Upgraded Systems Give Builders Options

August 13, 2003
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Picture the following scenario: A local builder is putting in a new residential subdivision. You, as an HVACR contractor, have worked with the builder in the past as a subcontractor, installing the basic “construction-grade” equipment because the builder sticks to a strict budget and doesn’t have time to get into the custom market.

But you have an idea that might intrigue the builder — if you can nail his feet to the floor long enough to listen. You propose offering a package consisting of a higher-efficiency furnace and condensing unit, a dehumidifier, an electronic air cleaner, and a multifunction thermostat. The margins on these upgrades are very attractive, and you know that, if given the choice, buyers often opt for a higher-efficiency system in a new home.

Does the builder like what he hears? Can you make the sale? Several manufacturers have set up programs to help you do just that, asserting that upgrade packages can be a win-win situation for contractors, builders, and homeowners.

American Standard’s Home Comfort Tour Kit is designed to help prospective buyers familiarize themselves with the heating and air conditioning equipment.

All-American Home Program

American Standard Heating & Air Conditioning (Tyler, Texas) began its All-American Home Program after noting the success of a similar program, which was run through its kitchen and bath products division. The original program is tiered, allowing dealers to sell kitchen and bath products throughout the home. The more products sold, the higher the rebate to the dealers.

“From working with our people in the bath and kitchen side, we determined that we could bring in heating and cooling equipment and tie in many of the same elements,” said Paul Trotter, American Standard’s national sales manager. “We created this new program with the heating and cooling equipment eight months ago, targeting the local custom home builder. The two programs are run separately, but they appear to be seamless to the builder.”

With the HVAC equipment, the categories for upgrading are listed as “good,” “better,” and “best” — depending on the product’s efficiency. Air cleaners, coils, and thermostats are all included in this program.

“If a builder chooses the better and best equipment, he can get extra incentives, besides the higher rebates,” said Trotter. “He can get a two-year parts and labor warranty. He can get up to a $300 rebate if he maxed out everything.”

In order to market the product to the builder, American Standard offers a Home Comfort Tour Kit. It comes in a briefcase-shaped display and includes door hangers and a home tour guide.

“The guide includes a map where builders can walk the buyers through the home, on a scavenger hunt through the home, looking for elements of the heating and cooling system,” said Trotter.

“The home tour guide brochure allows the prospective home buyer to take a self-guided tour of the home highlighted by a stop at each of the actual components of the heating and air conditioning system.”

“We merchandise each element of the system and describe the element with a ‘hanger’ card,” said Joyce Warrington, American Standard’s brand manager. “The tour takes buyers outside, where we talk about the outside units such as the condensing unit or heat pump.

“The final part of the tour is an invitation to go back indoors and enjoy the indoor comfort. Buyers are encouraged to take a brochure entitled ‘At Home With Comfort Guide.’”

The whole tour is an educational experience for home buyers, informing them of the various efficiencies and add-on products designed to make the home more comfortable and lower energy costs.

“The dealer includes his business card in the guide, providing a possible future lead for him or her,” Warrington said.

“Builders enjoy this home tour because the buyers can see all of the amenities of the model, like crown molding and arched doorways — items they might pass by if they weren’t on this tour,” said Trotter. “They also like it because they can provide an extended parts and labor warranty on every American Standard product in the house.”

To top it all off, there is a galvanized powder painted steel site sign that can be placed on the front lawn, inviting the prospective home buyer to come inside. Dealers can insert their own name on the sign for added marketing.

“Our dealers love this program,” Trotter said. “It is a creative way to get in with the local custom home builder.”

American Standard issues the rebates, which are passed down through the local distributor to the dealer and eventually to the builder. The dealer and distributor share the cost of the home tour and the two-year warranty. In many cases, the distributor markets the program directly to the builder and leads are then given to the dealer.

“We make it easy for the dealers to develop their own marketing tools and not to use a cafeteria-style menu to sell equipment,” said Warrington. “The program is all packaged together in a cost-efficient manner, which makes it easy to order and to set up.”

American Standard also offers a builder upgrade program in which the builder provides the names of the home buyers to the local dealer, who then has the opportunity to sell upgrades, such as high-efficiency equipment and add-ons. The program can be customized. The dealer needs to have a showroom or the capability to show a computer program depicting a “virtual showroom.”

“Everybody shares in the spoils of the game,” said Trotter. “The builder gets a rebate, the dealer makes a higher margin, and the consumer gets the product he or she wanted anyway.”

Levels Of Customization

Rheem Air Conditioning Division (Fort Smith, Ark.) offers a customized upgrade package that is available through a network of independent contractors and de-signed for specific builders. The customized program consists of three upgrade packages, according to Ken Geurian, the division’s industry accounts manager.

“For example, in an area like Fort Smith, the standard new home package might consist of an 80 Plus efficient furnace and a 10-SEER condensing unit,” said Geurian. “An upgrade package — because of the mild temperatures — might consist of a 12-SEER condensing unit, a power humidifier, a UV light, and a digital thermostat.

