Marketing Magic: Market and Sell the Tax Credits

July 27, 2009
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Those government officials are at it again. I recently blogged that Mike Murphy’s comments on the tax credit program - though laudable in intent - seemed to indicate it had been created by zombies with the intelligence of cantaloupes. I felt this was an insult to cantaloupes.

Now for some reason, Murphy won’t take my calls, and an unmarked brown sedan keeps circling my building. But that doesn’t have me worried … yet. This does.

HVAC contractors, amid the gloomiest economic times since the Paleozoic era, may be dismissing one of the most lucrative programs ever created. To recap: the federal government allows a tax credit of 30 percent - up to $1,500 - on the purchase of new, high-efficiency air conditioners, heat pumps and furnaces. This is three times more than the tax credit last year, and it goes through 2010. Sounds good? We thought so.

However, a few discussion boards and the rumor mill contend that the tax incentive is “too complicated”, or that “homeowners don’t go for it”, or that the “paperwork is too intense.” And my technical response to that is - hogwash.

As soon as this was signed into law, we sent a marketing and sales program to clients who had done exceedingly well with the previous tax credit program. They were our Beta Group - a really modern word for guinea pig. These contractors worked through wrinkles, perfected their own approach, and across various United States cities they began closing some very high-ticket sales.

A few weeks later, a West Coast client on a group coaching call told me and several shocked participants, “I just closed a $31,600 replacement system using the tax credits to close the sale.”

How?

By making it easy, understandable, and irresistible. Seems some contractors are having a tough time with all three. Not after you read this.

To be clear, this is a tax credit, not a deduction. It reduces the amount of tax that you’d normally owe, by up to $1,500. Some online “know-it-alls” full of skepticism (among other things) have claimed that determining the amount of credit is hard. Contractors hear this, and assume that since it involves the IRS, no human can possibly figure it out.

Basically, if a taxpayer owes $1,500 or more, and they bought qualifying equipment with a receipt to prove it, they’re credited $1,500. You can go to www.energystar.gov to check.

I’m tired of talking about the boring stuff, let’s talk about contractors and how they’re getting more leads and sales.

SOME EXAMPLES

Jeff Lee, an extraordinary HVAC sales pro in Detroit, jumped on this program right away.

“Literally, ever since the tax credits came out, I don’t think I’ve sold anything but a 95 percent energy-efficient furnace,” Jeff said.

“Yes, even in summer, we’re applying the credit to furnaces, but contractors can put the credit on either unit, the package, or qualifying heat pumps. Doesn’t matter. The sales presentation is simple too. It goes like this.

“If you present three furnace choices – a 95 percent energy-efficient model for $5,000 (the system that qualifies for the tax credit); a 93 percent for $4,200; and a 90 percent for $3,600, it’s a matter of simple math. That last number seems lowest until you apply the $1,500 tax credit to the top model, and then you’re down to $3,500. Then I use the Wouldn’t You Agree close: ‘Wouldn’t you agree that it makes sense to get the best furnace for less than the cheapest furnace?’ Very few people disagree. The few who do, don’t want to pay all of it now, having to wait until April’s tax deadline to regain their $1,500. That’s when I say ‘I can offer you 12 months same-as-cash so you don’t have to pay for it until after the tax deadline. This way, you’re getting the best system and the credit now.’ This takes care of many who hesitate. It’s a no-brainer,” Jeff said.

MARKETING THE ECONOMIC STIMULUS BRAND

This is a benefit that sells well to almost anyone with an aging system … and yet, how do you let them know about it and get the phone to ring?

We had so many contractors asking this question that we put together the package of ads, direct mail letters, and press releases I mentioned, but companies can develop their own ads as well.

“It’s one of our major lead generators,” said Greg Gill of Action Air in San Diego County, Calif. “We’re taking a two-pronged approach. In some ads and letters, we promote the tax credit incentive on its own; in others, we package it with incentives from the local utility company and the manufacturer. This gets the phones ringing. In this market you need something to give people incentives. It really is a head liner for our marketing right now.”

Action Air hasn’t increased marketing from about 6 percent of total sales, only re-adjusted from other pro- motions. “We still generate about $6 million in total sales, but the tax credit sales are at higher margins and higher transaction sizes. We love it.”

The tax credit program is not limited to HVAC. Everyone from window installation, to roofing, plumbing, and insulation companies can all sell qualifying jobs. Once the $1,500 has been used up, that’s it. Basically, this amounts to probably one home improvement.

That’s not a bad thing, since it means the economic stimulus brand is very strong right now. Your job is to reach them with your offer first and help them make the best decision. “We’re selling predominantly high end,” Greg said. “We don’t sell that many systems that don’t qualify. This could change if the homeowner uses up their credit elsewhere though. That’s why we’re full speed ahead!”

Plus, since credits are scheduled to end next year, this leaves only four peak seasons for an HVAC contractor to market hard.

ANOTHER SALES CLOSE

Many contractors get homeowner resistance at systems with a high out-of-pocket price. That’s the wrong way to offer it. Greg’s company does a cost-of-ownership analysis over a 10-year period. As they present it to customers, they can see the operational cost comes to a 10-11 percent return on investment. “Or if they’re replacing really outdated equipment, if a $9,000 system saves them $75 a month in energy, that’s a 10 percent return.”

“We usually close them with a statement you suggested like, ‘I don’t know what your 401(k) is doing right now…,’ and everyone can relate to that. This makes our heating and cooling system ROI better than most any bank,” he said.

As long as the sales guys are on the top of their game and educating the customer, folks can make these decisions without thinking.

NEWS Update: This topic has been so hot, that Adams conducted an interview with Greg and Jeff on exact strategies they’re using now. Several closes and techniques are shared. You can get the CD of the call (80 minutes) plus the workbook and a free report “How To Sell the HVAC Tax Credits Now” by faxing your polite request to 334-262-1115 or e-mailing to freenewsstuff@hudsonink.com.
 
Publication date: 07/27/2009
 

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