Marketing Indoor Comfort: Contractors Face Changing Landscape In 2006

April 25, 2005
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The indoor air quality products featured on this system provide the homeowner multiple health and comfort benefits and allows the contractor to differentiate his/her business and generate more revenue. (Photo provided by Aprilaire.)
The Pet Rock had its day. So did the Hula-Hoop. Ditto for 8-track tapes and black-and-white televisions. They have either gone out of style or do not exist anymore.

It's the same for getting to the airport in a nonchalant fashion; you cannot pull into the airport parking garage five minutes before your flight is scheduled to take off. Prior to 9/11, you might have had a chance to make that flight. No way in post-9/11.

Talk to many industry insiders, and the same can be said regarding the current sales pitch in the HVACR ranks - namely, the good-better-best approach. In their opinion, it's no longer doable and certainly on the way out - especially with 13 SEER being the national minimum efficiency standard for residential central air conditioners and heat pumps beginning Jan. 23, 2006. It's on this date that manufacturers can no longer build equipment less than 13 SEER.

With the higher efficiency standard, many experts agree that selling the value of comfort - versus the current status quo: level of efficiency - is the way to go. And, many are saying if you have not accepted the change already, you had best better do so in a hurry.

One Message: Total Home Comfort

"Change is inevitable, especially in the heating and cooling industry," said International Comfort Products (ICP) President Herman Kling. "Our success depends on our ability to harness the power of change and use it to our advantage."

In ICP's case, it is holding its "Mission Victory Tour," which is going to 36 cities during the coming spring and summer. The manufacturer plans to prepare 3,000 dealers and contractors for the changes coming to this industry next year. ICP wants to update dealers on the upcoming efficiency standards, how it will impact businesses, and offer training necessary to make a smooth transition. The company will introduce new marketing support programs and tools, and show dealers how to use them to get a head start on selling higher-efficiency equipment.

Also in its arsenal are sales training and R410A training. ICP plans to introduce "no-hassle replacement warranties," designed, of course, to give homeowners extra incentive to purchase ICP products.

"We embrace the opportunity to set ourselves apart by offering ongoing training to help our dealers prepare for the future," said Kling. "When we started the planning process, we estimated 1,500 to 2,000 dealers would attend. The need and desire for training is evident by the more than 3,000 dealers already signed up."

Before you get the wrong impression, almost every major manufacturer has something up its sleeve to help its dealers and contractors get a leg up for 2006. ICP is certainly not alone in that department.

"Marketing-savvy contractors currently rely on energy-efficiency ratings when selling good-better-best home comfort solutions to their customers. Contractors are able to capitalize on consumers' willingness to trade up by demonstrating the energy savings and comfort advantages between a 12- or 14-SEER system when compared to the current minimum efficiency 10-SEER system," said Jack Sinkler, vice president, marketing, Rheem Air Conditioning Division. "After January 2006, energy savings will be less dramatic to consumers with 13-SEER systems because the SEER gap decreases."

That's why manufacturers are trying to get dealers and contractors into the mix right now. In the case of Rheem and Ruud, Sinkler said they plan to stress total home comfort, as opposed to energy savings.

"Total home comfort versus energy payback will become the main arguments to be successful at upselling," said Sinkler. "We're estimating 90 to 94 percent of all outdoor units sold will fall in the 13-SEER category. The biggest challenge for all contractors will be to effectively sell value, as 13-SEER products become the standard in the market."

Kevin Garr, a service technician with Ted’s Air Conditioning in Fort Smith, Ark., checks refrigerant levels on a 13-SEER Rheem outdoor unit during a service inspection. With the transition to 13 SEER, many experts believe it is more important than ever for contractors to pay close attention to their business niche. (Photo provided by Rheem.)

Change Is Necessary

Drew Fitzgerald, vice president of marketing, residential and light commercial, Nordyne, is in agreement.

"Good dealers are able to identify the consumers' comfort needs, which goes beyond selling on increased efficiency levels," he said. "Addressing indoor comfort problems - like uneven temperatures, allergens, noise, etc. - with a system solution is still part of selling comfort, along with the dealer being able to provide long-term support for that customer."

In his estimation, the good-better-best approach is not about efficiency levels alone - and, for Nordyne, never was.

