Weighing In on Replacement System Selling

December 1, 2008
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In an earlier issue of The NEWS (July 21), Business Editor John R. Hall and Editor-in-Chief Mike Murphy squared off in a debate about how contractors should sell replacement HVAC systems in dueling columns “Dear Johnny, Have You Lost Your Mind?” and “Price Is Going to Sell Today, Not Cost Savings.” Hall said it was all about cost, while Murphy touted efficiency as leading factors in how customers chose a contractor and equipment.

In a follow-up online survey at www.achrnews.com, readers were encouraged to give their own reasons for what customers look for in a replacement system. The survey asked the following questions:

1. If you had to pick one from the list below, which factor are customers today most interested in? Choices: cost, product quality, quality of installation, energy efficiency.

2. Do you recommend that customers get at least three estimates for replacement equipment? Choices: yes, no.

3. On a rating of 1-5, how hard is it to sell equipment based on your own reputation, with 5 being the hardest and 1 the easiest?

4. Have you ever had to “fire” a customer because of price objections? Choices: yes, no.

5. What name is prominently displayed on your trucks and vans? Choices: company name, equipment name.

In addition, respondents were asked to explain their answers and send in additional comments. A total of 88 replies were tabulated and the results are listed below.

MOST IMPORTANT FACTORS

Of the four choices in question No. 1, energy efficiency topped the list with 38 percent of the responses (see Figure 1). Cost and quality of installation came in with 28 and 23 percent respectively. Product quality was a distant fourth with only 7 percent. Some respondents said all four factors were equally important.

“Energy efficiency relates to cost,” said Stuart Golden of Temperature Service Co., Elk Grove Village, Ill. “A 15-year-old system on average can pay for itself in 2 1/2 to 3 years in energy savings alone. Add the cost of repairs and the return can be much sooner.”

“The reason most of our customers initially consider replacing their system is to improve their comfort, and they end up investing more to reduce their energy consumption,” said Fred Hutchinson, of Hutchinson Plumbing, Heating & Cooling, Cherry Hill, N.J. “They realize by doing this they accomplish their primary goal too.”

“Rising energy cost is a killer to most budgets,” said Larry Taylor of AireRite Air Conditioning Co., Fort Worth, Texas. “That is why we are starting to market more as the ‘Kill-A-Watt-Killers.’ We can show them how to save energy through our complete line of whole-house products and services, with a laid-out plan of doing the right things first with a planned order of replacements.”

For contractors like Elaine Powers of Powers Heating & Air, Peachtree City, Ga., cost is what her customers are looking at. “Most consumers assume that all products are equal in quality and efficiency and do not truly understand the complicated differences or the payback analysis,” she said. “They are more concerned with the bottom dollar in the current economic conditions of the nation.”

“People are watching every dime,” said Tom Moersch of Tru-Temp Heating & Cooling, Garden City, Mich. “Unless they have money to burn, they are looking to get through this downturn so they can survive and then concern themselves about the other three issues.”

Quality is important to customers of one small Texas contractor. “Last year we sold only five 13 SEER systems, and 18 16 SEER systems - not bad for a two-crew company,” said Wayne Mulholland of Tri-County Mechanical, Fort Worth, Texas.

“This year we are competing with ‘cheap’ system installations. We have been keeping most of our margin by selling quality.”

“It is my belief that consumers desire an installation and all the items it consists of to be trouble-free,” said Keith Davis of Davis Heating & Air, Cleveland, Tenn.

“They want their system to be out of sight and out of mind, so to speak. They want it to keep their home comfortable without requiring repairs, with minimal noise, and easy maintenance.”

GET THREE ESTIMATES?

Most respondents (75 percent) said it wasn’t necessary to get three quotes for replacements (see Figure 2). Their reasons varied.

“Most of our jobs are with existing customers, or by referral, or called us based on reputation,” said Scott Robinson of Apple Heating & Cooling, Ashtabula, Ohio. “If we have earned the privilege to propose a system, and we are liked and trusted to do a great job and guarantee the customer’s satisfaction, and have listened to the customer and proposed a good solution to their problems at a price they can afford, we deserve the work - we have earned it.”

“We explain what we will do for them,” said Rob Dowd of DiFilippo’s Service, Paoli, Pa. “We educate them about efficiency and quality.”

