[Editor’s Note: This article is a summary of research performed for David Wells’ Masters’ thesis, a 68-page report that resulted in the awarding of an MBA degree in Marketing Management.]

The purpose of my research was to show manufacturers and dealers of residential HVAC systems how to raise the equity of their brands, enabling them to sell more premium systems and increase their revenues and profit margins. The results were culled from responses from 140 homeowners. Specifically, this study answered the following research questions:

• What product attributes are most important to consumers when selecting residential replacement HVAC systems?

• To what degree does brand name influence the price consumers are willing to pay for residential replacement HVAC systems?

• What are the primary sources of information when consumers are purchasing residential replacement HVAC systems?

• How do select demographic characteristics influence the purchase or residential replacement HVAC systems?

Traditionally, consumers know little about the features and benefits of various air conditioning brands. They generally have relied on dealers’ recommendations and expertise when choosing a new system. However, with the increase in technology, the diversity of media selection, and the advent of the Internet, information about consumer durables is more accessible.

Some consumers will now make a purchase decision prior to product or dealer contact, based on prior experience or a thorough online information search (such as, “The impact of the Internet on information search for automobiles” in the Journal of Marketing Research, May 2003). However, two-thirds of replacement HVAC buyers still use the dealer as a primary information source, according to Decision Analyst Inc., in its “2006 American Home Comfort Study.”

DECISION CRITERIA

When it comes to brands, most consumers have a very limited evoked set, since most HVAC manufacturers do not market directly to them. Consumers form their consideration set from the brand choices presented to them by the dealer, according to Decision Analyst. Choice criteria during the evaluation stage depend on the consumer’s end goals, and may include brand image, features, price, design, and past experience.

This information was derived from “A Study of Market Structure: Brand Loyalty and Brand Switching Behaviors for Durable Household Appliances” in the International Journal of Market Research, summer 2000; and “The Impact of Marketing Communication and Price Promotion on Brand Equity” in the Journal of Brand Management, August 2005.

The final purchase decision depends on the choice heuristics of the decision maker. After evaluating the alternatives, the consumer will select the product and brand that will most closely fulfill the desired end goals, according to “Self-Relevance and Purchase Goals: Mapping a Consumer Decision” in the Academy of Marketing Science Journal, summer 1996.

Research is divided regarding the relative impact of advertising, price, and branding on the final purchase decision, particularly on high-ticket items such as air conditioning. A self-administered survey was developed to assess which attributes were most important to consumers, to what degree brand influenced the price they would pay, and where they searched for product information.

The survey was distributed to homeowners from 64 different zip codes in California, Nevada, and Arizona, and included participants in all adult age groups and income and education levels. Five-point Likert scales (multiple choices from “strongly disagree” to “strongly agree”) were used for most questions.

MOST POPULAR ATTRIBUTES

Findings showed that reliability, serviceability, and energy-saving features were the attributes consumers desired most. Brand name communicated quality to them, but was not an important choice criterion. Price was important during the decision-making process, but not as important as quality. Two-thirds of respondents said they would be willing to pay more for an HVAC system with a reputation for quality.

If brand name communicates quality, this would explain why consumers would pay more for a brand with a reputation for quality. However, brand reputation as an attribute was ranked low in importance, while price was ranked near the top.

This apparent incongruity may be due to lack of knowledge on the part of the consumer. Since most consumers seldom shop for air conditioning, they are uninformed about HVAC brands. They assume homogeneity and automatically shop for price. If consumers were better informed about the important attributes of a particular brand (reliability, serviceability, and energy efficiency), they would be willing to pay more for that brand.

WHERE CONSUMERS LOOK

Results also indicated that consumers searched for product information from friends, family, and manufacturer Websites and brochures, but not from the Yellow Pages or through salespeople. Fewer than 25 percent of respondents indicated they would likely turn to the Yellow Pages for information.

A popular assumption is that older age groups use the Yellow Pages, whereas younger consumers use the Internet. This research found no major differences between “age group” and either “Yellow Pages,” “manufacturer’s Website,” or “social networking Websites.” In fact, the 51-60 age group was the least likely to use the Yellow Pages, and the most likely to use the manufacturer’s Website as an information source.

Many HVAC manufacturers market to dealers rather than to consumers, on the premise that:

1. It is too expensive to market effectively to consumers, and

2. Since consumers are uninformed about HVAC brands, it is the dealer’s role as an expert to suggest to consumers which brand is right for them.

However, this study suggests that salespeople are not the consumers’ preferred information source. In fact, only one-third of respondents indicated they would be likely to seek information from salespersons.

Nevertheless, dealers can still be an important influence in other stages of the consumer decision-making process, such as identifying which product attributes will satisfy the consumer’s end goals.

Next to “friends and family” (71.4 percent), the sources of information that respondents were most likely to seek were “manufacturer Websites” (60.2 percent) and “manufacturer’s brochures” (50.4 percent).

While marketers would have difficulty targeting a consumer’s particular reference group, manufacturers could certainly use their own Websites and publications to provide information about their products. By communicating images of reliability, serviceability, and energy efficiency to the consumer, marketers can raise the equity of their brands, and in turn command a premium price.

BRAND EQUITY IS A LOSER

Dealer brand equity is at least as important as equipment brand equity. Dealers play a crucial role in the consumer decision-making process, despite the lack of esteem indicated by this study.

The unique dealer-client relationship established during an in-home sales call creates an opportunity for dealers to involve themselves in the consumer’s thought processes and discover what features and attributes are really important in their decision-making process. They can also influence the consumer’s decisions by asking questions about their unique needs and wants, like allergy relief or energy efficiency.
Once customers have opened their wallets, dealers should offer add-on items such as filtration, electronic air cleaners, and humidifiers, since the consumer may desire an option that was not in the original set of choice criteria. This not only raises customer satisfaction, but also increases dealers’ revenues and profit margins.

Friends and family are the No. 1 source of information for shoppers of residential HVAC. Dealers who provide homeowners with solutions to problems, especially problems they were unaware of, become topics of conversation with other prospective buyers. Fulfilling undiscovered needs produces satisfied customers. These customers become sources of referrals, which is the best source of prospects.

Besides referrals, outdoor advertising is another good way for dealers to raise awareness of their business as a brand. Some inexpensive media are truck signs, yard signs, and door hangers. Many HVAC manufacturers offer co-op advertising, and dealers can benefit from the brand equity of the HVAC systems by including the manufacturer’s logo on their signs.

Brand loyalty to the dealer can be achieved by contacting the customer regularly by phone or direct mail. After installing a residential HVAC system, dealers can send satisfaction surveys about the experience, and include tips to make sure the system works properly and that the customer remembers the dealer. Dealers can also send customers reminders to call for seasonal maintenance. After each service call, a survey should be sent to make sure the customer is satisfied.

Every contact with customers strengthens the bond between the dealer and the homeowners, and increases the possibility of repeat sales to those customers and referrals to new ones.

Publication Date: 11/10/2008