Should Your Company Tackle Installed Sales?
May 1, 2007
Why installed sales? This question opens up a host of separate issues regarding installation services for doors and windows—both for builders/contractors and remodeling/retrofit applications. Indeed, why would a dealer, distributor or manufacturer decide to assume the mantle of responsibility to provide installation of a product, versus simply selling that same product to the customer?
The answer is simple: in many cases and markets, if you don’t offer installation services for many products, you will not sell those products. The customer—whether they are professionals (builders and contractors) or the residential consumer—has determined that the only acceptable delivery method is via professional installation.
This situation is not new to our industry. Many lumber and building materials dealers and window manufacturers have been offering installation for years. But with the changes in our industry over the past 10 years, more and more customers are virtually demanding installation service.
Now the question becomes, “If we have to offer installations, how do we start?” I have consulted with literally hundreds of dealers and the questions are the same. Here are my suggestions for determining the strategic positioning of your program:
If this program or service is readily available elsewhere, why are we going to offer it?
• If your customers can obtain installation service through other channels, what are you going to bring to the table?
• Can you install better, more efficiently?
• Can you be competitive in your marketplace, and still generate sufficient margin?
• Can and will you offer your customer a value-added solution?
Is there a strategic and valid reason for subsidizing this activity during start-up?
• Understanding that this will be a cost and labor intensive start-up, are you willing to subsidize it during the initial phases?
• How long are you willing to underwrite the process until the program is capable of producing revenue to become a stand-alone profit center?
Do we allocate all costs to this program or activity? If we did, how likely would we be to continue it?
• Good question following on the heels of the item above. There are numerous hidden costs associated with an installed sales operation that need to be considered. A thorough and honest financial analysis and budget need to be established prior to commencing operations. Then financials need a thorough and regular review to insure that goals are being met.
If we devoted the resources required to support this activity to another initiative, would our customers be better served?
• What other activity could we/you offer that would provide the same or an increased benefit to our customers?
• What other services could we support that enable our customers to increase productivity, decrease operational costs and complete their respective projects with more ease and simplicity?
Will we still be offering this program, activity or service in 5 to 10 years?
• Are you committed to installed sales as an on-going activity?
• Will your individual and collective market sustain this activity?
• Will demand for your product offering decrease, increase or stay the same?
• Will other options become available to your customers resulting in the same end-product?
And the final question: “After a thorough strategic review, do we really feel a need to start this program, activity or service?”
If the answer is yes, then let’s look at what you need:
First is a thorough market analysis—who is installing your product today? Are they doing it well? Can you offer a better solution? I would recommend a comprehensive SWOT analysis for this process. Look at your company’s strengths and weaknesses, as well as potential opportunities and threats that might come with adjusting your business plan (Table 1).
Then look inward. Who, within your staff, is qualified and willing to run this program? A successful installed sales program needs a dedicated manager; someone who is solely devoted to insuring the success of this program. If you delegate this to someone who will only be available part-time, then the results you see will reflect this lack of commitment.
Next, survey your customers to see just who is really a qualified prospect for this service and who is merely a “suspect.” Oftentimes I see companies who assume more demand for their service than is present in the marketplace. This is a time for cautious optimism and the setting of realistic goals.
Now it’s time to develop a projected budget. What will the scope of your average project be? Analyze the material costs, labor costs, related installation costs (permits, dumpster fees, delivery fees, etc.) establish an accurate cost analysis of a project and then look at your market. What level of activity can you reasonably expect to achieve during the initial phase, six months, first year, and so-on. Don’t be overly optimistic. It is much better to project conservative numbers initially.
And finally, let’s get started. Train your sales team, train and certify your installers and begin offering the service with full commitment and both eyes open.
Mike Butts, president of LBM Solutions Inc., Dewitt, MI, is a consultant serving the lumber and building materials industry. His career spans nearly 25 years in the sales, management, consulting and training business, and he has provided services for a number of Fortune 500 companies. He is also a regular contributor for ProSales magazine and other trade publications. He can be reached at 517/668-0585 or on the Web at www.lbmsolutions.com.