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Murphy's Law: Find the R in ROI

July 13, 2009
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Mike Murphy

Energy savings. Carbon footprints. LEED points for green buildings. What is pulling the trigger for your customers lately? Is it possible, in today’s economy, to upsell customers into more expensive value-added equipment solutions?

The concept of return on investment (ROI) is fairly simple: everyone wants something back from their investment. The complication begins when you question the customer as to how they measure ROI. Is the return measured in dollars, or design, or bragging rights? It is different for everyone.

During a recent meeting with a prominent CEO, the discussion turned to lead generation for the selling process. He said, “We have to find out what our customer wants. How does the customer define the R [return] in his own version of ROI? For some it may be a list of e-mail addresses, for another it may be phone numbers, for still others it may be street addresses for a direct mail campaign. Every customer can have a different judgment of what the R is for them, and we have to know how to provide what they need.”

Good advice.

YOUR CUSTOMER'S "R"

Some building owners and facility managers will value first-cost, some a plaque on the wall from the U.S. Green Building Council, some just want to be green with or without the plaque, and some want to save money. Others want help with design. However, it appears that nearly everything showing any promise in the commercial mechanical arena has an energy conservation aura about it.

During a series of phone calls to some of the most successful mechanical contractors in North America who regularly attend the annual MechanicalXchange Summit Event, sponsored by The NEWS, the following question was posed: Is your firm more first-cost driven or more into value-added solutions with potentially higher first-cost but lower life-cycle cost?

Here are a few answers that may shed light on what these contractors’ clients value as the R in their businesses: “Customers are spending money on the front end as they are looking for the life-cycle approach to measure their investments.”

“We are leading with energy conservation. When we saw the market begin to slide, we began planning how to best weather the storm. We chose to attack with an energy saving approach because that is what the customers want.”

“We have identified a few municipalities to help them spend stimulus money for renovation or add-on features, even such as measurement and verification services to help provide them with LEED points.”

“The engineering function seems to be getting weaker and weaker in this market, so our clients are asking us to become involved in design/assist.”

“Many of our customers who are waiting on the sidelines in this economy are more interested in the long term value of life-cycle costs. They aren’t purchasing less expensive solutions, they are waiting to do what’s right for their company in the long-term.”

ENERGY CONSERVATION

Conservation of natural resources, especially those that create energy, is certainly not a new concept. However, almost all of the MechanicalXchange contractors who were interviewed said that in the last two years, interest in energy conservation among building owners and facility managers has shown a marked increase - as well should be the case. Dr. Steven Chu, Secretary of the U.S. Department of Energy and the co-winner of the 1997 Nobel Prize for Physics, said, “Currently, buildings consume 80 percent of all energy in the United States for lighting, HVAC, etc. Reducing this is vitally important.”

Even at a time when a bottoming recession has kept some buyers out of the game temporarily, many of these same buyers are carefully evaluating higher first-cost value-added solutions. When the market comes back, these customers appear willing to come back with a strong need for long-term energy solutions.

ASK THE CUSTOMER

Discovering your customer’s definition of the R in their ROI calculation before they get back into the market could be a critical step in the sales process. Customers are not going to throw money up against the wall to see what sticks, and not everyone will be satisfied with energy conservation as the R for their investment. Finding out what value they place on efficiency, or design, or even just a matching color is the price of admission to earn your client’s business today.

MURPHY’S LAW: ROI is not just about money.

Publication date: 07/13/2009
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