Fees for SFI prospects range from 5% to 18%. If your current marketing costs are greater than 10-15% or more, this may seem feasible. Remember, however, that you may be required to set up displays in stores and to operate those displays as well.

Do the arithmetic, when you add the cost of the in-store displays, demonstrators, or others required to make the floor time, you can detect another 8 or 9%, which when added to the fee paid could add up to 24 or 25%.

You must confirm leads, schedule appointments, and train salespeople to handle this “third-party source”; still, it might be viable. As long as you can get margins that allow for this excessive marketing cost and still make a net profit.

Most of these SFI partners provide heavy traffic for their exposure and many are equally demanding as to what products will be sold and how they will be sold. They have a legitimate concern because they fear pushy sales will “push” their customers. Therefore, the need for enhanced sales training is required. Beyond which you will also need to develop an ongoing relationship with the store manager and those other people with whom you have to interact. Whether you consider the terms or actions excessive or unfair, it is your territory and you must learn to act in accordance with your culture.

You may find that SFI partners require you to cover multiple stores and respond to each potential customer promptly. Therefore, the smaller sales organization can quickly be inundated with leads that they cannot serve quickly. Furthermore, it requires a mix of two extremely different cultures. SFI (home improvement contractor) dealers often salivate at the potential of plentiful leads, not understanding that big box stores that advertise “lowest prices every day” stimulate that kind of thinking for their customers. so the potential customer you get can be conditioned to get the lowest prices regardless of the top-of-the-line product you may offer. As one of our customers who has a relationship with SFI says, “The customer looks for quality and service from Nordstrom, at Walmart prices.” Therefore, SFI distributors must carefully analyze their customer satisfaction attitudes and then scale them up to meet the requirements of their new strategic partner.

Another concern is whether the relationship will last. A few years ago, Lowe’s had such a program involving many manufacturers and hundreds of distributors. When they abruptly canceled the program, the distributors involved were forced to remove their samples and displays from Lowe’s stores, stop receiving leads, and discontinue sales practices.

The distributors involved discarded their sample cases, presentation books, brochures, and sometimes uniforms that identified them with the Lowe’s program. In addition, programs and staff dedicated to the SFI program for which recruitment, training and development costs had been expensed had to be written off.

Lowe’s arguably had experiences with some distributors within the program that they viewed as unfavorable. If they saw this as a threat to their customer service image, they think they acted wisely. However, this case makes it a requirement that a merchant scrutinize and exercise prudence before simply jumping on the bandwagon with an SFI program.

The same can be said of involvement with a brand that offers exclusivity in terms of product and territory. Deals often tend to be overtly in their favor, raising questions: What if they decide to bring a similar product into their territory? What if they introduce a product under another name, but similar in design, or demand unrealistic fees for the purchase or performance of the product, or have favorable unilateral cancellation privileges for them?

On a positive but sobering note, for those who engage in an SFI or brand program, there is a retraining process that is necessary. Many of our valued customers have strong partnerships with brand name merchants. However, it requires developing a new or modified sales and marketing model with explicit controls over sales styles and presentation methods, but with all these precautions, it is still viable for those who plan structures and control their new model.

Two questions are inherent in our assessment of these kinds of relationships. The first is: Are the rates fair? The answer is: not in all cases. Certain “department stores” make a pre-tax 2 or 3% net profit that requires purchasing, warehousing, merchandising, packing, and tons of staffing. In the case of a 10-18% SFI fee, they may put little effort into the association except for a fee that requires little or no investment beyond their good name and some interaction from middle management.

The other problem is a “clash of cultures.” Large home improvement product-oriented retailers rarely understand the true dynamics of how a home sale is done and don’t put much energy into figuring out how it’s actually done. They are also unaware of the many puzzling problems associated with hiring and training specialist salespeople to carry out a customer-appreciated sales methodology.

In truth, the “big box customer in the store” often places great value on the brand relationship, but is used to shopping without the need for the copious discussions that get involved in a home improvement project or the psychological dynamics that are present in a professional home presentation, the lack of which can create high levels of customer dissatisfaction if the sale is made.

In many cases, the SFI distributor is unknowingly bound by the “big box” policy; for example, the store may have a policy of “If you are not completely satisfied, return the product and we will refund the purchase price.” While this is great for cash and on-the-go products, it can be costly when a customer wants to cancel long after 72 hours.

[3 working days] the termination rule has expired. In some cases where custom windows were sold, measured, and then made to order, the policy, when the store enforced it, leaves the dealer with inventory that might not be salable due to the custom size.

The final caveat concerns cash flow. Once you make the marketing investment, advance your salesperson a portion of the commission, order and pay for your product, permits, and installation costs, and ultimately have a satisfied customer (in most cases) you will wait for the I pay because your “big box” partner doesn’t send payments until the job is completely finished and customer satisfaction is assured.

The latter is not a statement of condemnation. Your strategic partner has every right to have these guarantees; however, it is important to understand that you will dramatically increase your accounts receivable with this interaction model.

All that said, SFI’s relationships with “big-box” brands or stores represent an effective method of developing leads as long as there is fairness for both parties and a proper plan for utilization and control is in place.