Private Labeling Offers Exclusive Brand Control
May 5, 2008
HVAC and refrigeration contractors have been telling themselves that in order to be truly successful and provide quality installations for their customers, the brand they need to sell is really their own company, not a manufacturer’s label. When your company is the brand, surveys have shown that it means more to employees and customers than somebody installing a box made by a large corporation.
Some contractors and manufacturers have started putting their money where their mouths are, by putting the contracting company’s name on equipment provided under a private label agreement with one of those large manufacturers, essentially making “Joe’s” a product brand.
Mark Swepston, president of Atlas Butler, Columbus, Ohio, has been using a private labeling program through a local distributor for Luxaire and York for about six years now. “It’s worked very well,” he said.
“At the time we started doing it, we were a Carrier dealer,” Swepston said. “I thought we would be 50-50 Carrier and Atlas Butler brand. We are now 90 percent Atlas Butler on the residential side.”
“I truly believe customers don’t care what equipment goes in,” he said. “Some people are loyal to a brand, but we find that very few are.” They are, however, very loyal to the contractor who installs and services the system. In the end, it’s the person sitting in front of the customer who decides which brand to put in; “The sales rep sitting in front of the customer is the one who makes that decision.”
EMPLOYEE PRIDEOne of the major benefits of private labeling through the contractor, Swepston pointed out, is that it really increases the pride employees take in their work. “Employee pride has skyrocketed. It’s their name on it, or the company’s name, so the pride goes up much higher in a job well done.
“One of the things we saw the first year was that our labor costs for warranties dropped significantly,” he added. “It was our name on it. That was a big part of it.” Another factor is the idea that it’s more difficult to throw the problem back at the manufacturer when the manufacturer’s name isn’t on the box. “It’s not a manufacturer problem, just the person right in front of the customer.
“I can’t absolutely credit all this to the label,” he said. “But I have little doubt.”
Now manufacturer Goodman is offering a private label program for its Goodman dealers. “You are the brand, the brand is yours,” said Gary Clark, senior vice president marketing, Goodman.
The Goodman Private Label HVAC program “allows you to create a brand of equipment that no other dealer can offer,” Clark said. “You select the brand name. You market that brand with support from the Goodman brand, if you need it. If not, you can market the brand any way you desire: premium, value-driven, or mid-range - you make the call.”
The program also provides marketing and sales support for the contractor’s brand. “When you have your own private label brand of HVAC equipment, you can sell it as your primary brand or as an alternative to your primary brand,” Clark said.
“Rather than compete with all the other dealers in town selling the same product and cutting into everyone’s sales and profit dollars, you will have your own brand. No other dealer will be able to offer a price quote against your private brand.”
According to Swepston, there has been “a lack of appreciation of the dealer by the manufacturers” which private labeling can help them fight. “For example, if you’re a dealer for most major brands, you can have an employee quit and they [the manufacturer] will finance them to go into business against you almost immediately. I think they finally started to do something about it.”
The manufacturer could still possibly sell their product to a former employee in a nearby location, but private labeling puts a different face on the brand. The quality of the product is determined by the quality of the contractor’s installation, which creates the differentiation between competitors.
TRIED AND TRUEAs some controls manufacturers could tell us, private labeling is not entirely new in the HVAC market. They’ve been putting contractors’ names on their products for years.
“At Honeywell, we have been providing private labeling for our thermostats and other products for over a decade,” said Dan Joyce, director of trade channel marketing, Honeywell.
“Since we have introduced private labeling into our new thermostat product lines, we are doing more private labeling than ever before. We now private label nearly a million thermostats annually, and see that surge continuing.
“Our private label program used to be more field applied,” he continued. “Dealers would insert a provided label onto the product. When we launched our new line of thermostats, we moved to factory-applied private labeling. This has provided higher-quality private labeling that is no longer the privilege of just large dealers. Now dealers can private label their thermostats with quantities as low as 48.”
The company said it is currently investing in laser technology that will further improve the quality of its private labeling offering. “There is no interaction point for the homeowner bigger than the thermostat on the wall,” said Joyce. “And there is nothing like the power of your name on the wall to get all that recurring revenue. We believe that it is better to have 24/7 access to the contractor’s name manufactured right on the thermostats.”
With Honeywell’s private labeling program, “You are building your brand,” said Joyce. “For distributors, there is another value. Honeywell offers free direct shipment for distributors to contractors. This eliminates the risk of distributors holding inventory that is specific to one contractor.”
The pitfalls of private labeling, in fact, seem mostly specific to manufacturers and possibly distributors if care isn’t taken regarding stock. “For the industry, it is a risk for distributors to keep private label stock,” Joyce said. “A nonprivate-label thermostat is always in stock. But as long as you plan your availability and need, private labeling is the way to go.” Honeywell’s free direct shipping helps eliminate that risk.
From the manufacturer’s perspective, “One pitfall is that we cannot resell private-labeled thermostats,” he continued. “Private labeling is also an intense operation. It certainly adds cost from our standpoint. It also adds some complexity to the distribution chain.”
The company also private labels air cleaners, humidifiers, and media cleaners. “Honeywell believes that the next big opportunity - and a great place for a private label - is on the media cleaner,” said Joyce. “The consumer is ready for the contractor to lock in these recurring replacement filter sales, and we would love to see more contractors take advantage of it.”
FUTURE WORKPrivate labeling can also help contractors generate future maintenance, repair, and replacement business. Say a homeowner needs their appliance fixed; first thing they see when they look at it is the name on the box. Chances are, if they look in the Yellow Pages, they will look for a dealer who carries that brand. “If you are the only company selling that brand, you should get all the calls,” said Clark. “It’s your business. You are the brand!”
It’s important for both the manufacturer and the contractor to make sure this type of arrangement is suitable for both parties.
“If I were a manufacturer,” said Swepston, “I would have to step back and make sure I have the right system in place. Most companies are not very big, and they don’t stay in business very long.” If a company won’t be around in 20 years or so to get the replacement sales, the manufacturer could lose it. “They have no name recognition at the home. Their chance of getting any follow up is diminished.”
Goodman’s private label program includes this partial list of the guidelines that the contractor must agree to follow:
• Contractors interested in the private label program should consult with their local distributor to make certain that the program is a good fit for the long-term success of their business.
• The logo for your private label brand must be submitted for approval.
• Participating contractors will sign and abide by Goodman’s private label supply agreement.
Goodman’s private label marketing support product images and photos in both color and black and white files (high-resolution, digital) are available for inclusion in advertising and marketing materials. Private label product literature templates can be used to insert the company’s name and product badge name, that the contractor can use in a custom design. In addition, the participating contractor can have custom literature designed locally.
“Not every dealer who applies to participate in the program is approved,” the manufacturer warned. “Outside of honoring its contractual agreements, Goodman reserves the right to discontinue its private label program at any time and to refuse the sale of any Goodman manufactured product for use in a private label program.”
“It is all about creating recurring revenue for the contractor,” said Joyce. According to a Honeywell survey of 2,500 consumers, 46 percent said they didn’t know the name of their heating and cooling contractor. “With private labeling, your name is now visible when that consumer needs a new furnace, a service call, or a filter change.”
Publication date: 05/05/2008