How to Promote Business Development Through Vendor Programs China Leasing Summit 2011 June 23,2011 Jonathan L. Fales, Senior Managing Director The Alta Group

2 Vendor Program Benefits Why Do Vendor Programs Exist in the First Place? Client BenefitsVendor Benefits Cash flow needs One-stop shopping for customer Additional source of capital Close larger transactions, faster Off-balance sheet financing Client relationship management Avoid capital budgeting process Higher gross profit per transaction Acquire more equipment Competitive differentiation Acquire equipment faster Facilitate follow-on business Prevent equipment obsolescence Gain access to key customer decision-makers Avoid used equipment disposition Better control of used equipment The Alta Group – China Leasing Summit 2011

3 Vendor Program Benefits Why Do Vendor Programs Exist in the First Place? Client BenefitsVendor Benefits Cash flow needs One-stop shopping for customer Additional source of capital Close larger transactions, faster Off-balance sheet financing Account control Avoid capital budgeting process Higher gross profit per transaction Acquire more equipment Competitive differentiation Acquire equipment faster Facilitate follow-on business Prevent equipment obsolescence Gain access to key customer decision-makers Avoid used equipment disposition Better control of used equipment The Alta Group – China Leasing Summit 2011

4 Some Past Breakthroughs… Office Equipment Manufacturer Client needs:  Easy way to install and pay for numerous, small pieces of “out of sight, out of mind” equipment  Let vendor take care of maintenance, upgrades on a regular basis Vendor needs:  Make it as easy as for its customers to install its equipment  Create barrier to entry for its competition  Produce ongoing revenue stream The Alta Group – China Leasing Summit 2011

6 Solution Vendor: Pitney Bowes Solution:  Install all of its equipment on a very low-cost, monthly rental plan  Customer “can’t say no” because the price is so low  Eliminate purchase as an option  Results:  Dominant market share  Annuity revenue stream  Rentals paid for equipment within approximately 30 months; average rental lasted in excess of six years  Business model has been copied many others – for example, credit card swipe machines The Alta Group – China Leasing Summit 2011

7 Some Past Breakthroughs… Global Office Equipment Manufacturer Client needs:  Ability to install equipment on a pay per use basis  Let vendor take care of equipment maintenance, supplies, upgrades and equipment cost via a single monthly payment Vendor needs:  Extremely competitive market – needed differentiation  Wanted to improve account control  Wanted to control the used equipment market for its products The Alta Group – China Leasing Summit 2011

9 Solution Vendor: Xerox Solution  Bundled offering included equipment rental, all supplies, all product maintenance, and upgrades to newer technology as part of the rental agreement  Trained sales force to offer only leasing – wanted to minimize customer purchases  Results:  Dominant market share for many years  Lease penetration rates in excess of 80%  Xerox corporate business model now built around leasing and annuity income streams The Alta Group – China Leasing Summit 2011

10 Some Past Breakthroughs… Vendor: Turf Maintenance Equipment Manufacturer Client needs:  Inexpensive way to acquire equipment  Match the timing of payment for equipment with seasonal revenue streams Vendor needs:  Be able to sell equipment 12 months/year – not just “in-season”  Reduce distributor inventories  Smooth-out product manufacturing cycles The Alta Group – China Leasing Summit 2011

12 Solution Vendor: Toro Solution:  Promotional offering – “No Pay ‘Till May”  Customer can acquire equipment starting December 1, and make no lease payments until May  Results:  Distributors can lower winter inventory levels  Toro can produce equipment year-round, rather than shutting down production lines in late fall and early winter  Lease penetration rates increased, giving Toro benefits of better account control (lock out its competitors) and better control of its used equipment market The Alta Group – China Leasing Summit 2011

13 Some Past Breakthroughs… Vendor: Global IT Manufacturer Client needs:  Stay selectively current with technology – be able to mix user needs from leasing-edge to average to “trailing-edge”  Help with asset management of massive enterprise-wide PC inventories Vendor needs:  Differentiate product in a commodity market  Make it easy for customers to acquire new technology when needed  Improve gross profit and account control The Alta Group – China Leasing Summit 2011

15 Solution Vendor: IBM Solution:  Promotional offering - “Fleetlease”  3-year lease with right to swap out up to 50% of PCs for newer technology after 18 months at no penalty  Replacement PCs would be put on new lease – “virtuous circle”  IBM handled asset management for client as part of Fleetlease – asset tracking, customized billing, end of lease notification, assistance with remarketing customer-owned PCs  Results:  Several significant competitive wins  Increased market share  Opened the door for new client opportunities The Alta Group – China Leasing Summit 2011

16 Some Past Breakthroughs… Vendor: Large IT Value Added Reseller Client needs:  Many clients wanted to upgrade to new release of reseller software, but needed larger servers to do so  Industry was in a downturn – most clients had significant budget issues Vendor needs:  Upgrade as many clients as possible to new software – critical to generation of additional revenues  Reduce /eliminate support requirements for older software The Alta Group – China Leasing Summit 2011

