Its only too difficult to earn a reasonable margin 50% or more over the cost of materials because digital signage and menu board software and all of the media players are crippleware that rarely if ever can be integrated with other software which is how VARs used to add value by writing or modifying and integrating software with extensive configurations.
Most of those who continue to refer to themselves as VARs lie to themselves and lie to everybody involved acting out a charade as they are in fact little more than order takers and delivery boys.
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How do you add value to generic products?
- Scott Sharon
When I first started my career designing and manufacturing menu boards more than 30 years ago, adding value was a given. We designed, engineered and fabricated them from basic raw materials. When the design was complete we added up all the raw material, direct labor, manufacturing burden and tooling to get a total cost. We added a markup (usually around 50 percent) to cover overhead and profit. That gave us our selling price. This process added our value to the product. If we did this process well and had good customer service, we were successful.
The process is totally different with today's digital menu boards. We purchase LCD screens, players and maybe even the software developed and manufactured by someone else. Even the smaller items such as mounting brackets and cables are manufactured by someone else. We are referred to as Value Added Resellers or integrators, not manufacturers. So, where do we add our value in this process, and how do we cover it in our price? Our value is determined by how well we design our digital menu board systems, the quality of the products we choose and how well we manage our projects: how well it satisfies our customer's needs and at what cost.
We add value by providing great customer service and training our customers on how to get the most value from their systems. This is an area where I feel many of us are still falling short. I have evaluated many of the systems out there, and I find very few end-users that are utilizing the full capabilities of their systems, so they aren't obtaining the full value. If we all do a better job of increasing our customer's ROI on digital menu boards, it would be a tremendous boost to the industry.
I have worked with several of the traditional menu board manufacturers, helping them convert to digital boards. They all have a difficult time with determining how much markup to add to their products. Many still believe they need to get the 50 percent I mentioned in the first paragraph. However, I don't think that's practical as a reseller because it's too difficult to add that much value to the process. Also, if they take advantage of all the engineering, programming, warranty, marketing and service support the manufacturers and distributors provide, their overhead would be much lower and less markup would be needed.
The companies entering this industry from the Audio/Video and IT industry don't have as many problems converting because their process does not change as much; I think, however, that their lack of menu board experience helps even things out.
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Scott Sharon
Vertigo Group USA president Scott Sharon has decades of experience in the sign and menu board industry, and nearly another decade in digital signage. He’s a longtime proponent of, and innovator in, expanding the deployment of digital menu boards in QSRs.
