On April 22, people all over the globe celebrated Earth Day. This holiday serves as a reminder to many that we all need to do our part to preserve the planet. While some plant trees, recycle, or clean parks, the HVACR industry touts the potency of geothermal heating and cooling.
A geothermal heat pump, or ground-source heat pump, transfers heat to or from the ground and uses the earth as a heat source in the winter or a heat sink in the summer. Because geothermal exchange is a fundamentally solar technology, it is recognized as a renewable energy source.
Therefore, when consumers seek renewable comfort solutions, geothermal is often contractors’ first choice.
MILLENNIALS VS. BOOMERS
Millennials are known to be constantly connected to the internet, which has earned them the moniker the net generation. Therefore, millennials are inclined to conduct extensive research prior to making an investment or purchase.
“Millennials have overtaken and are now quite possibly the largest group of consumers in the nation,” said Tim Wright, national sales manager, Enertech Global LLC. “They are also the most tech-savvy within the generations. Even if they’re carrying debt, they still tend to look at all of their options when it comes to technologies. While return on investment [ROI] does come into play, they’re also looking at how they are impacting the environment.”
Tim Litton, director of marketing communications, WaterFurnace Intl. Inc., said geothermal is a perfect fit for millennials.
“Millennials tend to be more willing to pay for sustainability, are better educated, and tech-loving – which is pretty much the ideal geothermal customer,” Litton said. “We’re working to reach this population early, so when they begin looking for ways to condition their homes, they’re already aware of the benefits geothermal heat pumps provide.”
But, even with all of their research and love of all things technological, many millennials end up opting out of a geothermal purchase due to financial reasons. Therefore, it’s actually the more established and financially secure baby boomers who make up the largest percentage of geothermal customers.
“While many identify millennials as being more energy-conscious, I think the energy savings is important to the baby boomer generation, too,” said Chas Kerin, senior trainer, Bosch Thermotechnology Corp. “Also, the luxury factor that geothermal units provide is a greater motivation for this generation.”
Steve Smith, president and CEO, Enertech Global LLC, noted that the majority of Enertech’s geothermal customers are baby boomers.
“The majority of our customers fall into the 55-64 age range,” said Smith. “We believe this is evolving quickly, though, largely due to millennials’ obsession with research. Our kids are telling us stuff they are finding in their research, and there is a push and pull there with that information transfer. Also, as a generation, I think we baby boomers are environmentally concerned, but a majority of our decisions are based on the fact that geothermal units offer a significant return on investment.
“The older generations have been around the block and have paid a lot of bills,” continued Smith. “They’ve watched gas prices go up and down. They realize it’s cyclical.”
Those who are looking to build new homes are more likely to identify the benefits of investing in geothermal, said Craig Lazinsky, marketing manager, Bosch Thermotechnology. They’re likely planning to stay in these newly built homes for several years and recognize the immense savings they’ll obtain in the long run.
“There’s a different process when you’re selling to someone who is building a new home,” Lazinsky said. “Customers who listen to contractors explain geothermal’s benefits recognize that while the upfront cost is higher, it’s going to save them money year over year. Once they get this, they’re more inclined to purchase a geothermal unit. The installation process for existing homes can be complex, but that’s not really the case in new homes.”
Smith has found the geothermal selling process is easier when you educate the new homeowners or builders on the cost savings, energy savings, and increased comfort levels.
“There are many advantages to geothermal systems, and the only disadvantage is the upfront higher cost,” he said. “If we have a half hour to explain all of geothermal’s advantages, we feel we’re more likely to sell customers on it. Once we describe how geothermal works, its advantages, and the long-term savings, customers are more likely to step back and say, ‘We’re going to be here for many years, so this is the perfect opportunity to tap into our future energy costs since this loop lasts forever, and the equipment will exceed 20-25 years.’ There’s a big investment in the loop not going anywhere, and there’s no outdoor unit to deal with. When consumers are properly educated, we feel more than 70 percent will choose geothermal.”
