Last time ('It's all about price, price, price', ARN, May 3, page 16), we looked at the adventures of Norman the specialist reseller. His lot was not a happy one because of major inroads into his business by CE stores, more direct sales being made by manufacturers and less channel support being provided.
We sat together, over a few red wines, and looked at his options. He had tried to sell the business, because last financial year's figures were not too bad, but found only willing and expensive business brokers rather than buyers.
He swallowed his pride and went to his nearest competitor suggesting a merger but found they were incompatible. He even tried advertising in the local Weekend Shopper but found his sales didn't even cover advertising costs. He had resorted to the last line of defence - cutting prices. His average gross profit was now about 15 per cent and still declining, as was his profit.
We talked about SWOT - strengths, weaknesses, opportunities and threats.
His strengths were that he had a loyal base of customers who would pay reasonable prices, mainly second time users and SMB clients who needed, but seldom paid for, support.
He had a presentable shop and workshop. He had relatively clean stock and was turning it over about every four weeks. In short, he was a good reseller and there was not much to be done in that department. So he increased margins back to previous levels and it turns out that he has not lost any more sales than he was making at lower margins.
The main weakness was being savaged on prices, mainly from unethical resellers but also from bargain specials in the CE stores. He sold via education and would let a customer walk out without closing the sale.
By introducing simple strategies such as asking for the sale, and phoning the customer to follow up, his close rate is up 30 per cent.
Where he had previously avoided using second or third tier distributors who sold cheaper products, he expanded his product line to include some of these items.
At last report he was actually still selling the same amount of higher-end gear but the lower cost stuff had helped him to save some sales that would previously have been lost. He embraced the concept of up-selling.
I reminded him there were no such things as problems, just opportunities waiting to be solved. His sales process was too involved so he came up with a new system of preparing simple PC information sheets using icons and comparison tables that let the customer do a little more of the work. Latest reports indicate the sheets are working very well.
I suggested he sell additional two- and three-year warranties for his better systems. He does his own repairs, which means it is cream on the cake. He added an optional no blame clause to his warranty that, for a fee, gives customers access to higher levels of support than they can get elsewhere. He now does on-site repairs as well, but only for the PCs he sells. It is working like a charm and, because he is upfront about the service options, customers don't expect free post-sales service.
The threats however are still out there and we will meet regularly to address them. But for the moment, Norman is feeling a little better about himself and that positive attitude is reflected in his business.