18 Solution Vendor: Jack Henry (reseller for the trucking industry) Solution:  Developed a customized lease program with vendor partner  Vendor had new-generation servers to be announced in 60 days  Jack Henry worked with captive lessor to get credit pre-approvals for months leases for over 300 of its largest clients  On announcement day, each of Jack Henry’s pre-approved was given a proposal for a lease which included new equipment and the disposition of its currently-installed equipment (either a buyback or a lease buyout) with disposition costs rolled into the new lease payments  Results:  Most successful new product launch ever for Jack Henry  Generated then-record revenues for the company The Alta Group – China Leasing Summit 2011

19 Making Vendor Programs Work The Alta Group – China Leasing Summit 2011

20 Making Vendor Program Work What keeps vendor financing programs from working more effectively? The Alta Group – China Leasing Summit 2011

21 Making Vendor Program Work What keeps vendor financing programs from working more effectively? 1. Lack of executive commitment from the vendor The Alta Group – China Leasing Summit 2011

22 Making Vendor Program Work What keeps vendor financing programs from working more effectively? 1. Lack of executive commitment from the vendor 2. Lack of understanding and commitment from the vendor sales executive and team The Alta Group – China Leasing Summit 2011

23 Making Vendor Program Work What keeps vendor financing programs from working more effectively? 1. Lack of executive commitment from the vendor 2. Lack of understanding and commitment from the vendor sales executive and team 3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model The Alta Group – China Leasing Summit 2011

24 Making Vendor Program Work What keeps vendor financing programs from working more effectively? 1. Lack of executive commitment from the vendor 2. Lack of understanding and commitment from the vendor sales executive and team 3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model 4. Poor execution: credit approvals too slow/too few, slow documentation process The Alta Group – China Leasing Summit 2011

25 Making Vendor Program Work What keeps vendor financing programs from working more effectively? 1. Lack of executive commitment from the vendor 2. Lack of understanding and commitment from the vendor sales executive and team 3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model 4. Poor execution: credit approvals too slow/too few, slow documentation process 5. Boring offerings The Alta Group – China Leasing Summit 2011

26 Making Vendor Program Work Making vendor programs work 1. Lack of executive commitment from the vendor  Have an executive sponsor who is committed to the success of the program – will not work without one  Set program goals and review regularly with the sponsor 2. Lack of understanding and commitment from the vendor sales executive and team 3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model 4. Poor execution: credit approvals too slow/too few, slow documentation process 5. Boring offerings The Alta Group – China Leasing Summit 2011

27 Making Vendor Program Work Making vendor programs work 1. Lack of executive commitment from the vendor 2. Lack of understanding and commitment from the vendor sales executive and team  Vendor sales team must sell and support financing  They don’t need to become experts – just know enough to bring in the experts  Vendor sales training is important – not 20 minutes at the end of a sales meeting  Sales reps are coin operated – they’ll need some type of incentive 3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model 4. Poor execution: credit approvals too slow/too few, slow documentation process 5. Boring offerings The Alta Group – China Leasing Summit 2011

28 Making Vendor Program Work Making vendor programs work 1. Lack of executive commitment from the vendor 2. Lack of understanding and commitment from the vendor sales executive and team 3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model  Usually done as last recourse, after full purchase discount has already been given away  Reps need to learn how to wrap financing into the way they sell – can do this through vendor sales training  Results: higher gross margins, ongoing revenues, account control 4. Poor execution: credit approvals too slow/too few, slow documentation process 5. Boring offerings The Alta Group – China Leasing Summit 2011

29 Making Vendor Program Work Making vendor programs work 1. Lack of executive commitment from the vendor 2. Lack of understanding and commitment from the vendor sales executive and team 3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model 4. Poor execution: credit approvals too slow/too few, slow documentation process  Vendor programs should have service level agreements in place  Regular reviews – monthly, annually – and closed-loop process for fixing problems 5. Boring offerings The Alta Group – China Leasing Summit 2011

30 Making Vendor Program Work Making vendor programs work 1. Lack of executive commitment from the vendor 2. Lack of understanding and commitment from the vendor sales executive and team 3. Poor sales execution: selling leasing at the back-end, instead of in the beginning as an integrated part of the vendor’s go-to-market model 4. Poor execution: credit approvals too slow/too few, slow documentation process 5. Boring offerings  Core offerings are an important base – full payout, etc. But…  Sexy offerings sell – 0% financing, “No Pay ‘Till May”, Fleetlease  Be creative!! Use financial engineering to construct an offering that matches your client’s needs with a unique financing structure  Sexy offerings mean success and… The Alta Group – China Leasing Summit 2011

32 Thank you! 谢谢 ! Jonathan L. Fales Principal, The Alta Group The Alta Group – China Leasing Summit 2011