Are installed sales for you

tf|ITHkitchens and baths top remodeling projects, UY should a retailer include them when he considers establishing an installed services program?

"Yes," answers William C. Olsen, WCO & Associates, a Troy, Mi., sales and marketing company, "if he restricts involvement to installing products he sells and leaves the contracting business to contraclors. Avoiding complicated jobs requiring structural changes reduces liability and the competitive threat an installed sales program represen8 to professional customers. "

The decision to add installed sales requires careful consideration of the advantages and disadvantages. Some retailers consider installed sales a defensive move to match services offered by competitors. Others have watched distribution channels for products they sell change and see installed sales as a way to maintain or regain market share. Some view installed sales as a strategic move to bolster sales by addressing the demands of homeowners'

Although the repair and remodeling market is the fastest growing segment of the industry and an installed sales program the most direct participation, there are pros and cons to be considered, cautions Olsen, who specializes in developing and implementing installed sales programs.

ADVANTAGES: o ldentity for your company as the source of home improvement products and projects in your community.

O Increased sales for products you install without significantly increasing inventories.

O Turnkey solutions for homeowners with remodeling and replacement projects. This should increase the number of homeowners you sell and discourage existing customers from shopping elsewhere.

O Control. You can accomplish similar results by increasing your service level to professional remodeling conEaclors and offering a referral program to bomeowners, but the results are less reliable.

O Lnproved gross profit margins. Sales will increase for higher quallty, higher margin products and selling an installed package should reduce the pressure to cut prices.

O Differentiates your company from competitors and strengthens its position with manufacturers by adding value and increasing sales for products they sell you.

O Provides a convenient vehicle for selling service contracts and offering financing programs.

DISADVANTAGES: o Liability. Your company will sign the contract and assume responsibility for labor and product performance.

O Contractor customers may perceive the program as a competitive threat.

O Since installed sales are more similar to the remodeling business than the retail business, a company becomes subject to the fatality rate experienced by remodeling contractors.

O Difficulty of finding a sufficient number of subcon- tractors willing to comply with the performance standards you establish. o Your image may change from a low cost source of materials to a higher priced source for installed services. In order to succeed, you must sell at higher prices than most contractors you will be competing with. Selling at prices that don't yield an acceptable level of profit is the primary reason for the high rate of failure in the remodeling business. Your higher priced installed sales progrart may affect the perception customers have of your prices for materials that don't require installation.

The decision to offer installed sales is a serious one. If you decide to do it, tread carefully, Olsen says.

SUGGESTIONS:

O Restrict your program [o installing products you sell.

O Select subcontractors carefully. Their perfomnnce will leave a lasting impression with customers.

O Minimize competitive threat by restricting programs to products not generally sold to professional customers, subcontracting installations rather than hiring your own crews, communicating openly and honestly with your professional customers. Tell them what you are doing, why you are doing it and how they can participate or benefit before you do it.

O Stafl simple with single product/single trade installations (hot water heaters, giuage doors and garage door openers) and fine tune your system before moving to more complicated projects.

O Position your progrirm to compete primarily on quality and service rather than price. Many small contractors will sell for less, btrt90957o of them will fail within their first five years ofbusiness.

O Make sure installers are freated fairly and can make a profit on the installations they perfomt. If subcontractors can't make money, they will cut comers on the job or go broke. Neither altemative is good for you or your customers.

O Take time to leam the business. There are few similarities between the retail building products business and remodeling (installed sales) business. Recognize and address the differences to be successful.

Installed sales programs will be important to the future of many building product retailers, but the decision to initiate a program should be made carefully, Olsen advises.