The word on the street is that the recent stimulus package is having some effect on the economy already. There are also rumors that it has no bearing whatsoever on daily HVAC business.
Contractors across the nation have been investigating the federal tax credit program in order to provide every advantage to customers who have a desire to spend any money at all on HVAC energy-savings solutions. As with any incentive, rebate, or marketing program, some find a wealth of opportunity, while others find ways to make their own opportunities.
Steve Chrismer and wife Julie, a couple of wannabe rock stars with a steady bedrock of entrepreneurial spirit, started Drake Heating & Air in 1989, serving the Eaton, Dayton, and Springfield areas of Ohio, also know as the Greater Miami Valley. From that sprang a variety of business endeavors that have succeeded, with service as the connecting pin. Everything is serviced through Drake Service Co. The company network of services includes Sprint mobile technologies, appliances, and of course - HVAC.
MORE TAX CREDIT SELLINGSteve Chrismer said, “The tax credit does stimulate our business at the end of the day. The customer can get a Mac-daddy (rock star wannabe lingo for top of the line) system for about $1,000 more, instead of what would normally have cost them up to $3,000 more.”
Chrismer has always had a knack for selling higher-efficiency products, and in fact, tries to sell dual-fuel systems whenever possible. However, he said that the biggest thing he has found that works well is to be educators for the customer, not just salespeople.
Chrismer tells his customer that he has a very good system to sell to them, but then he asks his customers if they have the capital to invest for one year.
“If they do, then I tell them we have a great system to sell them. Not only does that help the customer, but also our average ticket used to be around $5,000, now it is about $6,800. It doesn’t take any more overhead for me to put in the more expensive system.”
Many salespeople can get hung up trying to explain return on investment or payback to customers who inquire as to how long before their investment pays back. Chrismer does not offer any explanation of payback because, as he asks, “How could you ever give them a correct answer with the volatility of energy prices being what it is?” Chrismer does ask his customers if it is in their best interest to have low, medium, or high utility bills, whatever the cost of energy might happen to be. That usually stirs their senses enough to be interested in higher-efficiency products.
Chrismer also said that the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) certificate is very helpful to assure customers that they are purchasing equipment that will qualify them for the tax credits at the end of the year.
LESS TAX CREDIT SELLINGSteve Miles, general manager of Jerry Kelley Heating & A/C, said the effectiveness of up-selling with the tax credit story has lessened somewhat in his St. Louis market area. “Around tax season they were asking for the credits, especially if they already knew they had some tax liability,” he said. “Many homeowners have begun to forget about it now, so we have to get it back on their radar screens.”
Miles’s company is pushing the tax credits, but he thinks that those companies that have always been successful selling high-end products will continue to be successful with or without the tax credit stimulus package.
BE AN EDUCATOR“We train all of our techs and salespeople to be educators. To me, the days of spitting out a scripted sales pitch are over. Half the time, we don’t even ask for the sale. I want to help my customer get information; I tell them that ‘I won’t even ask you for the sale today; you’re not even going to see a proposal today.’ My closing ratio is 58 percent, and that’s not too bad in these times,” said Chrismer.
Miles said that the education needs to start in everyone’s own backyard. “Emerson Climate Technologies surveyed customers about HVAC pricing. The results suggest that the techs and salespeople are telling customers about the higher prices; otherwise, they really didn’t even know.
“I believe a lot of customers are repairing rather than replacing because of what is between our own ears, and not because of a consumer’s preconditioned mindset. The consumer didn’t get a price quote two years ago, or four years ago. How do they know that prices have gone up because of the increased energy efficiency standards? They don’t have any frame of reference except for the one that HVAC contractors provide.”
Miles believes that too many technicians and salespeople may dissuade customers from investing in a replacement when they suggest, “Prices for new equipment are really high right now, I would repair this one if it were me.”
When they do that, the customer tends to go with the suggestion to continually repair an old unit, and then misses out on the advantages of a high-efficiency solution for a number of years. That owner will literally never recoup the energy savings opportunity that has been lost if someone helps their crippled unit limp along for an eternity.
Emerson Climate Technologies also believes that education is a key. “Topics like high-efficiency systems, selling up, and the stimulus package are extremely timely, are always evolving, and have great weight in our industry for both contractors and homeowners,” said Karl Zellmer vice president of sales, Emerson Climate Technologies, air conditioning division. “To make sure that contractors stay ahead of the curve in this area, we feel that it is important to provide training opportunities to arm them with the up-to-minute details they need to be successful.”
Emerson has seen strong growth in high-efficiency compressor sales despite the slower HVAC market. A company spokesperson said the market is down almost 9 percent from 2007 to 2008; however, the company’s Copeland UltraTech™ compressor sales were up 30 percent during the same period.
Further Emerson research shows that 25 percent of homeowners are willing to pay for systems that provide high levels of comfort and energy efficiency.
Even with a sagging economy, and perhaps because of it, customers are no longer just looking at first costs. They are considering the long-term operating costs that are also associated with the initial purchase price.