Fatting Up Thin Margins with A4’s26 Nov, 2007 By: Ronelle Ingram imageSource
Fatting Up Thin Margins with A4’s
Andy Slawetsky’s article “Look to the Prints, Not to the Printer,” published
in the October issue of ImageSource brought up an interesting concept. Dealers
need to consider the value of offering a wide variety of products, including the
A4 group. I would like to expand on how sales reps and service departments can
live off the small margins afforded on the amount of revenue received by the
dealer on these low-end sales.
As a long time service professional, I have learned to live in a .0075 world.
This three-quarters of a cent must be split up with the supply department;
leaving service with about half a cent per click. Under the Global model,
service is expected to generate 40%-50% margins. This leaves service with about
.002 to .003 cents (2-3 mils) to finance the entire service operation. The
service department exists in a world of millions of very small slices of the
As a service manager, who has learned how to prosper in a .002 profitability
per click world, profits from the A4 market is one additional element in the
overall dealer arsenal.
One problem that often arises when dealers sell low end products is belief
that all customers are created equal. Employees often treat the customer buying
a $1,000 item, the same way as they treat the client who is leasing a $20,000
piece of equipment plus 5 years of full service and supplies.
All sales are not created equal. When competing with the Internet, super
stores, one man operations, or Penny-Saver one inch ads, make sure you play by
their rules. When a customer calls asking you to match the superstore or
internet price on low end equipment, make sure you provide exactly the same
product and services that are being offered.
All too often the special advertised price is ‘today only, while they last,
no rain checks, may be refurbished, no returns, pick-up only, no start-up
supplies, no credit card sales, cash and carry,’ etc. There is no delivery, no
installation, no training, no local warranty, no in- office service and no
polite, knowledgeable, commission centric sales rep available to talk to on the
phone or visit the end user’s office.
At the super store there is usually a large parking lot to maneuver, followed
by a store full of teenage clerks, earning a bit over minimum wage, having 6-10
weeks of superstore experience. When asked a question, they may respond with a
blank stare or they will start reading the side of the box. End users who seek a
low cost should realize that in a capitalist society you get what you pay for.
So why is it that more dealers do not teach their employees the concept of
value added selling? When a customer calls asking for a price quote on the local
Superstore’s last weekend’s special, make sure you offer the same product.
Equipment only: they drive to your office and pay immediately in full, pick up
the box, and put it in your own vehicle. There is no trash removal, no delivery,
no set-up, no supplies, and no training; they process the mail away warranty,
they store the original box and packaging for future warranty returns; no in
office service, no OEM supplies available and no telephone support.
Customers have come to expect all the amenities of a full service dealer at
Internet or super store (no-profit) pricing because dealers have modeled their
selling skills on under-cutting another dealer’s pricing to get the sale.
Some readers may mentally retort that ‘We can not treat a customer with such
disrespect.” I agree, but the end user who shops and quotes the super store ads
is not my customer. Any one consumer who is making their buying decision on
price alone is not a potential buyer of the products our dealership sells.
There is a viable market of business people who understand that value of a
piece of business equipment is more than an advertised low price.
Selling A4 equipment starts by requiring every sales rep to allocate 30
minutes each month to actually going in and shopping the local superstores.
They must also log into random Web sites that offer similar low end products.
Require that they actually try to buy an A4 product on line. When you know the
competition, selling becomes much easier. The real life shopping experience of
these low priced vendors will reassure you that buying through the (higher
priced) dealer network is an enormous value to any business person.
Being able to supply A4 products to your current customers will keep you as a
viable part of their purchasing options. You will have the necessary contacts
and reputation to be considered for more complete solutions. Don’t be fooled
into having to offer Internet or super store pricing when you are providing a
full service product.