Volume 13, Issue 4 - May 2012

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Continuing Education
Manufacturers and Dealers Soak Up Industry Information at Fenestration Day™ 2012
by Tara Taffera

No you don’t get any sort of formal credit for attending, but one thing is for certain: The manufacturers and dealers who attended Fenestration Day were rewarded with valuable information that will allow them to become even more successful in their businesses. The event was held April 12 in San Antonio, Texas, and included an educational track for manufacturers and dealers as well as a few joint sessions. The individuals in attendance were an engaged group who shared ideas and asked questions, which added to the success of the program.

The annual event is sponsored by DWM magazine.

Economist Presents Housing Forecast
David Crowe, chief economist for the National Association of Homebuilders, served as the keynote speaker with a presentation entitled, “Looking into Housing Markets’ Crystal Ball.” Taking a look back at 2011, Crowe commented that there were still many “30-year-olds living in Mom’s basement.”

“Household formation will start again when they move out,” said Crowe. “They will need a house. Hopefully you will be ready to supply that building when things come back around,” he said, adding that by the end of 2013 there will be an increase in housing.

“Mortgage rates are very low and may go up just slightly. We are beginning to see a recovery in employment and that will lead the recovery,” he said.

According to Crowe, the distress in the mortgage market is heavily concentrated.

“In the United States 70 percent of mortgages are seriously delinquent, but this is only in certain states,” he said. “There is a vast number of states that have excess inventory.”

Speaking of home prices, Crowe asked, “What is the ratio of price to income? Affordability remains high.”

He added, “All this information about markets is national, but you have to remember that markets are local.”

According to Crowe, 101 markets are improving.

“We started this improving markets index to show growth,” he explained. “They are spread out everywhere. It started out in September of last year with just 12.”

“2012 will still be the stage setter–the year of getting our act together,” he said. “2013 will be more robust.”

He added that 2011 was the worst year on record—the worst year since the 1940s.

“We are starting from a low point, a 17-percent increase this year, which sounds good but is still low,” he said. “We are still a long way off, but a 17-percent increase will be the start of a recovery.”

Looking at multi-family housing, Crowe said this is a completely different story. This segment saw a 55-percent gain last year and “between 2004 and now we have had the same number of homeowners,” said Crowe.

He also talked about remodeling, which he said has been a “bright spot.”

“The tax credits helped buoy the remodeling expenditures. We also had a phenomenon of people who chose not to move,” said Crowe. “We have had a reasonable surge due to that phenomenon.”

According to Crowe, the dollar amount of remodeling expenditures is higher than new homes.

“That has never happened before,” he said.

He also pointed out there will be a long road back to normal for many states.

“The recovery is occurring in states that have little effect on total production,” he said. These include, for example, smaller states such as North Dakota.

During the presentation one attendee asked if the inflation numbers from the government are real numbers.

“We are seeing spikes in certain building products such as lumber, gypsum, etc. … This will be a bumpy recovery and building products may be the worst of it,” said Crowe. “Underlying inflation, I am convinced, will still be relatively low. If you don’t have strong demand it will be hard to push up prices.”

Another question was about the Fair Issac Corporation (FICO) score. “At what point do you see the banks releasing [this] so the people who live in basements can get credit and move out? Don’t you think that is one of the main factors that is affecting our market?”

“Yes,” Crowe answered. “When I do my survey of builders they say, ‘I have a great buyer but they aren’t getting the loans.’ Yes, mortgage rates are still low but we still have this problem of getting credit.”

Crowe told his audience, “The job of an economist is to make guesses as to how all this will work out. There will be some modest easing in underwriting. Also, the real key to the recovery is job recovery. It has to be consistent—convincing the customer that this is here to stay.”

Get Creative with Financing Options
Jim Plavecsky, owner of Windowtech Sales, spoke to dealers about creative financing options. He discussed four financing options: cash, same-as-cash, unsecured loans and secured loans. While three people in the audience noted they used the same-as-cash options, others said a lot of their business is based on cash.

Plavecsky said there is a disadvantage to cash. “Could you have sold more windows if financing was readily available?” he asked. “The advantage of same-as-cash is it often turns a maybe into a yes. The disadvantage is the customer may demand a discount in lieu of free money.”

