The fees for S.F.I. leads range from as low as 5% up to 18%. If your current fully loaded marketing costs are over 10-15% or more, this may look workable. However, remember you may be called upon to put displays in the stores and man those displays as well.
Do the arithmetic, when you add the cost of in store displays, demonstrators or others required to do floor time you may detect another 8 or 9% – which when added to the fee paid could total 24 or 25%.
You have to confirm the leads, set the appointments and train salespeople to handle this “third party source” – still, it might be workable. Provided you can attain margins which permit this excessive marketing cost and still make a net profit.
Most of these S.F.I. partners supply heavy traffic for your exposure and many are equally demanding as to what and how products will be sold. They have a legitimate concern because they fear that aggressive selling will “put the squeeze” on their customers. Thus, the need for upgraded sales training is required. Beyond which you will also have to develop an ongoing relationship with the store manager and those other persons with which you have to interact. Whether you consider the terms or actions excessive or unfair – it’s their turf and you have to learn to act according to their culture.
You may find that S.F.I. partners require that you cover multiple stores and respond to each lead promptly. Thus the smaller sales organization may rapidly get inundated with leads which they can’t service promptly. Moreover, it requires a blending of two extremely different cultures. S.F.I. dealers (home improvement contractors) often salivate thinking of the potential of abundant leads, failing to understand that big box stores who advertise “lowest everyday prices” stimulate that kind of thinking for their customer, so the prospect you get may be conditioned to getting the lowest prices irrespective of the top of the line product you may offer. As one of our clients who has an S.F.I. relationship puts it, “The customer is looking for Nordstrom quality and service, at Walmart prices.” Thus S.F.I. dealers need to look carefully at their attitudes about customer satisfaction, then extend them to meet the requirements of their new strategic partner.
Another concern is if the relationship will last? Some years ago Lowe’s had such a program which had numerous manufacturers and hundreds of dealers involved. When they cancelled the program abruptly, those dealers involved were forced to remove their samples and displays from Lowe’s stores, to cease taking leads and discontinue selling practices.
Those dealers involved, scrapped their sample cases, presentation books, brochures, and sometimes uniforms which identified them with the Lowe’s program. In addition the programs and personnel dedicated to the S.F.I program for which the cost of hiring, training and development had been expensed, had to be written off.
Arguably, Lowe’s had experiences with some dealers within the program which they saw as unfavorable. If they saw this as a threat to their customer service image, they believe they acted wisely. However, this case makes it requisite for a dealer to examine thoroughly and act prudently prior to simply jumping on the bandwagon with an S.F.I. program.
The same may be said of involvement with a brand name which offers exclusivity as to product and territory. Frequently agreements tend to be overtly in their favor, begging the questions: What if they decide to introduce a similar product in your territory? What if they introduce a product under another name, yet, similar design or demand unrealistic quotas for product purchases or performance, or have unilateral cancellation privileges favorable to them?
On a positive yet sobering note, for those getting involved in either an S.F.I. or brand program, there is a retraining process that is necessary. Many of our valued clients have strong partnerships with brand name merchandisers. It does however require developing a new or modified sales and marketing model with explicit controls on sales styles and presentation methods, but with all these cautions, it is still workable for those who plan structures and control their new model.
Two questions are inherent in our evaluation of these kinds of relationships. The first is – Are the fees fair? The answer is – not in all cases. Certain “big box stores” make a 2 or 3% pre-tax net profit which requires purchasing, storage, merchandising, packaging and tons of personnel. In the case of a 10 to 18% S.F.I. fee, they may put little effort into the partnership except to extract a fee which requires little or no investment beyond their good name and some middle management interaction.
The other problem is a “clash of cultures”. Big home improvement product-oriented-retail merchandisers seldom understand the true dynamics of how a sale is accomplished in the home and do not put much energy into finding out how it is actually done. Neither are they aware of the numerous and enigmatic issues involved with hiring and training specialty salespeople to perform a customer appreciated sales methodology.
In truth, the “in-store big box customer” frequently places a strong value on the brand name relationship, yet is used to purchasing without the necessity of the abundant discussions that go into a home improvement project or the psychological dynamics that are present in a professional in-home presentation – the lack of which, can create high levels of customer dissatisfaction if the sale is made.
In many cases the S.F.I dealer unconsciously becomes subject to “big box” policy – as an example the store may have a policy of, “If you are not completely satisfied, return the product and we will refund your purchase price”. While this is great for cash and carry products, it can be costly when a customer desires to cancel long after the 72 hour
[3 working days] rule of rescission has expired. In some cases where custom windows were sold, measured, then made to order, the policy when enforced by the store leaves the dealer with inventory that could be un-sellable because of custom sizing.
The final caution deals with cash flow. Once you make the marketing investment, advance your salesperson a portion of the commission, order and pay for your product, permits, and installation costs and ultimately have a satisfied customer (in most cases) you will wait for payment because your “big box” partner does not remit payments until the job is fully completed and customer satisfaction is assured.
The latter, is not a condemning statement. Your strategic partner has every right to have these assurances, it is nonetheless, important to understand that you will dramatically increase your accounts receivable with this model of interaction.
All that being said, S.F.I. relationships with brands or “big box” stores represent an effective method for lead development provided there is fairness to both parties, a proper plan for utilization and control is implemented.