"It has been about varying levels of product, systems, and dealer services that combine to meet specific homeowner comfort needs that are commensurate with the brand promise," said Fitzgerald. "Dealers who can do this well should make better margins, have happier customers, and realize more success."

Matt Peterson, vice president-sales and marketing, York UPG, believes there must be a sea of change in marketing and selling strategy by contractors.

"It's nothing less than the transformation from traditional technician to contemporary retailer," is how Peterson put it.

In his estimation, the advent of 13 SEER is not the only factor driving the need for change, "but it is an inflection point between the old strategy and the new."

He added, "It's also an opportunity for growth and profitability. The key is to not allow a minimum efficiency standard as the maximum value we offer the end consumer. That approach will relegate central heating and cooling systems to the status of commodity products. The winning approach for contractors is to raise the entire value proposition for premium home HVAC appliances and services, recognizing that energy efficiency is simply one necessary element of the complete retail package."

A technician with Florida Home in Jacksonville, Fla., checks the electrical components of a Rheem high-efficiency condensing unit. In the eyes of Rheem, a contractor can be successful by focusing on the needs of the individual homeowner. (Photo provided by Rheem.)

Factor In What's Going Around

Peterson wants contractors to examine the dynamics that are going on in the market:

  • As reported in The News, an online poll conducted by The Henry Ford historical institution and America Online (AOL) last fall revealed that the most influential innovation in the past 75 years is residential air conditioning. More than 2.5 million votes were cast during the survey.

  • The trend in home remodeling continues to grow, and that's the "sweet spot" for the residential replacement business. HVAC products that appeal to consumers, because they are efficient, "green," quiet, provide better indoor air quality (IAQ), and look better from an aesthetic viewpoint will attract a higher portion of those remodeling dollars - or, so thinks Peterson. "People will spend the money; we just have to give them the reason to spend it," he said.

  • Consumers are better informed and have more retail purchase options. Women are reportedly making anywhere between 60 percent and 90 percent of the purchase decisions, and they are motivated by aesthetics and by their perceptions of how a contractor will handle installation and follow-up service.

  • Mass merchandisers with hefty promotional budgets are now selling unitary HVAC products. However, consumer preference studies show that homeowners still prefer to buy from a quality, local contractor.

    Add all these dynamics and Petersen said contractors just have to get in line with the times.

    "These are a few of the broad trends and indicators that tell us we are selling more than ever in a retail environment to customers who are sophisticated and who want our industry's products, expertise, and service," said Peterson. "And they underscore the profit potential in the add-on/replacement segment."

    He summarized it this way: "Contractors who grasp this reality can not only survive but thrive through 2006 and into the future, and they can make 13 SEER work for them."

    "I'll repeat: Don't let a minimum efficiency standard be the maximum value you deliver to the customer," Peterson stated.

    "In other words, efficiency is important, but you cannot rely on efficiency to sell up and realize higher margins. We also need to sell comfort, sound, aesthetics, humidity control, healthy indoor air, warranty and service support, and so on. These should be the contractor's strengths and the keys to differentiation."

    This home cutaway shows what a total comfort system should and can consist of: a two-stage variable-speed furnace, air conditioner, humidifier, UV light, electronic air cleaner, HEPA system, an energy recovery ventilator, and zoning panel with programmable thermostats. (Illustration provided by Nordyne.)

    Age Of Packaging

    Tom Rodgers, marketing director, Re-search Products, believes it has become the "Age of Packaging."

    "I think it is a good idea to quote and sell a bundle or group of accessories," he explained. "Consumers are overwhelmed with decisions. HVAC is not immune. Rather than providing a quote and having to discuss the furnace, air conditioner, air cleaner, humidifier, UV, zoning ... why not go where consumers are already comfortable: buying a combination of products preselected to meet their needs?

    "The beauty of this process is that other industries have already paved the way - fast food, power tools, new cars. All have packages of accessories that deliver multiple benefits with a single price and single decision. Also, it is assumed that the packaged items were meant to go together. This means less stress and pressure on the end user to make the right combination of decisions."

    Via this approach, Rodgers said the focus shifts from each product and its features to a conversation about the list of benefits delivered.

