The six sales reps of Home Town Restyling, a window, siding, and sunroom company in Hiawatha, Iowa, are allowed to offer homeowners a discount for making the purchase tonight. But that discount, says sales manager Tom Casey, never tops $500 on a large order, which, he feels, is fair compensation for the sales rep not having to return on a second visit.
Home improvement sales have traditionally relied on the one-call close and used an escalating series of discounts — The Big Drop — as incentive to persuade reluctant customers to make that immediate decision. Home Town Restyling used The Big Drop technique as recently as five or six years ago, recalls Casey, who has sold home improvement products for 18 years and been the company's sales manager for three.
But, he says, the days of layered discounts are long gone at the company, which instead sells its “product-specific” employee installers and 22-year reputation in Eastern Iowa. Deep discounts, Casey finds, are counterproductive. “People can understand a 5%, even a 7% [discount],” he says. “But when you get over 10%, you start losing credibility. I just don't think people are that gullible.”
NO BLUE-SUEDE SHOES Changes in consumer attitudes toward buying are causing many companies in the home improvement industry to reexamine their policy when it comes to discounting. Morris Windows & Siding, in Succasanna, N.J., is among them.
In the early months of 2007, the company was at a crossroads. For more than a generation, owner Gerald Damora had been an enthusiastic practitioner of The Big Drop. He'd been using it for so long, he says, that he felt like he “wrote the book” on this established technique. But he could see that this tried-and-true method of moving fence-sitters was fast losing its power to persuade. The reason? “[The Internet] can provide anyone with price information.” And more.
Morris Windows & Siding had also lost four of its 11 salespeople over the previous 14 months. Each had been bringing in $1 million or more in annual business. All this led Damora to conclude that he needed a new, more straightforward sales strategy. So he embraced a no-gimmick approach made popular by General Motors Corp. to sell its Saturn automobiles, and now salespeople, both rookies and veterans, follow a presentation script that limits discounts to 10% off the listed price.
With this new limit, salespeople couldn't get carried away reducing the price in an effort to close at all costs. Damora calls it “the best decision I ever made.” It raised the company's gross margin. It also had a big effect on cancellations: As reps emphasized value over price, buyer's remorse faded, and cancels, which historically ranged between 21% and 26%, dropped to below 9%.
“Customers are receptive to the way we sell,” Damora points out. “They say, ‘Don't even bother coming to us with that blue-suede shoes stuff.'”
POTENT IMPACT On today's Internet, information about price, product — even a company's past performance — “is everywhere,” observes Alan Levine, director of sales for Legacy Remodeling, a home improvement company in Pittsburgh. That has made a lot of what the industry considered “inside information” transparent to prospects.
So, is this new reality good or bad?
“The shroud of mystery has been removed, and customers have a better sense of why different products cost more,” says Mike Ferguson, vice president of sales for Gold River, Calif.–based K-Designers, which has 11 branches fielding 160 salespeople. “We welcome that,” he adds.
But all that information can be a bit disarming, too. “I've had sales guys call from an owner's home saying, ‘[The homeowner] knows more about our products than I do,'” says Rhonda Ladley-Love, director of sales for Renewal by Andersen of Colorado Springs, Colo.
This is where The Big Drop comes in. Not so long ago, discounts for posting company yard signs, buying back existing windows, etc., could take a price down by as much as 40% or 50% and were considered the nuclear weapon in a salesperson's arsenal of persuasion. In many homes, Internet-generated suspicion has killed The Big Drop's effectiveness. Instead, forward-thinking companies use discounts as one element in a more nuanced and informative in-home presentation that places greater emphasis on competitive differences. “We've tried to move away from [steep discounting] and toward acting like consultants because people are more sophisticated,” says Mike Kuplicki, who co-owns Alure Home Improvements' Owens Corning basement finishing franchise in New York.