Redefining Custom - ResidentialSystems.com

Redefining Custom

To separate yourself from the mass market, you must add value for your customer.
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In the weeks between Thanksgiving 2003 and the beginning of 2004 the virtual tidal wave of print, radio, television and magazine advertising for ever cheaper CE and home entertainment products gouged a new channel through the industry. It wiped the shore clean of the weak and marginal retailers and custom dealers, causing many to simply fold their tents or just lock the doors and walk away.

At the root of all these changes was a simple and unalterable fact: price and margin had been eroded to unsustainable levels. Many "channels" in the CE world have become so focused on a "totally lowest price" strategy that they have forgotten that you still have to make enough money on anything you sell to support the infrastructure needed to sell it.

Several major computer companies have entered into the market with core custom products such as plasma at prices that are often below the cost paid by non-retail channel suppliers. This trend also has made it increasingly difficult to persuade customers that the design and installation oriented channel has something to offer that has actual perceived value.

When the price differential between their plasma and our plasma can approach 50 percent (or more) it's a non-trivial task to explain why. Yes, we all know that their stuff is low resolution or not 16x9. However, in a purchasing environment wherein customers have been conditioned to expect a massive discount or 0-percent-forever financing, the technical wonders of your variety of something is not a sufficiently weighty fact to make your case.

To make matters worse the industry has passively let the term "custom" become so thoroughly prostituted as to almost become worthless, at least on the surface. Customers have custom water and custom cabinets (made by Sears in a big factory somewhere, no less), custom car washes and custom cookies, custom suits, custom fragrances, custom cosmetics, etc. What they don't have, and what we should be focusing on is really customized systems and lifestyle-knowledgeable designs, functionality and actual installation services along with maximization of the audio side of the equation, where real profitability is still feasible.

While its certainly possible to make money on some of the aspects of the video portion of any project, real profitability from the products themselves (with a few specialty brand exceptions) is increasingly difficult and is likely to remain so for the foreseeable future. Too much "commoditization" has already taken place in the mainstream channels to allow a return to "normal" margins on most display hardware.

A number of dealers have already developed "bracket" packages of better loudspeakers, whole-house audio and related services plus real installation to go with display products purchased by potential customers from other sources such as mass merchants, the web and computer resellers. Instead of giving up when the customer decides to buy that $2,500 plasma, these savvy dealers try to customize the system with what the customer is willing to buy from them. This might include an external video processor to make that EDTV look better and other related services or products.

Why the emphasis on "real installation?" It may seem obvious to anyone who approaches this issue from the custom installation channel viewpoint that installation means precisely that. If, however, you think that is actually the case, then think again. It would reward you to go to your local major retailers and check out what their "we install" policy really means. Find out what it covers, what is done, by whom and for how much. This would be especially useful if the install option is relatively new to the store or chain.

To your surprise, you will likely find that in many cases their concept of "installation" is nothing more than a fancy repackaging of the word "delivery," with the courtesy of removing the often enormous amounts of corrugated cardboard material that accompanies many large video products on their journey. Perhaps, after you do this little exercise in competitive espionage you will see why marketing and promoting your installation capabilities, the training of your people and the realities of configuring often complex systems is not just an "Oh by the way" part of your business.

This is also where the real meaning of the word "custom" needs to be re-defined by you, for your customers and your potential customers. Given current competitive market conditions, you don't have much of an option if you intend to remain in the industry and grow your company profitably. In re-creating your own particular definition of custom, you might want to consider the following:

1) Custom does not mean having a truck or van with the word stenciled on the side. It does mean being able to provide each customer with carefully described, highly individualized, specific services, products and on-going relationships. It's the difference between buying a good quality suit off the rack and having it altered, and having a suit made to measure. One can fit quite well, but the other will fit perfectly because each component was made to only one set of measurements not a generalized group of specifications.

2) Custom does not mean sending a "technician" out to remove cables from a blister pack and hooking them up. It does mean planning out the infrastructure for the customer based on the physical parameters of their unique spaces, their current and future needs, their family lifestyle and activities, how invisible they want the installation to look and how capable they are of operating the hardware. Simply dangling the wires from the back of the TV and handing the customer a remote is not "custom installation."

3) Recognizing that a decent picture and mediocre sound will be unsatisfying and fail to provide the kind of experience the customer probably had in mind is also crucial. Remember that one unhappy customer will tell many more of his friends how much of a downer their new stuff was and potentially poison the waters for you with a large pool of possible future customers. While the obverse is not always true, positive words are far more likely to produce future revenue than the opposite.

4) Audio margins are not, generally, under as much pressure as video products. Often, just a few percentage points increase in the audio budget can produce dramatically better results, especially if you "customize" the product mix and selection based on the room(s) physical and interior design parameters. Even great speakers can sound like garbage in the wrong application or when poorly positioned and set up. Numerous studies over the years have repeatedly shown that great audio can improve the perception of picture quality, and in this case the opposite is also true. Spend the time to up-sell on the audio side, showcase the benefits of better quality components, whole-house audio, surround sports and gaming and all the other ways the system(s) can provide entertainment beyond the "theater" side of the equation.

5) Audio is very undersold by almost every mass-market retailers. They go for the big-dollar TV sale, and then spend five minutes throwing in an HTIB system for far fewer dollars than the customer would probably have spent if they had bothered to ask. This daily failure is a golden opportunity for you, even if you don't get the net 10 points on the video product. Sometimes custom means working with the customer in ways you might not have considered when you were trying to grab the whole project. Solving the difficult problems might well get you the whole job the next time out from that customer or their neighbor, colleague, partner or relative.

6) Custom does mean spending time with each client to work through a definition of need, capabilities and desires, with the investment being made to insure everyone agrees on what the goal of the project is. This is where you really separate yourself from the 100,000-square-foot folks and earn your money. They don't have the time, skills or capabilities to do what you do, and while price is certainly a huge issue, it's not the only issue. Custom means remembering that each customer is unique, and not trying to clone the last project and impose it on the current client. It is feasible to reuse good ideas, company-specific custom programming blocks and similar pieces. Unless, however, you are doing 25 identical tract homes with identical furniture, carpet, paint and owners, just changing the name on the top of the forms is not "custom" work.

7) Lifestyle-specific electronic architecture and design is what we are supposed to be all about. If we allow that to become a rote process, then we will lose our ability to differentiate ourselves and our businesses from our current competitors and from any new ones that might appear on the horizon.

The next time you hear the word custom thrown about loosely, stop and think for a second. Is that what your company does?

Frederick J. Ampel is president of Technology Visions in Overland Park, Kansas.

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