Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now


Selling Luxury

Its Not Recession-Proof, But Catering to the High-End Can be Good Business

With a focus on the luxury experience, Starpower has three high-end specialty retail stores in the Dallas area.

Theres an art to the way companies sell the idea of luxury to wealthy consumers. Retailers like Neiman Marcus and Burberry seem to know just the right way to find and fulfill the wishes of the rich, and car companies like BMW and Mercedes never seem to fall out favor with the luxury set.

For many years, custom installation firms and audio/video product manufacturers also have been catering to luxury-minded consumerssome better than others. Luxury, when done correctly, can be a differentiator for a custom integration firm that has watched CE products drift quickly downstream with lower price points and plug-and-play operation.

Luxury is a concept that a company like Sunfire, a manufacturer of high-end speakers and components, embraces whole-heartedlyfrom its glossy brochures to the quality of dealers it chooses to work with. Sunfires general manager Mark Weisenberg is a big proponent of luxury selling because he believes that it helps his company build on a legacy of unconventional product designs from industry legend Bob Carver. For starters, we set out to by introducing 18 new products that are relevant to this market niche, he explained. They are products like the worlds most powerful 7.3 receiver, the most powerful eight-inch tall speaker, the first flat-panel subwoofer with 2700 watts of output, and a nine-inch cubed sub that rivals anything twice the size.

But, for Sunfire, luxury selling means more than having the right products and dealers. Its the overall attitude and approach to the market by manufacturers and their dealers. Its about selling the entire experience of ownership. Its providing the easy button for customers who are willing to pay for it. Its being creative and providing a fun experience. Its about being prepared and professional and having a team of people who know what they are supposed to do at all times and by so doing, the process they create and the results they deliver keep their clients talking about them for years and referring their friends.

Its hard work and it takes a commitment from the top management to say, lets do this, with an un-ending, almost unexplainable dedication to becoming the haberdasher of home entertainment, Weisenberg explained. Dealers and manufacturers that have done so have created sustainable businesses that can withstand any economic challenge, be it from unforeseen events across the globe or a local competitor.

Knowing Your Customer
Before selling luxury goods to wealthy consumers, a manufacturer needs to understand as much as possible about that target demographic. For custom installation products that are built into luxury homes, the wealthy consumer often has consultants, such as an architect or an interior designer, that specify products for them, explained Sonances chief sales officer, Ari Supran. Understanding the influencers and how to make them aware of the solutions our industry offers is required of any innovative manufacturer in the luxury market.

At Sonance, Supran added, luxury selling involves providing its dealers with highly differentiated products and a brand image that allows them to position their products and brand at a premium, resulting in more profit from each project. We also believe that luxury selling should combine originality and exclusivity that is important to the luxury consumer, Supran said. As a vendor we seek to help the integrator satisfy that expectation by providing products that are unique and narrowly distributed.

Just as important is understanding that your customers are buying something that they want, not something that they need, offered Alberto Fabiano, SIM2s western regional marketing and sales manager, and former high-end custom integrator. As such, he explained, luxury selling must be a pleasant and exclusive interaction that generates an overall extraordinary experience.

Fabiano believes that manufacturers in the CI space must commit to a level of service and quality that surpasses what is found in the consumer market. We must offer personalized attention to our well-qualified dealers so that the customer experience is one to remember and talk to his/her friends about. Our residential custom integrator business relies heavily on referrals, and seven-days-a-week, bi-coastal offices, and extended hours of operations guarantee the support that the discriminating buyer commands.

This emphasis on service is echoed by Meridian America COO Norm Steinke, who noted that in a world where everything is done as quickly as possible and not necessarily for the comfort of the customer, service becomes a luxury. For instance, you can go to an airport, check in for a flight, pick up a rental car, and check into a hotel, and never be greeted by a person, he explained. The dealer or integrator plays a key role; they greet the customer and help set the expectations for the manufacturer to achieve customer satisfaction.

For Doug Henderson, VP of sales and marketing for the B&W Group, luxury selling requires a manufacturer to take a long-range view, have core integrity, and be willing to continuously reinvest in the business. While aggressive marketing can increase brand awareness, Henderson explained, when the substance of the product or service doesnt match the hype, the inevitable result is a disappointed customer. This situation has been far too prevalent in the audio/video business, he said. So many ordinary products are promoted as high end that the term has lost meaning.

Delivering an Experience
John Caldwell, co-founder of the value-added distribution firm, the StJohn Group, thinks that the custom installation channel should no longer solely focus on presenting brands as ultimate status symbols of ones station in life. Instead, he explained, luxury is now about delivering truly amazing experiences that cant be had anywhere else. What makes up that experience from a product standpoint is redefined daily, Caldwell said. Thats why weve expanded our offerings from high-performance loudspeakers that look like fine design elements, to acoustically transparent projection screens that hide speakers and dont detract from the environment when not in use, to state-of-the art digital projectors with high concept Euro-styling, to acoustical treatments that are cleverly disguised as lighting elements.

According to Caldwell, StJohn Groups growth has been a natural progression, reflecting where the luxury-oriented client is going and what is necessary to deliver those truly amazing experiences.

