Here are the specifics of the arrangement, according to the principals involved: Home Depot agreed to display residential equipment in their stores for the purpose of generating sales leads from walk-in customers in select geographical areas. Home Depot formed a relationship with Trane dealers from the area who were asked to join the program, which was designed to provide an equal number of sales leads for each dealer in the area. It was then up to the dealer to contact the lead and negotiate the sale and installation.
Home Depot encouraged the dealers to have their own salespeople on hand to talk with the walk-in customers. If that was not possible, a telephone hotline phone number was set up for walk-ins to call Home Depot for more information, which was relayed to Trane. For this exposure, Home Depot received a predetermined percentage of each sale as a “finder’s fee.” If no sale was made, no fee was collected.
The Home Depot/Trane program started in a few select U.S. markets, including Georgia and eastern Tennessee. It has since spread to many major markets.
The News contacted some participating Trane dealers and asked for their feedback concerning the program.
“Where in the world can a contractor, large or small, greet 20,000 people a day who are looking for home improvement? Needless to say, the exposure for any contractor is enormous. It’s like having a trade show every day, except for the fact that everything is set up and paid for and all you have to do is show up to work the only booth in the show.”
Schuman is impressed with the financing packages available to homeowners through Home Depot. He said that Home Depot offers a 10-year home improvement loan and revolving credit with six months interest free and interest rates as low as 5.9%.
“These special financing packages, coupled with Trane’s, are huge money savers, and customers are cashing in and loving the opportunity to physically see the equipment in the store prior to purchasing,” Schuman said. “Trane and Home Depot have done a wonderful job of setting up the program.
“They’ve provided us with all the tools and training needed for success, and all they ask in return is for those who volunteered to work inside the store. The key to success can be directly related to a dealer’s eagerness to man the booth. Working inside the store increases your leads and increases your business. It takes a lot of time and money to grow your business, and contractors in this program need to be willing to do so.
“The program has had a few bumps in the road, but Trane and Home Depot have been team players when it comes to working with dealers. We look forward to long-term success with the program.”
Holtkamp wasn’t pleased with the results of his involvement and eventually dropped out of the program. He cited a number of reasons.
Holtkamp has been pleased with his company’s high closing rate on selling Trane equipment, citing a closing rate of around 80%. The closing rate of leads generated through Home Depot? “Eight percent,” he said. “And the average sales presentation was two to three hours. So at eight percent, the time it took to make the sale was eating us up.
“Our niche has been the higher-end Trane customer, and when we went into the Home Depot market, we had to completely switch gears to accommodate the do-it-yourself homeowner who wanted the least expensive equipment.
“And honestly, selling Trane equipment puts us at a disadvantage in that type of situation, because our equipment isn’t cheap.”
Holtkamp said that he wasn’t pleased with the amount of time it took to get his money from the sale. “The customer made the check out to Home Depot and then we had to wait forever, months at a time, to get a check from Home Depot,” he said.
The Georgia contractor did not like the fact that his company was required to send a staff member to work at least 32 hours a week and on certain days. He noted that employees of his company couldn’t wear their own uniforms. “We couldn’t even tell the customer who our name was,” he said. “Our shirts had to say ‘Home Depot,’ and we couldn’t hand out business cards, either. It made our company look like a subcontractor.”
Holtkamp felt the program would have more of an impact in an area that wasn’t so saturated with HVACR contractors whose product lines were so varied and whose customer base is so diverse — which is how he described the Atlanta market. He noted that an area like Iowa, where he originally came from, is different from Atlanta.
“Everyone is price conscious in Iowa,” he said. “In rural farm areas, people watch every dime, so a Trane dealer in these areas would be in the competitive mode and willing to get involved in this program.”
“A lead is a lead is a lead,” Gerlowin said. “The number of leads, closing ratio, and average sale are the basis of our residential replacement budget. Home Depot leads have added in excess of $100,000 in gross sales each month for the last six months.”
Gerlowin is happy to staff the local Home Depot with one of his employees because of this simple fact: lead generation.
“Home Depot and Trane support to the contractor has been an outstanding tool for our company to generate and develop more leads,” he stated. “We have placed in-store lead generators at each of our stores to be able to have the face-to-face contact. Our in-store personnel are in the stores four hours per day, seven days a week. Home Depot’s lead generation, added to our own lead generation, keeps three comfort consultants with an average of three appointments each per day.”
Gerlowin said that implementing the program wasn’t easy at first, but it eventually smoothed out. “Adapting to Home Depot paperwork and funding process in the beginning appeared confusing and difficult,” he said. “But training and delegating responsibility for the program to our lead coordinator proved no more difficult to implement and follow than some of our own programs.”
“We didn’t realize that the training would cost us $700 each and we’d have to go out of town to do it,” she said. “I don’t believe Home Depot gave us the true picture of the costs of the program.
“We are only a three-man shop, and we are trying to get our finances in order. Home Depot wanted us to go out of town for training, which would have shut down our business for a week and cost thousands in travel expenses. We just couldn’t do it.”
Berk added that he hired a dedicated team of employees to develop leads, sell, and install systems for the Home Depot program. “This is a big investment, but it takes this kind of focus to train our team to ‘bleed orange’ and understand how to build relationships with the Home Depot associates.”
Berk said that he understands the need to adapt to different modes of doing business — especially the Home Depot paperwork.
“We’ve heard that many dealers have complained about the Home Depot process and paperwork,” he said. “We feel that their requirements are necessary, and any good dealer should be following these procedures to run a professional company. For instance, we have to do a 33-point audit of the installation at completion.
“We feel that is a worthwhile investment of time, which helps assure that the job has been done as promised and prevents callbacks.”
“The future will focus on fine-tuning the processes and identifying the dealers that truly see Home Depot as an incremental opportunity to grow their business. Dealers are currently participating in varying degrees, but some have already set up separate Home Depot departments within their business to handle the Home Depot program.”
Publication date: 10/28/2002