One contractor said it was OK to get three estimates - as long as they were all from him. “I give them three and therefore they can choose from them,” said Pete Kiefhaber of Kiefhaber’s Heating & Air, Star City, Ark.

“They are more than likely to find a weekend unlicensed friend of a friend to do the work for quite a bit less, and it is very difficult to convince the homeowner of the difference when the friend is selling the same equipment as you,” said Dean Shetter of Shetter Heating & Cooling, Eaton, Ohio.

“Even though they all are going to with today’s economy, if every salesman tries to sell a different tier, then there is no comparison,” said Joshua Becker of Pierce Refrigeration, Anoka, Minn. “The homeowners just think the salesman with the highest price is just too high.”

But some contractors said it was OK to get other estimates because it gives customers a chance to see how much better they are than their competition.

“After they deal with a lot of my competition, I’m pretty confident they’ll pick us (but not always),” said Tom Fricker of Tom Fricker Heating & A/C, Franklin, Mass.

“We have never had a concern with customers getting three estimates as long as we have the chance to explain the benefits of choosing our company and choice of equipment,” said Bill Slaughter of Waller Heating & Air, Valdosta, Ga.

SELLING EQUIPMENT ON REPUTATION

There was a clear-cut winner for this question: confidence. A total of 49 percent of respondents said it was easiest to sell equipment based on their reputation while none of the respondents said that selling based on reputation was difficult (see Figure 3).

Years in business don’t necessarily equate to a good reputation, it is the quality of work and word-of-mouth that play a key role.

“We have been in business for 26-plus years, and we are in a community that the neighbors know each other,” said John Richardson of Richardson’s Heating & Air Conditioning, Chapin, S.C. “We’ve worked hard and made many concessions along the way to earn a solid reputation, so it works to feed off of it.”

“Our reputation is the reason we get 80 percent of our leads,” said Kevin Westcott of Family PHAC, Gaylord, Mich. “When customers call that already have a relationship with us, the sale is already made. We just need to go work out the details.”

“If I have been referred to this customer because of a past customer, I should be very confident that the first customer liked what I had done for them,” said Gregg Elser of the J.A. Sauer Co., Pittsburgh. “This should then put the customer’s attention on what product they would like to have, based on my recommendation.”

“Some people don’t care about reputation until they pick the wrong company,” said Barry Kindt of SECCO Home Services, Camp Hill, Pa. “Then they appreciate dealing with us. We always respond and always do our best to make them happy, regardless of whether they bought from us or not. It’s simply our culture.”

One contractor said reputation is fine, but it can only go so far. “Our reputation gets us to the dance, but first cost is still a huge driver,” said Jim Hussey of Marina Mechanical, San Leandro, Calif. “It takes a lot of work (client education) to move them from first cost to life-cycle cost/best value.”

Another contractor said that reputation is hard to fall back on if there is no word-of-mouth. “I feel if it is not a current customer of ours, reputation will only have to do with making the sale if the customer asks other people about us,” said Aaron Clark of Lipton Energy, Pittsfield, Mass. “Otherwise they are only going on what they see in our first contact with them.”

FIRING A CUSTOMER

The phrase “firing a customer” has been used a lot in recent years because contractors often have no choice in dealing with difficult price-shopping customers other than to not have them as customers. In The NEWS’ survey, 85 percent of respondents said they had to fire a customer due to price objections (see Figure 4).

Part of the selling process involves dealing with customers who shop for price, something that is more prevalent when the economy is sputtering. It is the goal of many contractors to focus their energies and resources on customers who are looking for quality and efficiency, as witnessed by the responses to the first question.

NAME ON THE TRUCK

This topic generated the most lopsided response to any survey question. Only one person said the most prominent name on his trucks was the equipment he sold. The remaining 99 percent of respondents said their company name was featured more prominently (see Figure 5).

This topic relates to the third question, which asked contractors how much reputation plays a factor in selling replacement equipment. Most answered that reputation was a key factor and company name recognition, not brand name equipment, is a key to maintaining a positive reputation.

In the end, selling success often comes down to the value of quality work and quality service that each contractor provides for his or her customer. “Without quality installation, all the other factors will be nonexistent,” said Brian Leech of Service Legends, Des Moines, Iowa.

“You rarely achieve rated efficiency without being properly installed. Cost is relevant to value. If cost were the most important, people would just buy systems off of the Internet and install them themselves. You can take the highest-quality product and install it wrong and you are left with junk.”

Publication date: 12/01/2008

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