Upselling Furnaces in a Down Economy

November 17, 2008
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Times are tough out there right now. Consumers have less disposable income available - thanks to decreasing home values and increasing credit card balances - and creditors are less likely to extend any more credit until the economy turns around. This can make it very difficult for HVAC contractors to sell basic furnaces, let alone the more expensive, high-efficiency units.

It’s not all bad news, though, because rising energy costs have accompanied the soft economy, leading consumers to be more curious about how high-efficiency furnaces can save them money. In fact, many homeowners received notices from their local utilities earlier in the year, warning them of significant “fall rate increases,” so interest in high-efficiency furnaces - and subsequent sales - should be running high.



HIGHER EFFICIENCY EQUALS LOWER BILLS

Choosing to have a high-efficiency furnace installed seems like it would be a no-brainer. Older furnaces often have efficiencies in the range of 56 to 70 percent, while high-efficiency furnaces can achieve AFUE ratings upwards of 95 percent. The Department of Energy (DOE) states that a new high-efficiency furnace can significantly cut a homeowner’s fuel bills, as well as carbon dioxide emissions.

Yet the Environmental Protection Agency’s Energy Star program notes that one in four furnaces in the United States is over 20 years old, which means there are a lot of homeowners who should be in the market for a new heating system. The DOE adds that if a furnace is old, worn out, inefficient, or significantly oversized, the simplest solution is to replace it with a modern high-efficiency model.

It may seem like a simple solution, but the extra $500 to $1,000 that it costs to purchase a 90-percent-plus furnace may be more than some consumers are willing to spend right now. As Tom Tausche, president, Northstar Heating and Air Conditioning Inc., Evanston, Ill., stated, “There’s a squeeze on the bucks right now.”

That being said, Tausche still tries to educate customers about the benefits of high-efficiency furnaces. “We offer the pros and cons of 80-, 90-, and 95-percent AFUE furnaces, so people have an understanding of what’s available. We explain how gas prices are going up, electric prices are going up, and what types of return on investment they can expect. We also talk about the excellent warranties that come with the Maytag furnaces we offer. While most customers would like to opt for the furnace with higher efficiency, there are times when they just can’t afford it.”

At the moment, Tausche estimates that 50 percent of the company’s furnace sales are high efficiency, while the remaining sales consist of 80-percent units. “We do a good job of educating the customer, and we try to entice them into the higher-price unit, but it doesn’t mean it’s going to happen all the time.”



INFLUENCING THE DECISION

One of the main factors that often determine whether or not customers purchase a high-efficiency furnace is how long they plan to stay in their current home. Most of the customers who buy a 95-percent Westinghouse furnace from Doug Cooney, president/owner, Climate Control Systems, Xenia, Ohio, do so because they are planning on staying in their home for at least 10 years.

“The payback for high-efficiency furnaces is usually in the range of seven to 10 years, so people staying in their homes will wait for that payback,” said Cooney. “And as natural gas prices go up, the payback may even get down to around five years. As long as gas prices keep on going up, homeowners are going to get better savings more quickly.”

Tausche adds that with the soft economy, more customers are opting to stay in their current homes and make improvements that can lead to more sales of high-efficiency furnaces. “When people hunker down due to the bad economy, they’ll often remodel with better equipment. They’re more inclined to stay put in their homes, so whatever money that is available to them, they’re going to put it into their house.”

That seems to be the case in the Dayton, Ohio area, because even though the economy is in a slump right now, that hasn’t stopped Cooney’s sales of high-efficiency furnaces. He estimates that 60 percent of his furnace sales are 90-percent-plus units, and he prefers to sell these, as he feels they are a better value for his customers.

“With the 95-percent furnace comes variable-speed airflow plus two-stage heating - it’s a totally different comfort experience,” said Cooney. “If everyone could have variable-speed airflow on their furnaces, they wouldn’t go back to what they have now. The other benefit of going to variable speed is that the efficiency rating for the air conditioner goes up 10 percent. That means you can install a 13 SEER air conditioning unit, but with a variable-speed furnace, it essentially becomes a 14 SEER unit.”

While all that comfort is great, customers still need to find a way to pay for their high-efficiency system. Financing more expensive furnaces has become a bigger issue lately, and Cooney estimates that about 50 percent of his customers opt for the 12-month-same-as-cash deal offered through GE Money.

While the best method of payment is when the customer writes a check, financing through GE Money is a close second, and credit cards are a distant third. Cooney prefers to avoid credit cards at all costs, since he has to pay a 3- to 4-percent fee every time a customer chooses this type of payment.

“One-year financing has been a big help in the Dayton area,” said Cooney. “I had a customer just last week who got approved for $6,000, so he went ahead and got the top-of-the-line equipment and said, ‘Well, I’ve got a year to figure out how I’m going to pay for it.’ ”

In this economy, the price of high-efficiency equipment is definitely a big factor when customers are choosing what to install. However, with a little education, it’s possible to convince homeowners that purchasing a high-efficiency furnace will make an even bigger difference in their utility bills, as well as their comfort levels.

Publication Date: 11/17/2008
 

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