Meeting Aftermarket Needs in a Struggling Economy
August 17, 2009
There are key objectives of an aftermarket parts and service business that are necessary in order to become and remain successful, especially in trying economic conditions such as those that the HVAC industry is currently suffering through. According to the Source 1 division of York/Johnson Controls, these include unwavering availability; outstanding product breadth; and, last but not least, competitive pricing.
Michael Riley, of Riley Sales, Inc. - a second generation family business in Plymouth Meeting, Pa., that has served HVAC trade contractors throughout eastern Pennsylvania and southern New Jersey since 1965, is involved in mostly residential/light commercial/multi-family housing.
“In this market, we try to do it all!” Riley said “We have our hand in everything.”
Frank Kern, director, Source 1 has been with the company for seven years at the Wichita, Kan., locale and is split about 50/50 between residential and commercial focus as far as proprietary parts manufactured in Wichita, Kan., and Norman, Okla., where the company is headquartered.
Source 1 is a part of the Aftermarket Sales and Service Group, an operating business of York Unitary Products Group (UPG), a Johnson Controls Inc. company. The Aftermarket Sales and Service Group combines all the departments of Source 1 - sales and marketing, distribution, materials, and customer service - with UPG’s Technical Service Team and Warranty Administration Department. With more than 24,000 different parts, Source 1 provides proprietary parts for York-branded equipment, including York, Luxaire, Coleman, and Fraser-Johnston, as well as a full line of universal replacement parts for other brands of HVAC equipment.
“We are a business unit within the building efficiency unit of Johnson Controls,” Kern said. “York, Coleman, Luxaire, and Fraser-Johnston are brands we operate under.”
REMAINING COMPETITIVE IN A TOUGH MARKETKern said, “There is no question, the economic situation has impacted unit sales,” although he noted that parts are pretty much still flat with last year. Across the industry, Kern said, the current economy has distributors watching inventory very closely and protecting cash flow.
“Our philosophy, which has been in place for about four years, is more focuses on core products, which our customers (primarily distributors) and then their customers (dealers and contractors) use every day,” Kern said. “Form supplier partnerships to bring parts to the market at prevailing prices.”
Doing so allows distributors to create brand loyalties through those exclusive brands, Kern said. “It flows downhill, if you will.” Some initiatives in place at Source 1 to accommodate customers during these hard-hitting times include working to keep minimum order requirements for free freight as low as practical. Low/minimum orders can still qualify for free freight. Freight policies allow the company to recognize greater turns on their products through better inventory management.
Another company strategy is utilizing the Source 1 brand to bring exclusive products to distributors to increase demand. “We want to step outside of the me-too box,” Kern said. “We offer products exclusive to us and our customers. If everybody in the market has the same brand and same SKUs, then margins are compressed.
By offering exclusive, private-branded products - “quality products that meet or beat market prices” - this will afford customers the opportunity to make more money. “We stress to distributors: The guy that’s got it on the shelf gets the sales,” Kern said.
Some other tips Kern relays are to utilize point of purchase material where it makes sense, and, not tying cash-flow up in inventory maintenance. “Do offer services with regard to in-store displays and point of purchase material and fixtures to give them a clean retail look in store operations.”
“It’s a double whammy here in the Northeast,” said Riley. “We’ve been battling this recession and up until just this week, there hasn’t been any real heat. It’s been a cool summer. We had a cool, rainy June and a cool July … We’ve finally hit a heat wave.”
“We’re having the perfect storm here,” Riley said. “We’re looking at innovative ways to help our contractors. We’re trying to help sales through the Obama tax credit initiatives, working with energy auditors to recommend new HVAC systems, and working with auditors to have our customers get the leads directly from the energy auditors’ findings.”
“Partner up with your strong distributors and with good manufacturers,” Riley said. “Utilize their marketing and all the marketing and sales techniques you can. All of us need to push higher efficiency - the younger generation wants Energy Star™ and green products.”
