Livonia, MI, Mar. 28--Art Kramer says a major turning point for his company came about seven years ago when Ford Motor Co. asked for lower prices on a multimillion-dollar flooring contract.
A.R. Kramer Flooring had held the Ford contract for more than a decade, and price reductions were common for auto suppliers.
But this time Kramer and his brother Mike decided they couldn’t go any lower, and another company picked up the big contract.
“Either we had to make a change, or they were going to put us out of business,” Kramer said. “If we were going to continue to grow, we had to look elsewhere.”
That decision led to much more residential work at the company founded by their grandfather in 1925. Instead of shipping flooring material all over North America, the company focused on the basics of installing flooring one home at a time for home builders and families.
The retail salesforce grew from 13 to 20, while the commercial salesstaff shrank from five to two. Two years ago the brothers opened a second retail location in Canton, and over the years they have doubled their advertising budget to attract more retail customers.
The results have been dramatic. Annual revenues have doubled to $18 million and, just as importantly, so have gross margins.
Retail sales have grown from 20 percent to 40 percent of the business, and builder contracts are up from 30 percent to 40 percent. Meanwhile, large commercial contracts have dropped from 50 percent to 20 percent.
The Kramer brothers found that focusing on the retail market enabled them to compete on service and not just price.
“Anybody can have a lower price, but the company that doesn’t invest in service doesn’t stay around very long,” Mike Kramer said.
The brothers have found the old-fashioned business approach of maintaining an experienced staff is the key to good service. A good benefits package helps keep turnover low. Paying more than some competitors has helped attract and retain experienced contractors to handle the growing number of installations.
That approach works with Pulte Homes of Michigan Inc., which uses A.R. Kramer for hardwood flooring, linoleum and carpeting in 11 housing projects around Metro Detroit.
“They really care about what they do and that’s refreshing,” said Fred Wyborski, vice president of construction at the Royal Oak-based division of Pulte Homes. “This industry has become customer-driven, and having suppliers that understand the customer makes our end goal of delighting the customer that much easier.”
Focusing on service also enables A.R. Kramer to differentiate itself from larger competitors like Home Depot and Lowe’s. He added that meeting the needs of retail customers is more enjoyable than worrying about getting the paperwork right for corporate customers mainly concerned about the bottom line.
“It’s an easier business to deal with people who have a vested interest in their own homes,” he said. “There’s much more satisfaction.”
And there’s the added benefit of doing business with some of the same families that their grandfather served.
“We have customers whose parents and grandparents have bought here. It’s nice to see those relationships continued,” Mike Kramer said.
