The SFI brand leader (Sell – Furnish – Install)
SFI’s lead rates range from 5% to 18%. If your current fully loaded marketing costs are over 10-15% or more, this may seem feasible. However, keep in mind that you may be called upon to put up displays in stores and also to operate those displays.
Do the arithmetic, when you add the cost of in-store displays, demonstrators, or others needed to do floor time, you can spot another 8 or 9%, which when added to the fee paid could add up to 24 or 25%.
You need to confirm leads, schedule appointments, and train salespeople to handle this “third-party source”; still, it might work. As long as you can achieve margins that allow for this excessive marketing cost and still make a net profit.
Most of these SFI partners provide a lot of traffic for your exposure and many are just as picky about what and how products will be sold. They have a legitimate concern that hard sales will “put pressure” on their customers. Therefore, the need for up-to-date sales training is required. Beyond which, you will also need to develop an ongoing relationship with the store manager and those others with whom you have to interact. Whether you find the terms or actions excessive or unfair, it is your turf and you must learn to act in accordance with your culture.
SFI partners may require you to cover multiple stores and respond to each lead promptly. Therefore, the smallest sales organization can quickly become inundated with leads that it cannot serve promptly. Also, it requires a mix of two extremely different cultures. SFI (home improvement contractor) dealers often salivate thinking about the potential of abundant leads, failing to understand that big box stores that advertise “everyday lowest prices” stimulate that kind of thinking for their customers, so the prospect you get may be conditioned on getting the lowest prices regardless of what top-of-the-line product you may be offering. As one of our customers who has a relationship with SFI puts it: “The customer wants Nordstrom quality and service, at Walmart prices.” Therefore, SFI dealers need to take a hard look at their attitudes about customer satisfaction, and then expand them to meet the requirements of their new strategic partner.
Another concern is whether the relationship will last. A few years ago, Lowe’s had such a program involving numerous manufacturers and hundreds of distributors. When the program was abruptly terminated, the dealers involved were forced to remove their samples and displays from Lowe’s stores, stop accepting leads, and discontinue sales practices.
The distributors involved discarded their sample boxes, introductory books, brochures, and sometimes uniforms that identified them with the Lowe’s program. In addition, programs and staff dedicated to the SFI program for which recruitment, training, and development costs had been expended had to be terminated.
Lowe’s arguably had experiences with some distributors within the program that they considered unfavorable. If they saw this as a threat to their customer service image, they think they acted wisely. However, this case makes it a requirement for a dealer to thoroughly examine and act prudently before simply jumping on the bandwagon with an SFI program.
The same can be said of involvement with a brand that offers exclusivity in terms of product and territory. Deals often tend to be openly in their favor, which raises questions: What if they decide to introduce a similar product into your territory? What if they introduce a product under a different name, but with a similar design or demand unrealistic fees for the purchase or performance of the product, or have unilateral cancellation privileges favorable to them?
On a positive but sobering note, for those who become involved in an SFI or brand program, a retraining process is necessary. Many of our valued customers have strong partnerships with brand name merchants. However, it does require developing a new or modified sales and marketing model with explicit controls over sales styles and presentation methods, but with all these precautions, it is still viable for those planning structures and controlling your new model.
Two questions are inherent in our assessment of this type of relationship. The first is: Are the rates fair? The answer is – not in all cases. Certain “big box stores” make a 2 or 3% pre-tax net profit, requiring purchasing, stocking, merchandising, packaging, and tons of staff. In the case of a 10-18% SFI fee, they may put little effort into the partnership except to extract a fee that requires little to no investment beyond their good name and some interaction with middle management.
The other problem is a “clash of cultures.” Home improvement-oriented retailers rarely understand the true dynamics of how a home sale is made and don’t put a lot of energy into figuring out how it’s actually done. Nor are they aware of the many puzzling issues involved in hiring and training specialized salespeople to perform a customer-appreciated sales methodology.
In truth, the “big box in-store customer” often places great value on the brand relationship, yet they are used to buying without the need for the extensive discussions that go into a home improvement project or the psychological dynamics that go along with a professional in-home presentation, the lack of which can create high levels of customer dissatisfaction if the sale is made.
In many cases, the SFI dealer unknowingly becomes subject to the “big box” policy; For example, the store may have a policy of “If you’re not completely satisfied, return the product and we’ll refund the purchase price.” While this is great for cash and carry products, it can be expensive when a customer wants to cancel well after 72 hours.
[3 working days] the termination rule has expired. In some cases where custom windows were sold, measured, and then made to order, the policy, when enforced by the store, leaves the dealer with inventory that may not sell due to custom sizing.
The final caution is about cash flow. Once you make the marketing investment, advance your vendor a portion of the commission, order and pay for your product, permits and setup costs, and ultimately have a satisfied customer (in most cases), you’ll wait for payment because your “big” partner doesn’t remit payments until the job is fully completed and customer satisfaction is assured.
The latter is not a condemnatory statement. Your strategic partner is fully entitled to these guarantees, however it is important to understand that you will dramatically increase your accounts receivable with this model of interaction.
All said, SFI’s relationships with brands or big box stores are an effective method of lead development as long as there is fairness to both parties and a proper plan for utilization and monitoring is in place.