Marketing mastery: How to generate high-margin referrals

Home Columns Marketing mastery: How to generate high-margin referrals

September 5, 2016; Volume 31, Number 6

By Jim Augustus Armstrong

Even with dealers in some markets experiencing relatively high sales volume, now is a very challenging time to be in flooring retail. Box stores and online discounters continue to create downward price pressure, and many local retailers are attempting to compete by cutting margins and using cheap-price advertising. However, by using the right strategies, getting margins of 45% – 50% or more is completely achievable.

Recently I spoke with Danny Harrington, vice president of product strategy, Galleher, about strategies to generate high margins and referrals.

I try to help get high-margin customers, and the key to doing that is differentiation. What advice do you have for retailers in this regard?

Harrington: Retailers are getting squeezed by companies like Lumber Liquidators and the big box stores. We encourage our retailers to learn how to sell high-end because that’s where they’re going to have open space in the market. For example, special products with advanced finishing techniques that previously were more exclusive to very high-end dealers are becoming more available at prices that are friendly to a local retailer.

I teach dealers that if you don’t create differentiation then you’re forcing your customer to buy solely on price. If she sees three wood floor options that look similar, in her mind they’re the same thing. So why should she pay more?

Harrington: That’s why education is key with whatever product you’re selling. We do our best to educate the retailers about product features so that they can sell against lower priced items found at box stores and discounters. Take wood, for example. If they’ll go online and educate themselves about oil finishes and sourcing oak in Europe and the differences between Russian oak and French oak and some of those finer points, they can use to help upsell the products in their showroom.

What are your thoughts on the importance of referrals?

Harrington: Flooring is now a referral business. And that really speaks to the importance of service. The retailers can sell the benefit of high-quality installation along with having that accountability under one roof. Then there’s that extra level of “wow” factor if they follow up and visit the home later with the cleaning product that the customer is supposed to use. Those little touches with the customer create that referral business that big boxes can’t.

We train our dealers to bring a gift basket and include cleaning products.

Harrington: While you’re in the middle of a project with a customer, little things like calling them back quickly or answering your phones are critical to getting that referral business. Unfortunately, a lot of dealers don’t have that serious commitment to customer service.

The average level of service in flooring retail is mediocre at best. By following your suggestions retailers have a quick shortcut to creating huge differentiation.

Harrington: Unfortunately, a lot of retailers still believe that if they don’t hear from someone after the job is done that’s a good thing. If they have no contact with the person after the floor is installed, they’re happy. I can understand that emotion, but that’s not good for long-term business.

 

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