What did the market look like in 2006 for water treatment dealers? What does it look like for 2007?
Tom Leunig: It looks like 2007 will be a challenging year. Housing starts are expected to be down and dealers who focused on new construction will have to try to reconfigure their operations to sell to existing homeowners and their existing customers. The industry numbers seem to support this.
Last year point-of-entry residential-sized control valve sales were down by approximately 6%, so the industry was flat to somewhat declining in 2006. I think the best way for independent dealers to remain strong is to partner with a strong brand, offer new products and services, and make sure they take advantage of programs that maximize sales and profitability. New technologies are a must, including the new ultrafiltration systems for biological disinfection and RO, which can be sold to both new and existing customers. Service and maintenance can also become a profit center for dealers.
GE’s Dealer Expos have teamed up with Carl Davidson, director of Sales and Management Solutions, Inc., and WQP monthly columnist, to offer sales training and techniques to independent dealers. What do you think is the key to good sales?
Leunig: We have teamed with Pro Products to develop a sales demo test kit. Carl educates dealers that if they don’t do a demo, they are condemned to sell against other dealers on price alone. He also trains dealers that in combination with financing, they should perform a demo and create the customer’s desire for conditioned water or a drinking water system, and then use financing as a way to close the sale.
Think about that technique versus walking in with no test kit and no financing. The customer is left wondering, “How does it work and what’s your price? Bob’s Water Kitchen was in here yesterday and theirs is $9.95 … what’s yours?” The dealer is then caught in a price war.
By advocating good demonstrations, financing programs and the Carl Davidson sales training, we’re trying to get the dealers out of that situation.
GE offers dealers a variety of programs. For example, the Platinum Dealer Network is a network for independent dealers. What criteria must these people meet to gain access?
Leunig: In order to qualify for the GE Platinum Dealer Network, a dealer must actively sell and promote GE products purchased from one of our OEM suppliers. We expect that 80% of what the dealer sells will be GE components and products. This is checked during our qualification process. Not all dealers will qualify. Only the best independent dealers in an area will become a Platinum Dealer. Once they qualify, they receive access to all the programs and services—plus they can use GE branding.
Access to a financing program requires dealers to have a business location (not a home office or car trunk) and be in business for at least one year. We recruit dealers who are in it for the long haul and who want to be there to service their customers, not just sell and walk away.
GE also offers independent dealers financing programs that have been successful. Yet there are still many dealers who do not want to offer financing. Why do you think that is?
Leunig: Many of them, I think, are afraid of it or they don’t like the paperwork involved. There used to be so many forms to fill out and the dealer had to fax in applications and things like that. But now they can do it online, call it in or fax it in, and get immediate answers. In many cases, once a dealer is set up, all it takes is a signed application and sales slip to complete the transaction. The dealer gets funded right away and this improves cash flow.
There are also many dealers who offer self-financing, which involves financing the transaction with their own funds. This actually ties up their cash flow and usually results in a lower selling price. It’s best for dealers to run financing through professional finance companies. That way, the dealer can focus on sales and service, which is a growth opportunity for him/her, rather than spend time and resources on self-financing.
Why should dealers consider offering financing?
Leunig: One of the best ways dealers can increase sales is by selling at a fair price for the service rendered. Many dealers make a sales call, test the water, make recommendations on equipment and then sell for way below actual cost. Financing the sale can allow the dealer to increase the selling price. The average sale on credit is almost double that of a cash transaction. What we’ve found is that these independent dealers, who are selling without offering financing, are selling at pretty low price points. For example, an independent dealer will sell something for $995 or $1,200, and then complain that they can’t make any money and the competition is beating them, etc.
It’s a proven fact that if you use financing and convert the purchase price of the equipment to a monthly payment, the dealer will close a lot more sales. People are more inclined to buy if, instead of looking at the high price tag, they can look at what a monthly payment is going to be. The average sale for dealers using GE dealer financing programs is $3,295. We look at that price in comparison to a regular independent dealer selling something for $1,200 and see there’s a big opportunity for dealers to make more money using financing programs. Dealers can’t stay in business if they’re not making an acceptable profit margin.
Consumers want payment options for major purchases and this includes financing through known financial providers. If a dealer doesn’t offer financing, they’re losing sales.