How Full is Your Glass?
3/5/2012 7:48 AM
by John Sciacca
As a custom installer there are more than enough negative market conditions today to make you pessimistic about your future. Many companies have gone out of business, while those that remain have sales figures that often look like a giant, upside-down V, peaking somewhere right about 2007. More and more consumers are choosing to shop on the Web, video is essentially a throwaway, lost-leader, profitless item, and the iPad has taken a toll on dedicated touchpanel controller sales. And even distributed audio systems – long the complex, labor intensive, programming-rich gold and diamond vein that installers mined over and over – are becoming increasingly easier and more DIY.
But as I started thinking more about the challenges we all face, the more I began seeing the proverbial glass as half full, rather than half empty.
I had a sale the other day that I was initially pretty excited about. It was a redo for a client’s home theater system that we had initially installed about 10 years ago. We replaced his projector and ceiling mount, retro’d in a 10-meter HDMI cable, ripped out and replaced his A/V receiver, removed his dated control system and put in a new URC RF system, added a Blu-ray player with Netflix and rewired everything for HDMI. With all of the new parts – including a Runco projector – tax and labor, it was an $8,600 sale. Not too shabby.
“Eighty-six hundred?!” I thought. “That’s nothing! That is almost $1,500 less than the price for just the projector that we originally installed. A few years ago this would have been at least a $15,000 sale, easy.”
Then I took a mental step back and realized that I could just as easily look at this in a whole different light.
Sure, I didn’t make as much money on this sale. Sure things have come down – WAY down – in price. But it’s not a few years ago. It’s today. And, wake up, people, things ARE different and they AREN’T going back.
So, what good news can we glean from this?
First, yes things are cheaper, but this can be used to your advantage. There were lots of customers out there that might have loved the idea of a large projection screen true movie experience, but just couldn’t afford the $20,000 price of admission that it required several years ago. But now that good two-piece systems can be had for $5,000 and less, this is an entirely new market to go after. Think that these people wouldn't be thrilled to find that high-end performance – like Runco – is now within their budget? And these are systems that people aren’t tackling on their own. Systems that require professional installation assistance. Systems where you can get in, install something super impressive, quickly focus and dial-it-in, and leave them with an amazing experience that they will not soon forget and a nice check in your pocket. Also, this was a customer that elected to ditch a projector and upgrade instead of replacing a lamp – a decision he likely wouldn’t have made had the projector been $10,000.
Second yes things are cheaper, but they have also gone through many improvements in the past few years. Do you have any installed systems that are pre-HDMI? Or systems that are pre-streaming? Or systems that are pre-Blu-ray? Or systems that have outdated control interfaces? These are all great reasons to contact your clients and offer them significant performance upgrades for a small investment. A receiver that was purchased just three years ago might be WAY out of date in the features and performance department, and for around $500 you can present clients a new receiver that offers $1,500 or more in 2007 dollars-performance. Any chance to get back into the home of an existing client is a chance to re-establish a relationship and remind them of what you do. And maybe they’ll know a friend that has been thinking of making an upgrade.
Third, yes prices ARE cheaper but this has opened up an entirely new world for possibilities for automation. Cool tricks like lighting, HVAC, security, and shading control used to be very expensive propositions. Doing even a moderate-sized home would easily require a five-figure budget that was beyond what many non-one-percenters would consider. Now with systems from Control4, Lutron’s RadioRA2, URC, and Crestron’s Prodigy, you can offer clients cool tricks for a fraction of the price. Put together a packaged system – say a thermostat, X-number of light dimmers and maybe some shading, security, or door lock control – that you can offer to people. That way automation isn’t some ethereal, nebulous concept but a fixed, “THIS is what it is going to cost to automate your home” proposition. And these are systems that aren't going to be gobbled up by the internet or big box stores, because they require integration that is right in the wheelhouse of the CI industry. And if you haven’t looked into selling Lutron’s new Cell Shade system – with prices starting under $300 – you need to strongly reconsider. Motorized shading is one of the coolest tricks going and something that people aren't going to find on the internet. Here's a video of the shades in action in my home.
Fourth, yes video margins are now thinner than the blades on a Schick Quattro, but with Sony, Panasonic, and Sharp each posting multi-billion dollar losses last year due to plummeting video pricing, don’t think that this is lost on them either. They are all looking at new ways to revitalize video profits, and need high-end CIs to sell and install these premium sets. Word is that Samsung is also looking at ways to reign in the Web price butchering which should provide CIs with a more level selling field. And whether it will be larger screen sizes, OLED, 4K resolution, glasses-less 3D, video chat or something else, you can rest assured that a new technology will be always around the corner vying for consumer dollars.
Fifth, yes, A LOT of companies have gone out of business. Some of them were quite good and capable and failed through little – or no – fault of their own. And that sucks. But, let’s be honest. This market got glutted with “professional installers.” (And I don’t think that those small, simple quotation marks can possibly convey the dripping with sarcasm and contemptuous tone with which I am actually writing that phrase.) For a while there, when construction was really booming and there was WAY more work than anyone could handle, new shops popped up literally overnight; like horrible, poisonous lawn mushrooms that tried to choke out the beautiful, luxurious grass. Anyone with a truck/van, a tool belt and a magnetic decal was suddenly calling themselves an “AV Installer.” We have run into jobs where people told us that their flooring company or plumber did the work because “they had a guy.” Well, a lot of this work was terribly done and it reflected badly on the entire industry. There’s a lot of clean up out there, boys and girls, and it doesn’t take much to go in and really look good when you find a system that is often held together with little more than electrical tape and hope. Besides winning over a new customer, you’ll also likely find these systems were grossly undersold to begin with and can use all manner of upgrades.
Sixth, OK, you probably aren’t gonna sell nearly as many $1000 touchscreens as you used to. And, yes, that sucks. The iPad, iPhone, and iTouch were all giant punches-to-the-jeans of the control market. But people love their iPads and they aren’t going away any time soon – with a new one expected to be announced this week – so we’ve got to stop fighting it and start embracing it. Nearly every system we sell now offers some kind of iPad control option. Embrace that and use it to sell things you CAN sell and make money on. “You probably already own an iPad; what if I could show you how you could use it to control your lighting or HVAC or your music collection?” I sold a three-zone Control4 system this past week because the customer came into our showroom and saw our iPad lying around and mentioned that she loved her iPad. Just like that. iPad has definitely closed a door but opened up a bunch of windows.
Seventh, when price becomes a common denominator, what is the differentiator? The internet is making it fast and easy for anyone to shop and compare pricing. And when we ultimately get to a point when pricing on components is the same across the board, what will be left to separate you from a soulless click-to-buy experience? It will be your knowledge. It will be your experience. And ultimately it will be the thing that has always been the number-one go-to tool for the custom installer: your service. This is something that the internet and the big box stores can never match or harness. It is your number one asset. Make sure you tap into it, use it, and deliver it.
Sales might not be falling into your laps or beating down your door like they did in the past, but by adjusting your outlook, plenty of new opportunities abound. Will 2012 be the year of rebound and recovery or another year of regret and recession? Glass half-full or half-empty, the decision is yours to make.
2 comment(s) so far...
By email@example.com on
3/7/2012 8:19 AM
How Full is Your Glass?
John you are right on all counts. I'm pumped and ready to embrace the new normal.
Guys don't sleep on Digital Home Health and Remote Monitoring also.
By firstname.lastname@example.org on
3/7/2012 1:36 PM
How Full is Your Glass?
While I don't disagree with anything in this article, I do find it interesting that just about the only ones in this industry that seem to be positive about the current state of our business are trade magazine writers. And Jeremy Burkhardt.