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What is the marketplace going to be like in 2007? The last few weeks, I have spent time with many industry leaders, and have found that their crystal ball of economics is a little cloudy.
Some of these leaders have said that by spring, there will be such a strong market, it will be tough to keep up. Equally as many believe all of 2007 will be soft.
I know in our market, new residential housing starts currently are off close to 30% versus the previous two years. And I believe this is pretty close to what many markets are experiencing.
Now, I accept that I have no control over the national economic scene, no control over interest rates and no influence on unemployment. I do, however, have some control and direction over the next sales opportunity in front of me – and so do you.
ADD ON ADD-ONS
One way you can sustain your sales goals is to take maximum sales advantage by growing every sale with add-on sales. In adding to the sale, there is one Golden Rule to follow: Make sure your add-on sales are of the right value and the customer will benefit appropriately by their ownership.
There are a number of techniques for finding the niches that offer add-on sales opportunities, and for proving their benefits to the prospective buyer. For many of us, cabinets act as the trigger for the sale. Once we sell the cabinets, we almost assume the countertop, but then we tend to relax our selling intensity and spend less effort growing the sale and adding benefit opportunities for our customers. To make add-on sales, however, it should be just the opposite. Once the cabinets and countertops are sold, it’s not time to let up, but rather, it’s time to keep selling.
So, where do these add-on sales opportunities come from? The first place to look is within the cabinet. What can be added? You may have included the popular crown molding, but did you add on the light valance molding? In most kitchens, under-cabinet lighting will be installed. But by whom? Why not you?
Did you sell a glass door with mullions and interior lighting to display the pretty glassware or collectibles? The glass door will make the kitchen more attractive and be a real focal point.
Now, let’s look for convenience items you could offer to make better use of storage. Pull-out shelves, wire baskets, wastebaskets, knife storage, a cookbook rack – the list goes on. And don’t forget the add-on of a glaze to the cabinet finish, giving consumers a design statement they will love. Of course, you’ll love the added gross margin it will build in your sale.
Next, we move to countertops. Now, the basic countertop is not an add-on, but rather part of the starter package. The challenge is to remember that, regardless of the type of top you sell – from post-formed to granite – you can always find add-ons to build your sales package. For example, you can add a beveled edge, a wood edge or a solid surface edge to any laminate top. With solid surface, granite and quartz, you can also offer special edge treatments and backsplash choices.
We have found a brand of sinks to install in laminate tops that offers convenience and looks similar to a solid surface integral sink. This creates an additional $600 revenue every time we create the add-on opportunity. The way we compensate our sales/design people, it means they make approximately $38 to $42 on each sale. Add one of these sinks to a top every other week and in the case of our people, they will earn themselves an $800 raise per year.
Depending on the marketing focus of your company, appliances should also be looked at for add-on opportunities.
Another surprise that our sales/design people have enjoyed the last few years is the profits from the add-on of hardware. These days, it seems to take the customer more time to pick out hardware than to pick out the door style and stain finish. The good news is that 30 pieces of hardware at $10 each should give you a minimum of $150 in gross margin.
How about adding a water filter system to the sale? For your customer, this means no more buying water and hauling it home from the store. Now, add a chiller and hot water heater to the filter system. You might be surprised how this add-on can actually grow the sale. And who wouldn’t want healthy chilled and hot water for their family and guests available instantly at their fingertips?
One way to make add-ons attractive is to prove to the customer that the addition is a good decision. If the customer is only replacing a countertop, sink and faucet, wouldn’t it be wise to advise the customer that this would be a good time to change that outdated hardware or to add a grab bar in the bath – especially since labor costs for the additional work will be minimized because it saves a special trip by the craftsman?
We have a full residential lighting showroom along with our kitchen, bath and other divisions. For us, lighting is virtually an automatic sale. But, if you don’t offer lighting, you should explore the opportunities of how under-cabinet and in-cabinet lighting can be added to the sale.
One lighting product you might want to explore would be LED (light-emitting diode). These are small, they have the right Kelvin temperature and the color rendering index to make things look right. In addition, a strong point with the customer is the length of LED lights’ life cycle. In many cases, using them four hours a day could mean these lights will last up to 40 years without replacement.
A monthly payment table for simple interest loans can be a great tool to sell these add-ons. People buy a car or house relative to the monthly payments. With a monthly payment table, you can prove how small an addition the monthly investment will be to own and enjoy specific add-ons. For example, using a 10-year home improvement loan (where the interest is still deductible) at 7.5% interest on a target budget of $20,000, your client will have to make a monthly investment of $237.81. With $3,000 of add-ons, the cost is only $273.02 a month, for a difference of just $35.21. That’s about the same as buying one soft drink per day from the company vending machine. Once you explain how your clients will enjoy these add-ons, and how guests in their home will admire their decision, you’re likely to add another $1,000 of gross margin to your sale.
So, how can you grow your income in 2007 with a questionable market and make happy customers in the process? Do it by making add-ons your friend.
Read past columns on Closing the Sale by Ralph Palmer, and send us your comments about this story and others by logging onto Kitchen & Bath Design News’ Website at www.kitchenbathdesign.com.