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Marketing mastery: The 5/45 dealer

February 2/9, 2015; Volume 28/Number 16

By Jim Augustus Armstrong

(First of two parts)

Screen Shot 2015-02-09 at 2.59.58 PMMy next two-part series is about the mindset and strategies used by dealers who build $5 million businesses. To successfully command premium prices (gross margins of 45% to 50% or more) in today’s environment and build a profitable business, two critical components must be in place. The first is having a premium price mindset; the second is having sales and marketing strategies to magnetically attract customers willing to pay more, and to overcome the low-price brainwashing many consumers have undergone.

Mindset is critical. A low-price mindset will sabotage even the most effective sales and marketing strategies.

The first step in changing your mindset from cheap-price selling to premium-price selling is to realize that despite what you hear, it is possible to command high margins. Jerome N., a dealer from Texas, went from charging 20% to 30% gross residential margins to 45% to 50% over a 90-day period. Craig B. from Florida is commanding 45% margins. Garry C. from Illinois raised his margins to 50% over a 90-day period. Dan G. from Montana commands 45% margins. Jeff R. from Texas averages 55%. There are many more dealers, both inside and outside of the group I coach, who successfully charge a premium. If they can do it you can, too.

Next, you’ve got to believe you’re worth it. What a dealer charges is often tied up with his self-worth. When dealers don’t feel like they deserve to make a lot of money, their prices reflect it. Negative thoughts such as, “Who am I to ask for 50% margins?” or “No one will pay me premium prices” reflect an attitude about pricing that has more to do with the dealer’s self-worth than outside market forces or his customers’ willingness to pay more.

It’s also important to be aware of negative cultural programming that induces guilt in business owners about succeeding. “Profit” is considered a dirty word in some large, influential circles including our national news media. Add to that the endless government regulations that punish success and the infinite parade of politicians decrying corporate greed—is it any wonder that many entrepreneurs struggle with guilt about money?

Finally, don’t fall for the industry myth that if you have great products, great warranties or great service people will beat a path to your door.

Yeah, right.

I call this the “build a better mousetrap” myth and it’s one of the biggest misconceptions amongst dealers. In today’s incredibly competitive market no one is beating a path to anyone’s door. Legions of dealers have learned this lesson the hard way since 2007 and many are no longer in business.

Even the best flooring dealer will struggle without a system that attracts a steady flow of new customers. While being honest, ethical, knowledgeable and carrying top products are prerequisites to success, they are not enough. The thousands of knowledgeable, ethical and honest dealers with great products who were forced to shut their doors over the past seven years can attest to this. You must combine these prerequisites with sales and marketing strategies that attract the best customers, create differentiation, position you as a trusted advisor and empower you to charge high prices.