April 28th, 2014
Socks and Windows
I was talking to a friend of mine the other day who was purchasing a pair of socks. He was explaining to me how amazing these socks were. He read me the product description, he endorsed them as the absolute best, gave me wonderful analogies of walking on air and then told me the cost. The high expense surprised me. And I said “those must be some socks.” He stopped me from my sarcasm and said, “These really are the best. I don’t get blisters, my feet smell great, feel great, the socks breath great, are water-resistant—it’s the perfect sock. If I love them, how can they be too expensive? My feet are worth the investment.”
It got me thinking about windows and all the different brands and types available, the different prices, and the different types of companies—both manufacturers and home improvement companies. Recently, I had a discussion with an in-home salesperson and we were speaking about the different prices for windows. We talked about many of the companies out in the marketplace and went through the entire spectrum of prices from the price-point marketing companies all the way to the name-brand companies and their prices.
He explained to me that it would be challenging to look a homeowner in the eye and charge $200 for a window as well as lay a price of $1,000-plus for a window. He asked me what I thought was a fair price for a window. I asked him a few questions, “What does it take to advertise and market for customers? What does it cost to turn the lights on, put gas in vehicles, have order-entry staff, customer service (general administration), how much should you get paid as a salesperson?”
On top of this, what does it cost for the window, the installation, the cost to make sure you are around to service your customers down the road, and finally, the business sometimes likes to operate in the black even at the slimmest margins?
Of course all the above costs can vary, but typically those costs (general administrative, advertising, sales as reported by the many dealers I have worked with, spoken to over the years and have been around 10-plus years) seem to be approximately 40 percent. Again, this does not include the cost of the window, the installation of the window—and all of this before factoring in a profit for the business.
Some of you reading this will roll your eyes at me and think, if I could only do those costs for 40 percent, while some of you may say, 40 percent—you are out of your mind—it shouldn’t be that high! I would say that as long as you have a business model that works for you and your company, you are in great shape.
But I want to circle back to where I started. Socks can be expensive and so can windows. If you purchase socks that don’t follow the above business model/philosophy, the socks can get holes in them just like windows. The same can be said for choosing the right manufacturer and right home improvement company. You want durability and longevity.
Finally, if your customer is happy with you and your company, you are providing great service, and your business is operating in the black, everyone wins—the business, the salesperson and the consumer. If all of this is happening, I would say you are having your customers make a fair investment, they are offered a fair price, free of holes.