Many contractors (and big-box stores) try to grab customers’ attention by advertising the ubiquitous $29 tune-up, hoping that homeowners will pounce on the low price, then remember them when it comes time for future service. Other contractors decry this practice, noting that it is impossible to provide a thorough tune-up for this price and that it is simply a ploy to get into a home and find other maintenance work that needs to be done.
So is the $29 tune-up an effective marketing tool that can be used to beef up the customer base? Or is it a pernicious practice that lowers the bar for the HVAC industry? It all depends on your outlook.
Magic Touch Mechanical Inc., Mesa, Ariz., which specializes in building performance contracting, HVAC retrofit and service, and commercial refrigeration, offers a tune-up special each spring as a way to acquire new clients. The price for this tune-up is typically $69.95 per unit within a 20-mile radius or $79.95 per unit within 21 to 30 miles of the main office.
Company president and CEO Rich Morgan noted that they do sometimes offer short-term specials as low as $29.95 per unit, but only if the local utility companies offer incentives. In these cases, the utility company specials are typically attached to a buy-down program for the ratepayer, and the utilities cover the additional $40 back to the contractor. “Clients who purchase the tune-up special receive the same 66-point tune-up as they would had they purchased it at regular pricing.”
Companies like Groupon will also market low-price specials for Magic Touch Mechanical, but they only become available if enough people purchase the deal. “We use this ‘loss leader’ strategy in exchange for the opportunity to reach a lot of customers in a short period of time and convert them into lifetime clients,” said Morgan.
Isaac Heating and Air-Conditioning, Rochester, N.Y., also offers incentives in the spring. The company specializes in residential, commercial, and industrial HVAC and plumbing sales, service, and installation, and its four branch locations typically offer a spring special that costs $139 to $149 for furnace and air conditioning maintenance (the regular price is $179).
“The only difference between a spring special and a regular maintenance is the price,” said Eric Knaak, vice president of service. “Each one includes a 23- to 48-point inspection, depending on the system. The maintenance is complete, and on the air conditioner, it includes a coil cleaning, drain cleaning, and all of the other related services. The furnace includes all of the normal inspections, cleanings, and adjustments, as well as electronic carbon monoxide test.”
While Isaac Heating and Air-Conditioning does pick up a few new customers by offering a spring special, the majority of calls come from clients who have used their services in the past, said Knaak. “The primary goals of a special offer are to get into the home, create work when it is slow, and uncover opportunities.”
Stan Palaka, owner, Top Notch Climate Control, Metuchen, N.J., sends out postcards each spring, letting his customers know that it is time to service their systems in order to help prevent possible problems during the summer. The company, which specializes in residential retrofits, design/build services, light commercial, and custom-built houses, offers a special of $79.95 for the first unit and $49.95 for any unit after that in the same home.
“We offer comprehensive maintenance that includes checking all safeties and operations, cleaning or replacing standard filters, cleaning the condensate pumps and blowing out the drains, checking all controls, etc. Every year the spring special helps us pick up about 20 or more new customers,” said Palaka.
While many contractors offer spring specials as a legitimate way to add new customers to the base, there are also those who may be less reputable. “We see specials run by competitors as low as $39, and we know that these are meant to get somebody in the home to find something wrong,” said Knaak. “We have heard of these specials taking less than 20 to 30 minutes, and we do hear complaints about the work not being done correctly or properly. There are customers who are told they have to replace equipment because of safety issues, when in fact they did not have any, or they were just being sold a bill of goods that they did not need. That being said, there are some good competitors out there who offer extremely discounted pricing just to get the work and keep the doors open, and it’s hard to fault them for that.”
In the Phoenix market, it is not unusual to see tune-up specials for $19.95 or even free, said Morgan. “This has been a trend in companies whose service technicians work on commission — typically the technician is compensated 25 percent of the revenue he generates. I’m not comfortable with this compensation structure, as I believe it can promote dishonesty, and consumers are possibly buying parts they do not really need.”
Palaka sometimes hears customers complain about the service they’ve received from a low-priced competitor, and he will respond by saying, “You get what you pay for. We try to put value behind the personal touch. We let our customers know that we are a small company and that our clients always come first. If they contact us, they can reach us 24 hours a day.”
Conveying the value of a contracting firm is key when competing against those who offer super low priced — or free — tune-ups, said Morgan. “We are very clear in our advertising that the special price is not the everyday price. We train our service techs to let the customer know that our intention is to demonstrate our capabilities and professionalism in order to establish a long-term relationship. And that this price is truly a bargain for the services they receive, because we know once they’ve experienced the high level of service we deliver, they will continue to use us going forward.”
On occasion, Knaak said that their customer service representatives are asked why their tune-up price is higher than others, and he noted that they are trained to discuss the features and benefits of what is included in Isaac maintenance. “Internally, we have some ways that we handle this question, including scheduling these calls so as to create an immediate ‘wow’ factor, and that seems to work pretty well. Our CSRs have some flexibility and authority at their level as well, so that we can get that first-time customer onto the schedule. Once we have a chance to get in the door, we have a pretty high retention rate.”
Helpful or Hurtful?
Overall, Palaka does not believe offering low-price tune-ups is harmful to the industry, as he looks at it as a way to save his clients money by keeping their equipment running efficiently. “As long as you’re honest and upfront, treat your customers the way you want to be treated, and stand behind what you do, you will come out ahead in the end. I have been in this business for 28 years, and I have found that customers who are treated like friends will stay loyal forever.”
Low-price specials can be a double-edged sword, said Morgan. “Years ago, we didn’t participate in loss-leader specials, and our special was typically around $49. With Arizona being one of the hardest-hit economies in the country in recent years, homeowners are more likely to be enticed by a lower priced tune-up.”
Looking at the big picture, Morgan is concerned that offering low-price tune-ups does cheapen the value of the HVAC trade, but he said Magic Touch has combatted this by taking the approach that it does much more than HVAC. “We use the opportunity of a tune-up to share other services and products we offer. Our philosophy is that we are building performance contractors with an HVAC department, as opposed to being an HVAC contractor with a building performance department. This philosophy has enabled us to offer a much wider array of products and services and use the low-priced tune-up as a means to introduce those products to the customer.”
Knaak believes that a true low-price special that is run for a specific short period of time in order to obtain new customers is an effective and economical marketing tool, provided that the contractor clearly states what he will be doing and what he will be charging. “Where our industry gets hurt is when contractors offer a low price, knowing that they will not do a complete and thorough job and/or they are just looking for new equipment or repairs. These are the people who make it difficult for professionals to explain pricing to clients, but this is not unique to our industry.”
Regardless of the initial price, once a contractor has the opportunity to provide service to a customer, it is up to the contractor to retain that customer. “If we provide service properly, and we give customers a world-class experience, then there’s no reason they should look elsewhere,” said Knaak. “If we don’t provide them with that, and they leave, then that is our fault and it has nothing to do with the competition. All we can do is make sure we do it right each and every time.”
Ultimately, contractors must decide for themselves whether or not to offer low-price specials, said Morgan. “A contractor’s overhead and desired profit must dictate the price. The saying ‘if you can’t beat them, join them’ does not apply in the business world. We always look at what our competitors are doing and do whatever we can to be as blatantly different from them as we possibly can. We offer solutions our competitors can’t or don’t and take the stance that you can’t compare apples and oranges. My advice for contractors is to find out what solutions your business can offer to a homeowner that your competitors can’t or don’t and shout that message from the rooftops.”
Publication date: 04/02/2012