Fees vs. Commissions: The Double-Dipping Debate

One of the growing debates within the channel is whether telecom agents should charge for pre-sale and post-sale support such as needs assessments, telecom management, help desk and the like. The issue has arisen as more partners take on consultative roles, moving past their transactional roots. The shift means many agents are spending more time and effort helping customers, although few seem to be charging for that extra help. The dominant argument against charging is that residual commissions from carriers cover such support; making clients pay would amount to double-dipping, say the unconvinced. But proponents say commissions only compensate for a transaction, not a partners expertise; charging forces clients to evaluate how much they rely on their agents and assigns true value to those relationships.

Channel Partners readers seem to lean toward the latter view. In early May, Channel Partners conducted an informal online poll (see chart, “Should Agents Charge?”). As of May 31, two-thirds (69 percent) agreed that partners need to charge for their expertise. A third (31 percent) said partners should not add fees for supporting clients. Among those in the minority view, the most said carrier commissions pay for the support agents should provide but some said customers will not pay for advice and support.

But times have changed. No longer are agents earning the huge commissions they once did; as prices for network services have come down, so, too, have agents’ commissions. Plus, technological advances and service delivery changes (e.g., managed and cloud services) are causing agents to venture into new territory certainly past the carrier demarc and into the customer’s IT and communications environment where the complexity of unified communications, multivendor solutions and bring your own device reign. The challenges agents face today weren’t here a decade ago.

These are reasons proponents cited for charging their customers for the support-related services they now must provide, regardless of also being paid carrier commissions.

But there is a larger argument to be made: Channel partners shortchange themselves when not charging for the work they do. The fact that a provider pays residually doesnt change the fact that its a payment for a transaction,” said Dan Vidal, managing director of Telecom Advisors, which has charged most, although not all, clients for support for two years. Its not holistic to only provide service to that specific piece of their telecom world.” The ideal would be to oversee the clients entire communications life cycle admittedly, an ideal not easily achieved.

Interestingly, none of the agents interviewed by Channel Partners said they should not charge. Who would be very against it?” said Mark Brown, a principal at Portfolio Communications, a self-described transactional agency that so far has not charged for support. If theres money to be made, most agents will embrace the idea, he said. However, he added, I do think agents tend to give away value … to try to close a sale quickly.” Brown recently did this and is now considering charging for his professional services.  

In May, Brown met an executive of a logistics company. The firm was moving and needed help with its communications setup. On the spot, the executive asked Brown to do some consulting. The expected outcome, of course, was that Portfolio would land the job. But things didnt go as planned. Once the executive declared Brown involved in the process, the logistics companys head of IT said he already was working with a partner and they were too far into the deal to turn around. Portfolio lost out. I ended up doing probably three hours of work” for nothing, Brown said. Sure, the logistics company may send Brown a referral lead but if he had had a statement of work on hand for the executive to sign, he would at least have made some money and secured his place as a subject matter expert. After he told his story, Brown paused in a moment of self-reflection. Then, he said, I need to stop doing this. Im doing too many things for free, and thats not good for me or my existing customers.”

So what has kept agents such as Brown from charging their customers? Some sources say the answer comes down to fear of clients reactions, and then not knowing how, when or where to start charging.

Of course, there still are some agents unconvinced that they need to charge customers for support, all of the time. Steve Roy, owner of TelecomBuyer, is one of those partners and he prefers to serve as a knowledge broker, rather than managed services provider, for his clients. We are a small but effective agency and we like the personal relationship with our customer,” Roy said. We get enough in residuals that doing some of the support services, or most, is not hugely time consuming for us.” Still, Roy leaves the door open. He will charge for support when no commission check will come of the service involved. Examples include when a customer requests a move/add/change or wants help deciding which PBX to buy. Thats when he imposes a one-time professional services fee. I have not yet drunk the Kool-Aid that you have to become an MSP to survive, when we can easily add support services,” Roy said.

How to Have the Conversation

For agents ready to charge for support, its important to learn from those who have made the leap themselves. Lets start with the hardest example: talking about charging for support with the client youve helped for years, for free. This is absolutely the most difficult scenario and scariest for channel partners,” said Vidal. Ive gone through a few of these. None are the same and none are easy. But you just have to do it.”

Use the following advice to create an approach that works best for you.

Script No. 1

Script No. 2

How to Charge for Support

BENEFITS OF CHARGING

Charging for support yields multiple positive results, sources say. Here are some of those outcomes:

Charging works. At ATC, for example, 25 percent of 2011s revenue came from consulting. This year, Goodwin expects consulting fees to comprise a third of his companys revenue. Over at Telecom Advisors, charging has resulted in more than 20 percent revenue growth each year, Vidal said. Agents who charge have the competitive edge, he said. My model has not lost to theirs once. Im not saying my model is better than theirs, Im saying this model is the future, especially with eroding commission margins and services driving down to almost free. … This is a big, healthy portion of what a channel partners business might look like.”

With reporting from Khali Henderson