For the company, which serves as the U.S. sales and marketing arm for its mostly European manufacturer mix, an integrated marketing approach is another key to successful luxury sales. This is reflected in how the companys marketing materials for its products commensurate with their price and quality. Take for example, the brochure for its Artcoustic speaker line, which is a one-pound, 234-page book replete with glamorous photography that clients are proud to show off on their coffee tables and to their friends. There are no specs listed, just great rooms and the product on the walls.

A Good Fit During Bad Times?
The crack down on sub-prime mortgages and an overall slumping economy has made the luxury market seem like a safe place to turn for custom integrators no longer receiving referrals from production builders in their community. Its an observation made by Connected Community president Ron Romano, who runs a modest five-person custom installation firm in Kankakee, Illinois. Some of our smaller production home work has fallen off a little bit, but we havent really seen any slow up on luxury homes, he said. I think that the people that have the ability to build those homes are typically a little more economy proof, for lack of a better term. Some people find situations like the one were in a better time to buy.

To Romanos credit, however, he has never placed all of his eggs in one basket, having diversified his business enough to serve light commercial installations like corporate boardrooms, as well as an equal mix of retrofit, production, and luxury homes. Its a smart approach, agreed Darrell McComber, a financial consultant representing many leading custom installers and specialty AV retailers. McComber said that while its logical to view the high-end, luxury market as recession proof, it can be as vulnerable as any other part of the market. No matter what the income level, people tend to obligate themselves to a substantial amount of debt, he explained. Therefore, a slow down will eventually hurt us all.

One of the major stumbling blocks in tough times is a lack of customer deposit money. Thats why, even if an integrator wants to cater to luxury selling, its wise for him to diversify, according to McComber. When you work for a cross section of customers who purchase your products a wide range of price points, you run less a risk of being hurt by a slow down, he cautioned. Dealers that concentrate on just the large jobs have a hard time managing customer deposits.

McComber pointed out that when contracts are flowing in a strong economy, the payments in advance of each phase of the job result in a high level of customer money. This means that you rarely need to use your line of credit, because your average customer deposits will suffice. However, when their frequency slows down, cash disappears quickly from your customer deposits, and you find yourself suddenly needing to use your line of credit. This can eliminate your customary cash solvency, and dramatically hurt your businesses flexibility to operate.

Conversely, if you spread out your work with a variety of contracts of all sizes, many more jobs are always starting and ending, and cash flow tends to be much more stable. Some dealers currently are having record months for the last six months during this slow down, and they tend to be broad-based dealers. Essentially, all their eggs are not in one basket.

The Integrators Luxury Role
Even the best attempts by a manufacturer to sell luxury products in the custom channel are doomed to fail without the proper buy-in from a highly qualified custom integration firm. It takes an even greater understanding of the luxury customer, as well as the proper attitude and maybe even personal style, to successfully sell into that end of the market.

Starpower, based in the Dallas area, has three AV retail stores so focused on the luxury sale that it has written a luxury statement for its employees to follow. The statement, according to Starpower president and CEO David Pidgeon is, to provide our clients a luxury entertainment environment by empowering our staff to act with the singular objective of creating the finest personalized experience.

Starpowers sales staff is educated on the total sales experience, rather than the quick sale, and employee training is focused specifically on understanding the companys culture. Through Starpowers unique showroom design, the company works very hard at creating a fresh, bright environment designed around the same principle as an art gallery. We allow the client the opportunity to imagine the product in their home and all of its possibilities, Pidgeon explained. While our stores are definitely high-end, they are not intimidating or over done.

Brothers David (right) and Dan Pidgeon, respectively president/CEO and chief financial officer of A/V specialist Starpower, pose in the luxurious showroom home theater of their new North Dallas facility.

One of Starpowers greatest assets, however, is its VIP Services Group. Through this group of dedicated concierges, the experience for high-end clients is taken to another level. VIP goes beyond the relationship of entertainment products to include dinner reservations, concert tickets, sporting events, bottles of wine, and just about whatever the client wants whenever they want it. One example of this over-the-top service is a client who was scheduled to deliver a speech at a university awards event. When his son was admitted to the hospital just prior to the event, the client contacted Starpower VIP to go ahead and select and purchase the awards and meet him at the university. A concierge did just that. As a result of this service, 65 percent of Starpowers business is repeat and referral, Pidgeon said.

Because no one manufacturer can provide designers, architects, and luxury homeowners a complete solution including installation services, the integrator is a key member of the luxury services team, agreed Sonances Supran. The integrator that partners with the right manufacturers can position themselves as a design resource and a member of the design team rather than as simply another contractor on the job, he explained. The cons are only present when integrators miss opportunities to sell more profitable goods to the luxury consumer by not bringing the best products to the table. Todays luxury home owner and their design team are looking for products which integrate seamlessly into the overall design of the space and provide the homeowner of an attention to detail and precision that earn their place in todays luxury home.

Thinking Like the Client
The key to an integrators success in the luxury market is thinking like their client. As StJohn Groups Caldwell put it, What might be most important to an AV salesman might not matter in the least to a woman who absolutely does not want anything in her living room that looks like a traditional loudspeaker.

Sunfires Weisenberg added that it is important for integrators and manufacturers to gain a thorough understanding of what wealthy customers buy in other luxury categories, what turns them on and off, and why they buy the things they buy.

Jeremy J. Glowacki is editorial director of Residential Systems magazine in Carmel, Indiana.