Changes Can Affect Profitability, Growth

April 7, 2005
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Rheem’s Jack Sinkler listens to an ACCA contractor make a point during a seminar.
AUSTIN, Texas - Jack Sinkler told attendees of his "Key Changes to Profitability and Growth in the Next Two Years" seminar that they need to be aware of four key challenges. Sinkler, vice president of marketing for the Rheem Manufacturing Co., outlined the challenges at the ACCA 37th Annual Conference & Indoor Air Expo.

His list included:

1. 13 SEER transition.

2. Higher customer expectations.

3. Rising costs and inflationary pressures.

4. Shrinking labor pool and product complexity.

He added Rheem will help contractors meet these challenges. "We develop our plans based on the needs of the contractors."

Customer Expectations

Sinkler openly questioned whether there would be a "continued migration to low-priced equipment" when the market begins to transition to 13-SEER equipment. "Are we going to see that upper-end product marketing opportunity continue to grow or will it shrink? I don't know. We are building plans around uncertainties."

He said this new change provides an opportunity for contractors to differentiate themselves. Sinkler said the new "selling story" will be total home comfort - it is not about just selling energy efficiency anymore. "Total home comfort is easy to explain yet harder to quantify," he said.

Sinkler also said there is now a different level of expectation from consumers. "They think they are experts, but they're not," he said. "Yet they know just enough to change how you approach the sale."

He noted that contractors need to be sensitive to what the female homeowners need in HVAC solutions. "It should be no surprise that the female drives the buying decision in the home," Sinkler said.

Another interesting dynamic among buyers are the retiree groups, according to Sinkler. He said that retirees are divided between the affluent - who really are more concerned about comfort - and the ones on a fixed income - who are "pushed to the limit to afford service, let alone a system changeout."

Sinkler said the way to stay competitive during rising customer expectations is by listening to the customer and offering exceptional service because businesses "have difficulty competing against good customer service."

He said that there is often too much focus on selling features instead of benefits. "Listen to your customer," Sinkler said. "They may tell you things that you don't know (like a sick child in the home). You won't know if you don't ask questions or if the customer doesn't offer answers."

Rising Costs, Flexibility

Sinkler told attendees about the rising costs of raw materials and how these costs are being passed on to consumers. He noted the rise in demand for products in China and how these demands affect what U.S. manufacturers are paying for raw materials - if these materials are available at all. For example, China consumed 27 percent of the world's steel supply in 2003.

He stated that China's demand for commodities will continue to affect prices and product availability in the United States.

Referring to increased costs, Sinkler also noted the shrinking labor pool among HVAC technicians. The cost of doing business for contractors will continue to rise if they are forced to repeatedly replace and retrain workers.

He offered one tip on how to keep costs under control - sticking with the same support group. "Find distributors who believe in the partnership concept," Sinkler said.

"Don't cherry-pick your parts from different suppliers because you may not be able to leverage your relationship if you aren't buying a lot of equipment from [one supplier]."

He said that issues such as training, new products, increased expectations, and global pressures make the HVACR contracting business a real challenge. "We are in an era when running your business more effectively is more important than it has ever been," he said.

Publication date: 04/11/2005

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