Added-Value Service May Mean Lost Profit

About Power Equipment Distributors, Inc.
Began distribution in 1985
Territory covers MI, OH, IN, North Central IL, Northern KY and Western PA
Brands carried include: Billy Goat, Brinly Hardy, Exmark, Hoffco, McLane, Oregon, Power Trim, RedMax, TracVac and Velke

In outdoor power equipment retail, it seems that many of the services provided by a dealer with the purchase of a piece of equipment end up being free of charge to the customer. Sometimes it's delivery, and many times it's the setup. We all enjoy a good freebie now and again, but when it is at the expense of your business, you really should take a step back and ask yourself: Why am I giving this away for free, and what is it costing me to do so?

KNOW YOUR VALUE

A value-added service is any service that goes beyond what the customer pays for. The most unfortunate thing is that many of you are offering these value-added services, at no cost to the customer, without calculating what it is actually costing you. If you yourself don't know the value of the service, how will the customer? Every service that you perform has a value, and you have to come to the realization that it is worth something in order to feel good about the possibility of one day charging for it.

In completing a sale, many of you will set up and deliver the product for no charge. There is an expense for providing these services, and that should be calculated. Dealers should calculate the time and resources required to assemble a piece of equipment, as well as the time and money it takes to deliver a product. In delivery, account for the hourly wage of the person delivering the product and how many hours it takes to deliver. In addition, account for the cost of gas, which is becoming more of a concern daily.

It can prove to be very helpful if you take the time to calculate these costs. Without actually figuring out the cost, the business's profit is not the percentage you may think it is at the end of the day. You may be surprised at what these value-added services are costing you and, in turn, decide they are worth charging for.

CHARGE FOR COST

After calculating the cost of providing value-added services, it may be a good time to consider that many of these services provide the customer with a convenience that he or she is accustomed to paying for in other areas of retail. I don't work on the sales floor, so I don't know what the pressure to offer free services may be like. But I do know that we are working in an industry with very short margins, leaving little room for what some may consider an unnecessary cost.

Many people in our industry think that you have to give things away for free. This is because dealers are down-to-earth, good people. The reasoning behind this may be that after selling a $10,000 product, you feel guilty adding on an additional charge. Well don't. I wouldn't think anything of it if you charged me, because I get those extra charges everywhere else I go. I would have no way to get that $10,000 piece of equipment home. I understand having to pay for that, and your customers will also.

If you do decide that you want to start charging for some of your previously free, value-added services, a great place to put a price tag is on the equipment delivery. Charging for the equipment delivery will likely be the easiest expense to explain. Consumers and commercial customers especially will understand the woes of paying for gas when delivering equipment.

It pays to be honest with the customer. Tell them that in order to be a successful business and make it through the dry spells you simply have to charge for costly services. They should understand that times change and business changes. If they don't understand, you as the business owner have the power to decide on a case by case basis whether or not to charge a customer for the service.

Another way to start charging for services is doing it based on the value of the product. You can encourage customers to buy a higher quantity or a more expensive piece of equipment by charging less for delivery and setup as the sale price gets larger, ultimately offering free service with a very large purchase. It is simple; the more they buy, the more they get for free.

VOICE YOUR WORTH

If after calculating costs and factoring them into your margins you still want to offer the value-added services for free, at least inform your customer of their specific value. In this industry, dealers often do things for people just because they care. Do it, but tell the customer what it costs your business to do so.
Each time you provide a free service and do not notify the customer what it costs you, the customer sees no value in that service. In your advertising, conversations and even when a customer calls for a price quote, tell them the services you provide for free and what they would cost if charged for. This information can also be included on sales receipts or invoices.

By showing the potential cost of the service to the customer, they see the added value in purchasing from you verses another dealer who may not provide it free of charge.

Everything you do has a value, and if you do not voice it, how does the customer know how much that was worth? As far as they care, it wasn't worth anything. Meanwhile, it costs you the dealer every time you do it. In the process of retailing outdoor power equipment, the dealer is invaluable and the customer's realization of this keeps him loyal.

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