June 21st, 2011
The Future of Manufacturer/Dealer Relationships
I had occasion recently to attend an industry event in the overhead door market. I believe that some of the key thoughts I took from that conference apply to the door and window market as well. In an amusing bit of finger pointing, I heard from large and small manufacturers who each believed strongly that the other group’s lack of pricing discipline and insistence on pushing low-margin products was ruining the industry. Both were steadfast in their opinions. As the conversation with the representative of the larger company continued, he raised an interesting possibility.
In his opinion, there is a lack of training at the dealer level with regard to the ability to upsell a prospective customer on higher priced products with more features. Such products typically carry a higher margin for the manufacturer and dealer. Another manufacturer agreed and cited a recent “mystery shopper” experiment conducted by his company. The company hired a person to contact 70 dealers to purchase a fenestration product for what the dealers were told was a $500,000 home. How many of the dealers do you think presented a high-end, high-margin product? Exactly 2 of the 70 dealers did so. The other 68 dealers sold on price and delivered a low-priced, low-margin product well below the customer’s willingness to pay, with few advanced features that they would likely have appreciated.
The individual with whom I spoke believes that manufacturers may begin buying dealers in order to control the sales process all the way down to the end user. He felt the other alternative was simply to go around dealers in going to market. I would propose a third alternative – training dealers to sell products that meet the greatest possible spectrum of customer needs. These will also be the products that are the most profitable for both dealers and manufacturers.
I’m not trying to stir up discontent between manufacturers and dealers. The key point, however, is that dealers represent the “last mile” in reaching the end customer. Manufacturers are required to produce a continually updated stream of products that are aesthetically pleasing, protect against the elements, meet ever-changing codes, are easy to operate and last three decades in the field. If manufacturers come to feel that the handling of the last mile to the end customer isn’t being executed properly, they’ll most certainly address it in one way or another.