Review of the Summit: Product Diversification
In our continuing review of the last Home Improvement Summit, the next topic that was covered was product diversification.
In these times of economic uncertainty, diversifying your product line is more important than ever because most home improvement companies cannot rely on just their traditional sources of income.
The first presenter was Chris Ripley, who has been involved in the Home Improvement industry for eleven years (eight as a manufacturer). With dealers from coast to coast covering 26 states, Chris has a birds eye view of consumer trends. As a member of the Society of Industry Leaders, private equity firms and hedge fund managers have relied on Chris’s insight to plan multi-million dollar trading strategies in the remodeling field. Chris owns Smarter Coating a Boston based coatings firm.
Chris defines diversity in a product line as: The opportunity to increase your sale or decrease/eliminate your drop by adding product lines to the sale.
When a recession happens:
- Customers believe that they deserve a deal
- Average tickets grow as consumers perceive recovery
- The perception of deal moves from “lowest price” to “most for the money” even if that means spending more
Because of these factors, the need to get a deal is higher then ever, so you offer your customers the opportunity to get more for their money. Here are some ways to accomplish this:
- Use products as you would a drop at the end of the close
- Only add products that can be installed by the same crew at the same time as the primary product
- Partner with manufactures that will train your crews to be able to multitask with different product types
In the example of his large multi-product firm, Smarter Coating:
- Residential coating is the main product
- Price objections are an opportunity to add products
- Close rates are above 40%, the average cost of an additional product added, or “drop” = 10%
- Adding these additional products offers more marketing opportunities to that customer and their neighborhood
- Developed a program with a turn-key product
- Program has current net sales of $175,000
If you have any questions feel free to contact Chris Ripley directly.
In the next edition of this review we will continue to cover product diversification.