According to Plavecsky, 80 percent of people who use same-as-cash don’t pay it off during the same-as-cash period and this translates into a loan with a double-digit interest rate.

“Unsecured loans are loosening up a little bit. The consumer doesn’t have to put up collateral [for] amounts up to 7,500,” said Plavecsky. “This rather low credit limit is a disadvantage but the interest rates are decent.”

According to Plavecsky, secured loans can go up to $24,000 for up to 240 months.

“The minimum FICO is 660, which is good as you can get a good amount of customers at that range,” he said.

Refinancing is the last option.

“Say you do their windows, roof, etc. That is where this would be beneficial,” said Plavecsky.

“Tell customers they can save their cash and use it for other items. This will take you about 30 days, as an appraiser will have to come out, etc.,” said Plavecsky. “This is a great option if you have someone with a decent FICO score.”

He also told his audience, “You have to be creative with how you offer the options. If you know the value of your product really well and you sell it well and the customer adds up all those value points that will make a big difference.”

And he added, “It’s a cool thing if you can integrate your financing and marketing.”

However, there can also be challenges.

“Financing can squeeze your profit margin,” said Plavecsky. “But that could be better than not getting the sale at all.”

Another point of advice he shared was to differentiate products.

“If the consumer perceives you have more value you can roll it all in,” he said. “Tell your finance companies you need instant approvals. Tell them you want the money funded to the dealer.”

One dealer in the audience asked if using financing will increase sales.

Plavecsky responded that the fact that he asked that question shows that more dealer education is needed on financing solutions and how it can help improve their businesses.

Market Data and Survival Tactics
DWM columnist Michael Collins, managing director, building products group, at Jordan, Knauff and Co., gave two presentations at Fenestration Day. The first was geared toward manufacturers and detailed the latest merger and acquisition numbers as well as future projections. His presentation for dealers focused on meeting challenges head-on and how to survive a challenging market—good advice for any door and window company.

Regarding mergers and acquisitions for door and window manufacturers, 326 transactions have occurred since 2000, 75 percent of which he characterizes as strategic and 25 percent financial. The amount of expansions and plant closures are nearly the same—77 expansions from 2006-2012 and 74 plant closures in that same time period.

The amount of company closures has slowed considerably since 2008 and 2009, which is good news. Thus far in 2012 only one company was purchased and one closed.

Door and window dealers are looking for ways to thrive in this current market and Collins gave them some ideas on how to do just that.

“Be a problem solver, not just a seller of products,” said Collins. “Also, don’t make your customers wonder about delivery dates, delays, etc.”

He also encouraged companies to stay up-to-date on current and pending legislation and requirements that can ultimately lead to sales, citing the $1,500 tax credit as an example.

“Know the lead paint requirements cold,” said Collins. “Don’t fight the regulations, get out ahead of them. The homeowner will look to you for assurance that the new rules won’t be a hassle for them.”

He also talked about the decision making responsibilities at respective door and window retailers and reminded the group to keep in close contact with the customer.

“Make sure that key decision makers are highly accessible to customers,” said Collins. “Never make customers feel that you’re hiding behind a bureaucracy.”

The importance of customer feedback cannot be overstated, said Collins.

“Compare your own offerings with that of competitors and study why customers buy from you instead,” he said. “Ask your customers why they buy from you.”

Companies that know the most about their customers, what they want and what they think of the company, are those who conduct surveys, according to Collins. This is key to understanding a company’s place in the market.

Collins also talked to attendees about the importance of hiring exceptional employees. A company is only as good as its key people and sometimes that may mean looking to a competitor or a company that has closed.

“Look for managers, manufacturers’ representatives and other sales professionals that may have been displaced by a company closing or a merger of a company,” said Collins. “Your competitors will employ this technique even if you don’t.”

Another key area for dealers is the constant acquisition of new leads. “Don’t be afraid to ask for referrals,” said Collins. “Make requesting referrals part of the process of completing a job.”

He also encouraged window companies to take a close look at their own operations with a critical eye.

“Open your website and look at it from the perspective of a potential customer,” said Collins. “Look at your showroom in the same way. Is it helping or hurting?”