The geothermal installation process isn’t something that every contractor is educated and trained on. Those who are equipped with the proper skills and knowledge certainly have an edge on the competition.
“Contractors benefit from selling geothermal because it sets them apart,” Kerin said. “The market isn’t saturated with geothermal contractors, so for those who do offer it, it makes them different, and they could be viewed as experts in that market segment,” said Kerin.
Geothermal gives contractors yet another comfort option to present to customers. Additionally, it shows customers they’re respective to each home or business owner’s comfort needs as well as the environment. This helps create trust between customers and contractors as it shows contractors are after more than sales; they’re invested in the customers’ long-term wellbeing.
“If I step in and am the customer’s consultant and let them know the different options they have to heat and cool their homes, they’re going to look deeper into what’s available, which creates a bond of trust with the contractor,” Smith said. “This separates them from contractors who are just giving out prices. If two companies are selling geothermal and only one takes the time to educate the consumer and earn their trust, that company is the one who is going to walk away with a sale.”
In addition, many knowledgable contractors that install geothermal units have found themselves on job sites fixing the mistakes of other contractors that failed to take the time learn how to properly install geothermal systems.
While not the ideal call, this unique fix-it market does provide revenue and offers contractors a way to convert upset customers into customers for life.
“Selling geothermal is a way to establish yourself as a high-tech HVAC company,” said Russ Donnici, founder, Mechanical Air Service Inc., San Jose, California. “The caution is, you better be trained well or you will have issues. We actually make more money fixing poorly installed geothermal systems than installing new ones. We also do expert witness forensic analysis of failed systems when a lawsuit is involved.”
Selling geothermal can also attract a more affluent customer base.
“Geothermal is a higher-ticket item that’s good for any contractor’s bottom line,” said Litton. “Would you rather spend your time and resources selling a $7,000 job or a $25,000 job? If you’re looking to attract more high-end work, geothermal is a product you should carry.”
Rob Minnick, president and CEO, Minnick’s Inc., Laurel, Maryland, agrees, saying some people are willing to spend more money in the name of a healthier living environment.
“We focus on making homes healthier, more comfortable, safer, and efficient,” he said. “Some will spend more money to live in healthier homes, as they see this expenditure as an investment not a cost.”
COST AT THE CORE
While some contractors have had great success selling geothermal equipment, others have not.
The higher upfront cost of geothermal systems is holding some contractors back from diving into geothermal technology because their sales demographics aren’t keen on spending more than they have to on their HVAC units.
“Geothermal is renewable, but it’s expensive,” Donnici said. “Unless clients are dedicated to going green and have a solar PV system or a great deal of disposable income, they’re unwilling to pay the extra money. “In our area, we’ve found that 90 percent of people who initially show interest in geothermal actually select high-efficiency, conventional systems due to cost considerations.”
Just because customers want to be green doesn’t mean they can afford to fork over the greenbacks necessary to cover the cost.
“About 25 percent of our customers are interested in green technologies and, of those, about half of them actually buy green technologies,” said Matt Bergstrom, president, Thornton and Grooms Heating & Air Conditioning, Farmington Hills, Michigan. “We did a bunch of research and even some training but decided not to jump on the geothermal bandwagon at this time.”
But not everyone is facing this challenge. Some companies are having great success and profit growth with their geothermal sales. As a result, these successful geothermal companies argue that geothermal should be the first offer you make to customers due to its long-term cost and environmental benefits.
“Geothermal heating and cooling systems are the masterpieces of HVAC technology,” said Jay Egg, president, Egg Geothermal Consulting, Kissimmee, Florida. “As such, geothermal should continue to be our first offering to customers in both commercial and residential applications. We might be surprised by how easy it is to sell a product that has so many exclusive perks.”
Geothermal continues to be something the industry believes in, and a holiday like Earth Day further showcases its benefits as a renewable energy.
As a contractor, if the market’s right, perhaps it’s time to consider equipping your company with the skills and equipment necessary to begin offering geothermal solutions.
Publication date: 4/24/2017