Changing Economy Affects Sales
May 26, 2008
In an economy where more and more money is being spent on higher-priced gas, disposable goods, and utilities, it is logical to assume that home and business owners will continue to delay spending money on big ticket items like cars, appliances, and HVAC equipment. It is also logical to assume that many consumers will pay to repair rather than replace - at least in 2008.
The NEWS asked marketing directors from Goodman Manufacturing and Johnson Controls Unitary Products to comment on how the economy has an affect on one product in particular - heat pumps - and some strategies they are sharing with their dealers on selling in tough times.
As more money is required to pay the basic bills, many homeowners are beginning to reshape their spending habits to accommodate the rising costs in their household budget.
In our hypothetical home, about the time that a homeowner feels a sense of accomplishment with the revised household budget the heat pump stops working.
“As we all know, most homeowners do not plan for the failure of their current heat pump system,” said Gary Clark, senior vice president marketing, Goodman Manufacturing. “When it stops working they need to call an HVAC dealer to get the system working again because regardless of budget constraints, the HVAC system must be functional.”
Homeowners are faced with an eventual decision: to repair or replace the heat pump system. It’s a fair assumption to believe that as rising costs batter the household budget, whichever represents the lower cost option will be favored by the homeowner. Having to choose between an emergency expense of several hundred dollars compared to several thousand dollars, many homeowners will opt for the smaller immediate expense.
As this trend spreads, HVAC dealers may see their service side of the balance sheet increase while the new equipment side shrinks. This is a concern because most HVAC dealers strive to keep both sides growing regardless of the economy. “From our perspective, there are several dynamics in play in the service vs. replace decision, and all must be considered,” said Andy Armstrong, director of marketing, Johnson Controls Unitary Products. “First, we’re now into the second year of 13 SEER systems. In the summer of 2006, homeowners were all faced with sticker shock as new 13 SEER (outdoor and indoor) systems were more expensive than the 10 SEER (outdoor only) replacement. Because of the price difference, homeowners often chose to service rather than replace.
“This strategy can only hold for so long. Service is not an unlimited answer to a faulty unit. With that in mind, we feel there is a glut of older units that were serviced past their useful life. At some point, we’ll catch up.
“The second factor that we feel is very important is total cost of comfort. Homeowners will be faced with more difficult questions regarding their budgets, and repair of an HVAC system is not always the most cost efficient. In many cases, the new high-efficient, cost-effective systems from Johnson Controls (York, Coleman, and Luxaire brands), coupled with financing, allow homeowners to upgrade while actually reducing out-of-pocket expenses.”
WHAT CAN THE DEALER DO?Clark noted that in a robust economy homeowners may not fear taking on a large expense such as a heat pump system because they are comfortable with their household budget. He believes that the homeowner will readily accept the advice of the HVAC dealer regarding the repair or replacement decision. In a slow economy, the homeowner will still seek the recommendation of the HVAC dealer, but may lean toward the lower cost option to avoid taking on additional expenses in their household budget. At this point the dealer must decide how best to help the homeowner - and a new heat pump system may be the best answer and the more expensive.
“HVAC dealers must always provide homeowners with a quick analysis of first cost versus lifetime cost,” said Clark. “The cost to repair an existing heat pump system is nearly always less than the cost to replace the new system. Regardless, it may not be the best decision, and the most economical choice, for the homeowner. If a homeowner’s current system has a 13 SEER rating or less, a case can be made to them explaining the potential savings that a higher efficiency system will deliver.”
Armstrong said his company uses the same selling strategy it has always used because it continues to work well. “The coaching we give our dealers is very similar to what we’ve been giving for years,” he said. “First, ask a lot of questions and determine the true needs of your customer. If a contractor is truly determining needs across the comfort spectrum, there is no doubt in our mind that the opportunity for a system sale will present itself. Good times or bad, homeowners still demand value for their dollar.
“In addition, there is no question that heat pumps offer a unique solution to the increasing natural and LP gas prices. Most importantly, it allows HVAC contractors to offer more choices to the homeowner.”
Clark agreed, adding that the improved indoor comfort will benefit the homeowner regardless of the economic climate.
PRODUCTS THAT MEET THE NEEDRising natural gas prices and electrical rates offer favorable market conditions for high-efficiency heat pump systems. Since heat pump systems can operate almost all year in many parts of the country, they are able to deliver the best indoor comfort at minimum cost.
Clark noted that a Goodman brand heat pump, the SSZ16 is rated at 16 SEER and has an HSPF (heating seasonal performance factor) rating of 9.75. He said, “This combination delivers very efficient cooling and heating performance for homeowners. Our heat pump systems have the ability to lower energy consumption costs all year. The Goodman brand offers a full range of heat pump systems that offer enhanced comfort levels in any home.”
Goodman dealer Henry Temchin of the A.B. May Co., said, “I’ve seen an increased number of homeowners who wanted to just repair the heat pump system in their home, but when we explained the benefits that a higher efficiency system could provide we closed the sale.”
Armstrong also believes that his company has the right solutions for the HVAC climate today. “We feel that Johnson Controls heat pumps are the best alternative in today’s environment, as Hot Heat Pump technology allows for much warmer temperatures from the register,” he said. “Warm air out of the register is no longer a problem with the Hot Heat Pump.
“Another great option in the age of uncertain energy cost is the flexibility of our Hybrid Comfort Systems. With the option to choose to heat with a gas furnace or an electric heat pump, you decide which is most cost effective given the current pricing.
“We’ve been very pleased with our dealers’ reports on our high-end products. The spring consumer rebate programs are off to a faster start than last year, and the year before. Consumers seem to be choosing to improve efficiencies and comfort levels, rather than just put up with the high utility costs.”
Both Clark and Armstrong agree that now more than ever, homeowners need to make the right choice to enhance their indoor comfort levels, lower their utility bills, help stretch their household budgets - and a new heat pump system may be the best answer.
Publication date: 05/26/2008