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Strategy Changes

TWICE: How are installers responding to the market’s challenges?

Mike Hench, The Edge Group: Some dealers are joining forces, and some are more aggressively promoting to solicit new business. Dealers are also looking at ways to maximizing profits and reducing costs — things that many of them did not have time to do last year.

Jeremy Burkhardt, SpeakerCraft: New construction is off, so dealers are getting leaner, becoming better marketers and driving business to their shops. I suggest they sell audio, use iPods, sell better speakers, get the hell in and get the hell out of the house as fast as possible, and repeat the process by marketing your business aggressively.

Steve Crawford, Sonance: We have seen dealers position their business for sustainable growth by paying attention to previous customers. One example is a very smart and successful integrator partnering with a custom home builder to outfit a design showroom that’s being built in a 10-plus-year-old fully completed development with a verified high potential for remodel and retrofit business. The dealer has multiple clients in the development who are not interested in selling their homes in today’s market environment but have money to spend and express a high interest in remodeling to incorporate the latest design features, surface materials and technologies. These past clients are not only a direct source of business but also strong references for others in neighborhoods who are considering remodeling.

Jeff Kussard, Russound: Installers are responding by tapping previous customers, targeting MDUs and the retrofit market, and marketing to architects and interior designers, though they have to tread carefully when cutting prices. It’s always a good idea to give the customer a good deal, whether it’s a savings on labor or some other value-add.

Professionals need to go back to the basics and tap into your market’s needs and concerns today, not what we want them to be or what they were in more robust times. Companies need to become more efficient, and focus on trends like Green Communities that hold special appeal for today’s consumers.

TWICE: Has the rate of installers closing up shop increased with the market’s challenges?

Hench: Yes, we’ve seen more bankruptcies and consolidations in 2007 than in past years.

Bob Gartland, AVAD: I wouldn’t say we have seen a lot of dealers going out of business, but the market is not creating as many new dealers as it has in the past. As the opportunity slows, more mature, developed dealers have a better chance of winning the day than start ups.

Kussard: Absolutely, but not at the same pace as production home builders have closed divisions and moved out of various states and regions.

TWICE: How have suppliers responded to the challenging market?

Hench: We have not seen much change in supplier behavior. However, several are looking to broaden distribution without negatively impacting their existing business. We may see new products that will address the changing market in 2008.

Gartland: Many suppliers seem to be panicking and making short-term sales and distribution decisions. These chickens will come home to roost as the market continues to evolve.

Burkhardt: Suppliers must continue to invest in education, pay dealers to educate themselves, and grow and evolve. Yesterday is dead. What have you done to obsolete your current model lately?

Crawford: Our focus has been to offer more highly differentiated product that our dealers can profitably sell at higher prices. The new award-winning Sonance Architectural Series speakers appeal to interior designers and the high-end, design-sensitive clientele that they serve. By taking this product directly to the design community, we are beginning to create new relationships and specification business for our dealers. We are also introducing an additional line of aesthetically enhanced speakers called the Sonance Visual Performance Series. This line allows every Sonance dealer to up-sell clients based on design benefits in addition to acoustic performance. Our NACSound for Sonance line of Italian, hand-made, custom sculptural speakers also provides this benefit and does so with an admittedly high-priced product offering.

Kussard: Again, it’s all about going back to basics and giving consumers the products and technologies that enhance their lifestyles rather than complicate them. Communicate benefits in a clear, no-nonsense manner, and be quick to adapt to changing market conditions. Shaving margins should always be a last resort.

TWICE: Have builders more aggressively marketed custom systems to attract buyers during lean time?

Hench: I don’t think builders are aggressively marketing custom systems during these lean times. They’re looking to move their inventory and lower their costs. Most builders do not want to be directly involved in the custom business — preferring to let that part of the sale happen “post-closing.” Many have partnered with CI integrators, but still, other than pre-wire, most of the equipment goes in after the sale. That said, slowly but surely, CI dealers are finding partnerships that work with builders. Integrated lighting control systems have been a great help here, as builders and customers are beginning to see the power and integration capabilities of these systems.

Gartland: Builders who traditionally have not offered installed entertainment seem more interested than in the past. Our Dealer to Builder program is being received with more open arms than in the past two years. When a builder could sell every home in an auction environment, how much incentive was there to be creative?

Jay McLellan, CEA executive board member and Home Automation: A CEA survey indicated that buyers regret not installing technology at the time of construction. It also indicated that 90 percent of builders do nothing to market technology. As manufacturers, we want to provide installers with marketing tools that make it easy for the builder to offer in-home technology to home buyers.

Burkhardt: No. The majority of builders are still in the business of starting a project to build homes, sell them, and get out of that project. Most builders need to get aligned with CEDIA members and dealers and get a clue how to market this category. They are way under-marketing a hot category.

Crawford: Many builders have not yet even acknowledged the shift to flat-panel video products that don’t require a large cove in the family room/den/media room. Many home designs ignore the facts surrounding how people actually live and consume audio and video media in their homes, leaving integrators to place flat-panel TVs high above fireplace mantels and speakers in inappropriate positions relative to the seating area. Addressing these most basic issues of design would be an indication that builders are interested in leveraging custom installation as an important selling point in a challenging market.

Kussard: It seems obvious to me that builders and installers must work together to educate new home buyers about the value and options in multiroom entertainment and home networking. It isn’t as if homeowners don’t already enjoy multiroom audio; in its most literal sense, a home theater in the den, tabletop in the kitchen and compact system in a kid’s room add up to multiroom audio. When presented with the myriad ways they can tie all these elements together, with complete control and hidden components, consumers are quick to see the advantages of the latest technologies. It’s just a matter of presenting the benefits in a coherent, unified, and aggressive fashion, and for that, all parties must work together when defining goals and tactics for reaching them.

Traditionally, builders have focused on the core business of selling and moving houses, but leaner times call for a more strategic approach to increasing profits, and multiroom entertainment is one of the best ways to bring in more income with every purchase.

TWICE: What do you think the future is for the CI dealer?

Hench: We often hear it said that the big-box retailers are going to turn custom integration into a scalable, repeatable process, and through their efficiencies of scale and huge buying power, make it difficult for the independent CI dealer to compete.

I think it could go a lot of different ways, but I really believe the independent CI integrator will be here for quite some time to come. In many instances, the “integrator” is beginning to emerge as another trade, similar to an electrical or security contractor, lighting designer, or an IT professional. However, a good CI integrator has a working knowledge of the fields mentioned above, plus he understands audio/video and control systems. And most important, he has the skill set to bring all this technology together and make it work for the customer. That’s a huge challenge — and a great opportunity.