Big Box, Big Leads?

You've heard about leads acquired through The Home Depot and similar companies. You may have heard the horror stories of companies who got involved, sold a lot of business, and couldn't make a profit. So is this a viable lead source?

Fees for the leads range from 3% to 15%. If your current fully loaded marketing costs are over 10%, this may look workable. Remember, however, you may be asked to build and man displays. You also have to confirm leads and set appointments.

Moreover, a successful SFI relationship requires a blending of two very different cultures. Home improvement contractors often salivate at the potential for abundant leads but fail to grasp that big box stores advertising “lowest everyday prices” stimulate exactly that kind of thinking, and expectation, in their customers. Home improvement retail chains don't understand in-home selling and don't put much energy into finding out how it's done. Their customers are used to buying home improvement products and services without much discussion. For those just getting involved, there's a necessary re-training process.

SFI partners may require that you cover multiple stores and service each lead promptly. The smaller sales organization could quickly get inundated. Most of these SFI partners supply heavy traffic for your exposure. Many are demanding as to what and how the products will be sold. They fear aggressive selling will “put the squeeze” on their customers.

Another issue: Are the fees fair? Not in all cases. Certain stores make 2% or 3% pre-tax net profit, which requires purchasing, storage, merchandising, packaging, and tons of personnel. For a 10% to 12% SFI fee, they put minimal effort into the partnership except to extract a fee that requires little investment beyond their good name.

Many of my company's clients have strong partnerships with brand name merchandisers. These require developing new or modified sales and marketing models with controls on sales styles and presentation methods. Nonetheless, I approve, condone, and applaud my clients' relationships with brand name retailers. —Dave Yoho (www.daveyoho.com) is president of the oldest and largest consulting group serving the home improvement industry. For more information, call 703.591.2490.