on fleet complexity. To make things worse, we only collect payment for print AFTER the printing has already occurred. Our billing departments have to spend a lot of time just trying to get people to pay within an acceptable timeframe. Do you have any customers who are notorious for paying 60 to 90 days out?
SBB changes both the complexity of billing as well as the amount of time it takes to get paid. The customer receives the same unified bill every single month. And because it’s a subscription service, the customer pays for the user’s ability to print at the beginning of the month!
4. Easier for Sales to Understand Commission
One of the most common questions I get from business owners when I am consulting with them around MPS operations is the best way to compensate reps that are selling a CPP based service. I have worked with organizations that still don’t feel they compensate their sales teams appropriately. Because SBB is a fixed monthly billing amount that is constant through the life of the contract we can much more easily and accurately build commission plans that are easier for everybody to understand. Every sales representative likes to know how much they are going to get paid for a deal and nothing makes it simpler for them to calculate than an SBB offering.
5. Early Adoption = Less Competition
The first question business owners usually ask me when we talk about SBB is, “Who else is doing it today?” Most ask that question because they want to know that SBB is a proven model with little risk. Others ask because they want to get in on the ground floor like they did in the early days of CPP for MPS. Why? Because that is where the money is made! Mature models tend to lose margin along the way. New models, if the people are buying them, come with better margins and increased win rates. SBB isn’t without its nuances and hot spots and there are very few providers who have taken the plunge (so far). If you are a progressive dealership looking to lead the next wave, then SBB should be quite attractive. If you are neck deep in an existing CPP model and worried about the risks of switching things up, SBB is likely not your cup of tea.
6. Sell What the People are Buying
The way people choose to buy things is changing dramatically. With technology changing so rapidly many companies are looking to preserve valuable capital and increase the number of subscription-based payment methods. Why pay for a $600 phone if it’s obsolete in 2 years? The same can be said of computers, servers, storage, and yes, printers and copiers (along with the related consumables and service items).
It’s up to us to work with our customers to see if they have other ways they would prefer to be billed. I can assure you many of your customers are doing SBB or another form of user-based subscription service for many of their business function areas today. You might be surprised at how interested they would be if you could offer MPS in a more user-centric model.
Offering a unified billing model like SBB could be a very smart option if you are looking to gain more wallet share, increase stickiness, simplify billing, and pay your sales team more effectively. If you aren’t certain where to start, you can contact me or other members of the Seat Based Billing Executive Council. This 29 dealer and partner group spent over 12 weeks working on an effective SBB model for managed print. You can also download a primer on SBB for MPS HERE (www.printaudit.com/sbb).
SBB is here and ready for prime time. The only question left to ask is, are YOU ready?