April 19th, 2012
The Value Equation
During my finance seminar given last week at Fenestration Day, I was talking about how it might be necessary to buy down points on a loan in order to offer an interest rate that is acceptable to the consumer. The finance companies will charge the dealer percentage points on the loan in order to do this. The net result is that it squeezes the dealer’s profit margin, allowing less room to negotiate on the sales price of the windows. One dealer asked, “Then what do I do when a competitor comes along and offers a similar window to my customer at a lower price?” “The answer,” I said “lies in your use of the word similar.” Never admit that your window is similar to any other window! In fact, seek to prove to the customer that your window is as dissimilar as they come! The key to success lies in differentiation. Point out everything that you can possibly think that makes your window better than the competition and pump up the value! Always remember the value equation!
The value equation is this: Value = (Quality x Performance)/Price. The consumer is constantly weighing these factors in his (or her) head as the salesperson is attempting to sell the product. Of course, everyone wants the best price. But a consumer will be willing to pay a higher price if quality and/or performance are higher. And don’t forget to mention the financing as a feature as well. Money is not free. If you are offering financing, then include this as a feature. If the consumer does not need financing and wants a better price, you can offer a discount as part of a cash deal.
When the 2009-2010 tax- credit stimulus-program was rolling along, the whole window industry took a step toward generic. That’s all you had to do was crank out a 30-30 window, put an Energy Star label on it and you could sell windows to consumers lining up to take advantage of the tax savings. Especially as 2010 came to a close, they were really lining up!
The tax credit program was both good and bad for our industry. Yes, it gave the industry a boost. But the way in which it was done caused windows to take a step toward generic in the eyes of the consumer. Why? Because there was a single criterion – at first 30-30 and then later on it simply became Energy Star. Perhaps a better way to do it would have been to offer a variable tax credit on a sliding scale. Perhaps the program should have offered a certain tax credit for a .35 U-Value window, a higher credit for a .30 window, a higher yet credit for a .25 and so on. Sure the government wanted to make it simple, but by establishing a single criterion, Uncle Sam did a great disservice to the window industry – he made the typical salesperson rusty. Why? Salespeople were not selling. They were taking orders. Many of them have now taken a step backward in terms of the art of selling. They have forgotten how to sell the complete array of features and benefits of their window systems. There are many features to sell – the overall artistic design of the window itself, the weather resistance of the vinyl extrusion, the color options available, the security and ease of operation of the of locking system, the ease of operation and serviceability of the balance system, tilt& turn operation for ease of cleaning, sound control, security features of the glass, self- cleaning glass surfaces, and the list goes on. Even the equipment used in the factory to make the windows can be a selling feature. In a recent sales training session, I encouraged the salespeople to take a tour of their window fabricator’s factory, and to take pictures of the automated insulating glass line. “Point out to the customer the quality advantages that this state of the art machinery builds into your window system,” I said.
Now the new EPA is preparing to launch a new set of criteria for Energy Star and it is reported that they are likely raising the bar, at least as far as the Northern zone is concerned. It is very likely that the northern zone will have a maximum U-Value criterion in the .25-.27 range. This will likely involve the use of triple pane construction for many manufacturers, and because of the added re-design expense involved, some manufacturers may be forced out of Energy Star compliance. This is part of what the EPA is trying to achieve. The original goal of Energy star was for it to define the top 20 percent of windows in terms of thermal performance instead of promoting a set of criteria that 80 percent of all windows can meet. There is also talk of the EPA adding a Top Tier or Most- Efficient Performance level, and I am a proponent of this approach. Anything the EPA can do to facilitate further differentiation among window systems will be welcome. Perhaps they can establish a most efficient category and call it “Energy Star – First Magnitude”, as Hipparchus classified the brightest stars in our galaxy.
In a manufacturer –dealer roundtable discussion also held at Fenestration Day, one dealer, obviously quite frustrated, pointed out that he is dying for training from his manufacturer but that he is just not getting it! . I cannot stress how important and motivating a good sales training session can be and the positive impact it can have upon one’s business. By taking time out to train and educate the window dealer, the manufacturer will be well poised to take full advantage of the all the bells and whistles he has to offer. One can manufacture the greatest window system in the world, but unless you can effectively convey the value equation to the consumer, someone else will get the order!