    "Consumers buy benefits, not features. Selling IAQ opens up a whole new basket of benefits, well beyond temperature control and energy efficiency. The list includes comfort, convenience, health, aesthetics, reduced maintenance, protection of the home, its furnishings, HVAC equipment, and much more."

    In the end, this packaging approach should produce a) an increase in revenue per job, b) position the dealer as the IAQ total comfort expert, c) a differentiation from other heating and cooling dealers, and d) above all, said Rodgers, "a happier customer."

    "The benefits at the consumer level include less stress and complexity of the decision/buying process, optimized IAQ, IAQ accessories that work together, plus money savings by having all installed at once versus multiple trips," he said. "The opportunity is huge. You can turn this situation into one of discussing the pros and cons of package A or package B and how each meets the homeowner's needs. This positions the dealer as the solutions provider."

    Now Is The Time To Change

    Because contractors are leery of a vast price jump in 13-SEER products and above (and many manufacturers will tell you they have no choice), using the traditional return-on-investment sales pitch is not the best way to go either.

    "Before it's too late, every contractor should re-evaluate themselves in terms of their approach to the consumer and support they offer," suggested Fitzgerald. "In 2006, we see a definite break between the contractor who has traditionally sold on efficiency alone, and the contractor who has done a good job of branding, marketing, and delivering solid service. Because the differentiation of efficiencies is greatly reduced, the 13 SEER changeover runs the risk of further commoditizing the market. This may pose a risk for some contractors to resort to price selling instead of re-evaluating their approach and selling whole home comfort.

    "It will be key for dealers to have a solid marketing plan and be able to differentiate themselves based on their brand, their service, their ability to identify the consumers' actual needs, and support their customers in a long-term relationship."

    In the eyes of Sinkler, that means three words: total home comfort.

    "Successful contractors will differentiate themselves by focusing the selling and benefits of total home comfort and how properly selected systems improve the quality of their customers' homes," said the vice president of marketing, Rheem Air Conditioning Division.

    "The new fundamentals of the selling story in the 13 SEER world are built around a whole-house system. The most successful contractors will be presenting to customers things like accurate temperature management, humidity control, quiet operation, optimal airflow and ventilation, filtration, zoning, and electronic monitoring that protects the system from catastrophic failure or damage.

    "We see these as the primary elements to moving the customers' attention to benefits that can be felt and experienced every day beyond gains in efficiency, energy savings, and payback calculations."

    Sidebar: Sinkler - Two Simple Rules

    The question was asked of Jack Sinkler, vice president, marketing, Rheem Air Conditioning Division: "How can a contractor be unique and different from the rest with 13 SEER on the horizon?"

    He had two suggestions:

    1) "A contractor can be successful by focusing on the needs of the individual homeowner. They must ask good, probing questions, and ensure that they're listening to what the customer needs. Taking the extra step to make sure they're able to offer customers a customized home comfort solution will ensure they're always meeting their needs.

    2) "They have to continue to sell their business niche, whether it's outstanding service, an on-time record, product knowledge, or whatever. With the transition to 13 SEER, it is more important than ever because price and efficiency as selling tools will become less viable in 2006."

    Sidebar: Sell Reputation, Relationship, Price

    According to Gary Elekes, business trainer and faculty member with the York Business Training University (BTU) for contractors, value is in the eyes of the beholder. It is a customer's perception of the benefits relative to the person's idea of what those benefits should cost.

    To quote Elekes from one of his recent BTU presentations:

    "As dealers, it's your job to discover the beliefs of everyone involved in a purchasing decision and define the needs, wants, and desires that influence their buying decision ... In the end, every sale comes down to the buyer making a decision about their perception of the benefits versus the investment amount.

    "It is our job to make sure the customer feels like we are exceeding their expectations in the four things we sell: One, our reputation; two, our personal relationship with the customer; three, the installation and the product benefits we offer; and, four, the price of the product."

    Matt Peterson, vice president-sales and marketing, York UPG, had this to add: "Notice Gary doesn't mention 13 SEER or even energy efficiency specifically, though it is clearly a product benefit. To circle back to the new value proposition, and borrow Gary's language, we've moved from good-better-best to ‘reputation, relationship, benefits, and price.'"

    In the eyes of Peterson and York, "This is the approach we are recommending, and the one we are supporting through our distribution and dealer network."

    Publication date: 04/25/2005

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