McDonald’s is in the burger business; but it makes it’s money selling drinks and fries.
The same model can be applied to retailers who sell car radios but make their money selling accessories such as sound damping material, step-up RCA cables and even speaker wire.
Mike Cofield President of both Custom Sounds (Austin, TX) and of the Mobile Electronics Specialists of America buying/marketing group (MESA) says he used the burger-fries principle to take his 16-store chain from the red to the black. In fact, the store’s net income swung from a loss of over $90 thousand in 2004 to profits of over $1 million currently. Cofied himself went from taking a pay cut to driving a Maserati.
At a KnowledgeFest seminar last week he explained how he methodically incentivized Custom Sounds salesmen to sell extended warranties, sound damping material, step up RCA cables, woofer grilles, caps/batteries, and speaker wire.
In 2012, the chain’s profits hit $1.4 million on sales of $14.5 million.
But here’s the clincher.
It doesn’t matter if the Internet takes away sales. It doesn’t matter if the hack shop down the street grabs sales. That’s all here to stay and isn’t going to change, says Cofield. But, by selling accessories you are not trying to compete on price on car radios any more. You can match a price for the radio on the condition a consumer buys a “local” extended warranty from you. And then you sell him step up RCA cables.
McDonald’s once gave away water for free. Now it sells it for $1.25 a bottle. Cofield takes speaker wire spools, cuts up the wire and sells it in packets for $19.99 each.
He also pushes radar detectors. He stays away from credit cards, which costs the retailer a fee and pushes debit card transactions. He also charges for freight for special orders.
“Hushmat is your fries,” he told the audience.
In RCA cables you offer good, better, best and maybe even one more step up. Good is $15.99, better is $29.99, best is $49.99 and superior is $99.99. Prices are the same regardless of length.
He suggests retailers choose one accessory a month and focus the sales team on that one category with cash incentive awards. Then move on to the next until you build up to pushing 10 accessories. Look at register receipts and make sure each salesmen is pushing each category. If he’s strong in one and weak in another, call him to the office for a talk. It should take a year to make the transition.
“What business are we in? The car stereo business. Do we make a ton of money selling car radios? No. They are beat up all over the Internet,” Cofield said. “If we had to survive on head units, we’d all be out of business. What should we be pushing? We need to push ‘drinks’ and ‘fries.'”