“The next upgrade could consist of a 14-SEER condensing unit, a 90 Plus efficient furnace, and an electronic air cleaner.”

According to Geurian, the upgrade package is positive for the Rheem and Ruud contractors, as well as the builder. “Number one, the contractors upgrade sales to more profitable, higher efficiency equipment while in-creasing the sales of ancillary products,” stated Geurian. “Number two, it is good for the builder because we have people in the field who can design an upgrade program which includes a booklet, a CD, or a trifold handout.

“The builder is looking for rebates and good pricing. In each upgrade package we can build in substantial additional profits for the builder. All of a sudden, that smaller rebate is not as critical, compared to the value that an upgrade package gives.”

Geurian said that all of the components can be added to a customized CD, showing the payback for the upgrade based on a homeowner’s mortgage payment.

“The CD takes the selling process out of the builder’s hands,” said Lloyd Larkin, president of P&N Distribution, Cinnaminson, N.J., a Rheem distributor serving Pennsylvania, New Jersey, and Delaware. “This now becomes a sales tool for the builder. Not all builders will want to offer the same upgrades.”

Larkin said some of the up-grade products include Honeywell humidifiers, air cleaners, and thermostats. He added that almost every builder who has seen the upgrade packages has been impressed, but he said up-grades can be a hard sell.

“Builders don’t talk about upgrades because they are not high on the list of things to do,” said Larkin. “We recognize this. That’s why we are customizing programs so that consumers can see the benefits of upgrading.”

“Builders are beginning to trust us a little more,” said Geurian. “They are willing to talk with manufacturers to see how they can help in certain markets — particularly with a manufacturer like Rheem who has a network of independent contractors and distributors throughout the U.S. who sell Rheem and Ruud equipment.”

Solving Problems

“Builders are inundated with information from all different sources, and if we can find ways to solve problems in their everyday businesses, they are much more receptive to hearing about new products for the homes they build,” said Robin Pharo, channel manager of residential products for Aprilaire (Madison, Wis.). “We and our HVAC contractors would like to be seen as problem solvers.”

Pharo noted, “HVAC contractors and builders face many of the same issues — finding a way to design systems that meet the needs of their customers. Unfortunately, the new home business has become extremely cost conscious when it comes to what products builders will offer as standard in their homes. There are two approaches we are taking with our HVAC contractors to help them sell to their builders.”

The first of these approaches is a “ventilation solution.”

“We are training contractors on how they can offer solutions to ventilation problems with our new Ventilation Control System, without adding significant cost to their jobs,” she said. “In addition, it allows contractors to make more profit on their new home business.”

Aprilaire sets up parameters so that its automated humidifier control — which senses outdoor temps and indoor humidity —won’t ventilate if it is too hot, too cold, or too humid outside.

“The other initiative is to help contractors educate builders on the benefits of offering HVAC upgrades to their homeowners,” said Pharo. “According to The State of Green Building Report, indoor air quality is one of the top three important upgrades following kitchen cabinets and energy efficiency. One success story I just heard about involves a dealer that was able to increase their business by over $1 million in builder upgrades alone.”

Pharo added that although Aprilaire does not offer a specific upgrade “kit,” the company works one-on-one with its contractors to develop upgrade programs specific to their markets. “Once we see what our contractors want, we will bring out more materials next year.”

Adding New Features

One company is centering its upgrade programs on a specific product. Fujitsu General America (Fairfield, N.J.), a manufacturer of ductless mini-split air conditioners and heat pumps, has developed new Halcyon-IAQ models, which are due out in the spring of 2004. The units have a built-in electronic air cleaner and offer optional fresh air intake. This new product has a direct impact on new construction builder packages, said Roy Kuczera, director of HVAC sales for Fujitsu.

“The Halcyon-IAQ system allows us to install an electronic air cleaner, which, in preliminary testing in Japan, reduces dust particles in a room by as much as 70 percent in a half-hour,” said Kuczera. “This is going to be a great tool for homeowners with allergies or hay fever.

“The unit also has commercial features where it can be installed in a bar or restaurant, too. The unit can be mounted an inch-and-a-half from the ceiling and is small enough to be mounted above doorways where other mini-splits can’t go.”

The unit will be an integral part of a builder’s upgrade program. “New construction builders are set in their ways,” Kuczera stated. “It is not easy for contractors selling mini-split systems.”

But Kuczera is optimistic, citing the fact that Fujitsu is gearing up the marketing efforts toward consumers with television commercials and is making product specs available to system designers.

“In the coming years, mini-splits will positively impact new construction as more and more builders are educated by contractors on the simple zoning, energy efficiency, quietness, and performance of Fujitsu mini-splits,” added Kuczera. “We have successfully partnered with contractors to bring mini-splits to new construction, and we anticipate additional new construction opportunities in the future with our Halcyon IAQ series.”

Publication date: 08/18/2003

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