Don’t forget that it is the little things that matter, he reminded attendees.

Panel Proves Communication Still Lacking Among Dealers and Manufacturers
It doesn’t happen often that you gather manufacturers and dealers together and have an open question and answer forum that offers honest feedback regarding what each group wants from the other. But it did happen at Fenestration Day in one of the most interesting and informative sessions at the event. The result was an honest exchange of ideas that ultimately proved that companies on both sides of the aisle, manufacturers and retailers, still have some improving to do.

DWM
gathered together two dealers: Dan Wolt, president and founder, Zen Windows, Columbus, Ohio, and Scott Barr, steward, Southwest Exteriors, in San Antonio, and two manufacturers: Dennis Northcutt, national sales manager, NT Window in Arlington, Texas, and Mike Loter, executive vice president of Don Young Co. Inc. in Dallas together to share ideas.

If you weren’t already aware of how competitive the market is, and how price continues to play a crucial role, Loter offered a reminder.

“One thing we would like to see is less demand for cheaper products,” he said. “We used to have six competitors in Texas and now we have 30 and they drive the price down.” He added, however, that many companies do have loyalty to Texas-based manufacturers.

“We can’t always offer the lowest price,” added Loter.

Wolt echoed Loter. “If you want quality service you can’t get the lowest price,” he said.

During the panel, moderator Tara Taffera, editor and publisher of DWM magazine, asked participants a variety of questions and one of the questions to the manufacturers was, “What do the great dealers do well?”

Again, some of the answers came down to dollars. “They present the product at a fair price—not the lowest price—a fair price,” said Northcutt.

What else do they do well? “The good dealers take time to learn,” said Loter. “We encourage our dealers to come for training.”

Wolt said the training he receives from his chosen window manufacturer is non-existent.

“I wish dealers had to get together every year for training,” said Wolt.

He told the story of one manufacturer that canceled his training appointment three times.

With another, Wolt said, “In five years I haven’t gotten a phone call saying ‘I can come train you.’”

Another hot topic during the panel revolved around websites and technology and how the groups interact using these forums.

“The good dealers have great websites,” said Loter.

Wolt counts himself as one of these good dealers and said if the manufacturer he works with doesn’t have a great one as well that is a deal-breaker.

“Having a great website is crucial to me doing business with you.” In fact, he said he had met with a manufacturer who had a great product but the website was very low quality and “paled in comparison to his” so he declined to work with that manufacturer.

For Wolt, the manufacturer’s site is crucial as he sends customers there before he even shows up at the home.

“I tell my customers ahead of time to visit the manufacturer’s site, that way they are informed before I show up,” he said.

Other panelists agreed that a great website is crucial.

“The website is there to support the dealers,” said Northcutt. “The homeowner will go to the manufacturer’s website. Some direct them there. Some don’t, but the better dealers do.”

“We encourage our dealers to link directly to our site,” said Loter. “This is a great tool if used properly. I don’t think enough dealers direct homeowners there.”

As far as other ways to use technology, both Barr and Wolt said all their order entry is done online.

“We email, we tweet, we Facebook—we communicate in every way,” said Northcutt.

“Technology has helped us reduce mistakes greatly,” added Loter.

“Anyway you can connect to technology you can get us,” said Northcutt. “Hopefully later in the year we will have an iPad app.”

So while much communication occurs during forums such as this one, it seems more work on improving communications is still needed. For example, Wolt said his manufacturers don’t even inform him of new products that are available.

One dealer in the audience shared that he “doesn’t sell on price and doesn’t lose on price.”

“I buy x windows because they’re made in America and sometimes that is a tipping point,” he said. “But for a company my size if I don’t have help from you that hurts me.” As an example, he pointed out that he has lost sales due to the transferability of warranties.

Could that “help” from manufacturers include sales leads?

Barr pointed out that he gets a few leads from his manufacturers, a point with which Wolt was interested as he gets none.

So an attendee posted a question to Wolt: “If a manufacturer could deliver you leads, would you change?”

“If they could provide me with one lead a week, I would jump ship if they offered a comparable product,” he answered.

“Nothing makes us happier to get a lead and pass it on,” said Loter.



DWM

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