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3 Ways to Handle No-Margin Products
High-definition IPTV streaming and downloading services, like Apple TV (with no margin), can butt heads with such margin-laden components as Blu-ray players.
That's a common refrain among many custom installation companies, which have built their business models so as to garner the fruits of product margin.
That business model does not mean, however, that you shouldn't satisfy the lifestyle needs of your customers. After all, "The client is king," as the old saying goes.
There are products and services on the market offering tangible benefits to customers that don't necessarily provide a healthy margin of any consequence for the CE pro.
A few years ago, the lack of mark-up for big-screen TVs was the transitional problem.
Today, one of the key categories is IPTV video streaming and downloading services, such as Apple TV or Vudu. Integrators are often forced to recommend such services as DirecTV, Verizon FiOS or Netflix.
What should you do? Basically, there are three options:
Don't Offer it, Don't Connect it
If you aren't going to make the necessary mark-up on a product, one option is to simply not carry it. This keeps your business model intact.
Integrators can prepare a system fully to handle these products to be connected later, whether that is by the homeowner or another integrator.
Gaming products, like Sony’s PS3, are prime examples of components with which custom installers can’t earn markup, but integrating these with a home theater will create a more satisfied customer.
Don't Offer it, but Connect it
This option requires the CE pro to make sure he has a good installation contract. For example, does your contract cover you if the homeowner buys the product himself and it "blows up" while you are integrating it into the A/V system?
That's why many integrators who offer this option make sure they are absolved of all liability when connecting a product that they did not purchase. Likewise, having an established rate program for connecting no-margin legacy components is a good idea and has spurred some integrators to boost their labor rates.
Offer it, Connect it
If your goal is to go above and beyond your duty to satisfy your clients, then this third option is probably your only way to go. Especially with a fully integrated system, custom installers are often faced with legacy equipment that the homeowner already owns.
That's why, when you are engineering the system, it's advisable to get a complete list of all the legacy equipment and cross-check it against your proposed system.
For incompatible electronics, some dealers who sell equipment online will offer to take those old components and post them for sale, remitting some of the proceeds to the homeowner. For new equipment, the common scenario is to simply run to Best Buy or the Apple Store and buy the component yourself. This turnkey service is sure to impress the customer.
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3 Comments (displayed in order by date/time)
“For new equipment, the common scenario is to simply run to Best Buy or the Apple Store and buy the component yourself. This turnkey service is sure to impress the customer.”
Until the unit breaks under warranty. As far as Apple is concerned, the client doesn’t own the unit - it was sold to the installer. The installer must charge for his time to have Apple repair/replace - but what happens if the client wants to handle it?
I didn’t catch that part. I assumed it meant that the consumer would run out and by it themselves. I would never run out to BestBuy to pick anything up for the customer. If they want to buy something online or from the big box stores then they will have to make the trip or place the order.
I might go so far as to use their credit card and order it thru amazon but thats as far as i am willing to go. On occasion i will meet the delivery guy and carry in TV’s but we normally make it known that our involvement will be installation only. I wont be responsible for something i didnt provide. The last thing i need to be dealing with is a damaged plasma that someone else made money on.
We stopped being Dish Network dealers about a year after we became Dish Network dealers because we realized we didn’t want to invest the time/effort it would take to do it right.. because there was no profit involved.
That doesn’t mean we don’t work with it or wont jump at the chance to sell someone a surround system to go with it.
The iPod revolutionized distributed audio. No one ever used the mega CD changers because they had no idea what disc they were on without spending the money on Escient or attempting to fake feedback with tedious programming. I know this for a fact. Every time i upgrade a 10 year old system i find the same 50 CD’s i loaded and maybe 1 or 2 mix CD’s for holidays that have been added and thats it.
The iPod gave us the ability to provide the client with something cool at an affordable price. We havent sold a CD player since Crestron released their iPod dock.