AFTERMARKET PARTSTotaline is the HVACR replacement component/parts arm for Bryant, Carrier and Payne. According to the company Website, there are more than 500 Totaline distribution locations across North America that provide access to more than 120,000 SKUs. Totaline sales centers provide factory authorized parts for the house brands of equipment as well as aftermarket motors, compressors, thermostats, and IAQ products that will work with all brands of equipment, the company reports.
Jim Flynn, marketing and training manager for Totaline at the headquarters in Syracuse, N.Y., has been with Carrier for 36 years and onboard since the inception of Totaline 21 years ago, helping celebrate the company’s 20th anniversary last year.
Flynn is also the proud author of the “Stump Jim Flynn” column, where readers have the opportunity to ask him specific technical questions and have him answer directly via the Totaline newsletter. According to Flynn, he has only been stumped once in the 19 months or so that the column has run in the company publication. Flynn will send coupons for free stuff, i.e., laser pens, coolers, cooler chairs, radios, et al. to promote the Totaline stores and get contractors in to visit.
WHAT'S OLD IS NEW“Totaline to Carrier is like what Mopar is to Chrysler,” Flynn said. “Our push has always been the importance of factory authorized parts. These provide an exact fit and maintain all approvals and certifications.”
This strategy is where Flynn’s philosophy of “what’s old is new” comes into play. Flynn is the first to admit that the factory authorized parts (FAPs) may cost a little more money, but rest assured, it is also cheaper to service, as it is an exact fit. “FAPs are something we’ve always touted,” Flynn said. “When a customer comes in, we always train the store guys to ask ‘What are you working on today?’ ”
This catchphrase is also broadcast front and center on the company’s Website homepage.
Flynn explained that Totaline teaches the store staff to promote that “FAPs are available,” and to add “and here’s why.” Essentially, FAPs provide a “plug and play aspect.” By providing an exact-fitting part, FAPs thereby save time, which, as we all know, is money to the contractor.
Inevitably, Flynn concedes, customers sometimes do not want FAPs, and are not willing to pay extra. It is for this reason that Totaline also sells universal aftermarket parts.
CUSTOMER SERVICE WHERE EVERYBODY KNOWS YOUAs marketing and training manager, Flynn also teaches the staff to make sure that the customer has everything needed in order to fix the particular machine/system being worked on.
“The goal in stores is to give the technician what they need to complete the job. Always remind them they may need more filter driers.
“They likely have two or three jobs going, and might forget something,” Flynn said.
Flynn’s goal is to build havens for customers that resemble “Cheers,” the syndicated television sitcom, in respect to establishing places with connotations of an aura of “where everybody knows your name.”
“Everybody can have the same parts and stuff,” Flynn said. “The store you go to is where the people have been nice/friendly and taken care of every need - I go back to places where people know me.”
“The guy standing behind the counter is most important because he is the face of it.”
In this light, what’s new is actually old - customer service and replacements as well as everything needed surrounding those things. Flynn said that Totaline staff are taught to provide transactional excellence. This means that service is not only quick, but that the service people get customers everything they needed - and then some - and then get them out the store.
“Train people to be profitable for you,” Flynn said. “People buy parts from people.”
EYE TOWARD SUSTAINABILITYIn these economic times, turn to sustainability and go green. Now is the time to really see what benefits there might be from replacing older equipment with new, efficient equipment. According to Riley, this will help realize savings at every angle. Look to energy efficiency, Riley said, and perform energy audits.
“The contractors who realize this will be able to transition into selling more high-end, greener, higher SEER systems.”
Try to partner up with as many entities that provide leads through energy savings or financing - electrical associations, etc. - anything to help generate leads for customers, Riley said. “They will appreciate that.”
“The tipping point is here. We’re not going back toward the energy crisis of the 1970s and 1980s. We need to be able to save more energy. We need to be green!”
Publication date: 08/17/2009