Editors Note: Last month Ira Friedman explained why the custom installation industry, as it currently stands, is fundamentally flawed. This is part two in a series of columns explaining why he believes this is true and what you can do to fix it.
Because the custom installation business is relatively new, it is beneficial to find other analogous industries with which to compare. On one end of the spectrum, the CI business is very much like retail, with its storefronts, inventory, and high fixed costs. There are plenty of successful CI dealers with expensive facilities.
Look at a dealer specializing in high-end theaters, like Roberts Audio Video in Los Angeles. Dealers like Roberts have impressive facilities with hundreds of thousands invested in just one room. Look at broad-based dealers like AV Design in Massachusetts. Brad Smith built an impressive facility with multiple rooms showing entry-level to high-end solutions. Look at Richard Ades facility in Oklahoma City (profiled in the July 2004 issue of RS). His company, Contemporary Sounds, relies on an expertly designed retail-like facility focused entirely on the CI customer.
As time goes by we see more CI dealers distinguishing themselves by investing heavily in demo and office space. The greatest difference between these showroom-focused CI dealers and retailers is a fundamental understanding that the facility is built to show the functionality of engineered systems, not individual products. Is this the appropriate model for a CI company? Not if you talk to successful dealers who have chosen not to have a showroom.
These CI dealers use portfolios of previous jobs and visits to existing clients to showcase their work. Some of the industrys biggest (and arguably, most successful) dealers have no formalized showroom. A large chunk of the industrys top dealers dont have fancy demo facilities. Some have no demos at all in their offices.
Both types of dealersthose who use in-house demos, and those who dontcan be equally successful, and this choice, in itself, is irrelevant in discussing a companys success. Showrooms and portfolios are selling tools. When put in the hands of great salespeople they are both effective. This leads to an interesting point: when these same tools are put in the hands of mediocre salespeople, the results are low sales and dismal profitability.
Imagine a CI dealer with mediocre salespeople pumping $500k into his showroom. The high overhead eventually takes its toll, and the company suffers. Think of a CI dealer who relies on portfolios and past work, then hires a new, mediocre salesperson. They flounder, and are eventually fired. Meaning this: High-caliber salespeople work with the tools that theyre givenportfolios, showrooms, whatever. And retailers? With their investment in inventory, advertising, showrooms, brand awareness, and most importantly store traffic, they are less reliant on great salespeople.
This is why retailers may seem more stable than CI dealers; retailers spread the risk of their success across many avenues, from their own brand awareness (advertising, longevity), location, showroom facilities, and salespeople. CI dealers, on the other hand, are quieter in their marketplace, and thus, more reliant on their sales staff to get out there and make some noise. You know from experience that great salespeople are hard to find and keep, making it tougher still for a CI dealer to maintain stability.
The solution to this vexing problem? CI dealers must find ways to attract customers and impress them with system-wide benefits. This gives stability to their business. They need a mechanism to develop qualified prospects.
Like retailers, some choose the use of traditional traffic builders, such as showrooms, advertising, home, and garden shows. Like architects and interior decorators, others invest in referrals by providing unequaled service through their engineering staff, programmers, and professional project management. Some of the very best CI dealers invest in both. And of course, the best CI dealers also invest in the skills of their sales force.
Ira Friedman (email@example.com) is the president of Bay Audio, a manufacturer of loudspeaker systems.