The world is becoming an increasingly digital place. The internet has changed everything from how people interact with each other to how they get from place to place to even how they shop.
According to the Census Bureau of the U.S. Department of Commerce, U.S. retail e-commerce sales for the second quarter of 2017 registered approximately $111.5 billion, an increase of 4.8 percent from the previous quarter.
These days, consumers can go online and buy everything from groceries to automobiles and have them delivered to their front door. Many HVACR contractors believe it’s nearly impossible to adequately size and address a structure without properly sizing the HVAC equipment; therefore, while this business model may work in some industries, it simply isn’t a great fit for the HVAC industry.
BAD NEWS FOR HVAC
There are an increasing number of businesses — including Amazon and Google Home Services — offering homeowners instant HVAC quotes and service industry estimates for HVAC equipment and trades work.
“Websites that offer equipment replacement quotes and sell new a/c units online without seeing a job site are ultimately bad for both the HVAC industry and consumers,” said Rich Morgan, president, Magic Touch Mechanical Inc., Mesa, Arizona. “I’ve already seen evidence of this three times this past summer. In two of the cases, the customer complaints were both poor system performance and high utility bills. In both cases, it was determined the problems stemmed from improperly sized equipment and faulty connections between the existing ductwork and new equipment.
“In both cases, the company that sold the equipment and allowed the consumer to choose the installing contractor denied any culpability, stating it was the installing contractor’s responsibility to prepare a load calculation, address ducting issues, etc.,” he continued. “Unfortunately, the contractor’s agreement with the online retailer included language that accepted any and all responsibility for these errors and omissions, so the retailer is well protected. Ultimately, it is then the installing contractor and the consumer who suffer the consequences and battle it out.”
In the third case, the customer purchased a new ductless air conditioner online and hired a contractor to install it, according to Morgan.
“Unfortunately, that contractor did not perform a quality installation,” he said. “The homeowner then hired another contractor who attempted to repair the equipment by, as we jokingly say, ‘loading the parts cannon.’ In other words, he replaced many parts trying to get to the bottom of why the system was not performing to its capabilities. That contractor washed his hands of the entire situation. The homeowner called the manufacturer, who, in-turn, told them to call Magic Touch Mechanical because our technicians are trained, authorized dealers of the brand. We discovered that the wrong refrigerant line set was installed and suspected contaminants in the refrigerant as well. Ironically, the homeowner has more invested in this purchase than he would have spent had he purchased a quality installation [with a higher-end model], which would have included a 12-year warranty.”
According to Morgan, there are two types of companies filling this space: the online retailer selling equipment and brokering the installation of it and the online lead broker.
“We’ve seen the latter for years, but we are now seeing business giants moving in quickly,” he said. “I don’t believe either of them are going away; in fact, I think they will continue to grow, and we will see more of them in the months and years to come. They are definitely changing the landscape of how contractors have conventionally marketed themselves.
“The former, which we already have several of based right here in the Phoenix market, is a little newer,” Morgan continued. “We’ve seen this done before; however, we are now, for the first time, seeing equipment manufacturers not only embrace this distribution channel but actually support and invest in it. Every contractor should be concerned about this. The manufacturers that are involved in this are basically jumping over contractors and going directly to consumers.”
The method of selling HVAC equipment directly to consumers will eventually result in the commoditization of the installation itself.
“At a certain point, it will boil down to who is willing to do the installation for the least amount of money,” Morgan said. “If contractors believe they will capture these customers and retain these customers as theirs, they are sorely mistaken. There is no loyalty from a consumer who purchases this way — they are not buying on value; they are buying on price.
“The best way to combat this is for contractors to become better marketers as opposed to buying leads,” he continued. “All contractors can combat instant quotes by getting word out that HVAC installations are not plug-and-play. They should be communicating this in all of their communications with the public via marketing, blog posts, websites, etc. We need to demonstrate the importance of a load calculation, equipment selection, duct design, quality installation, and more. We need to shout from the rooftops how the exact same unit installed improperly, versus another that is installed properly, will cost customers more in the long run and, in some cases, immediately.”
Steve Lauten, president, Total Air & Heat Co., Plano, Texas, agreed that websites offering consumers instant quotes and selling equipment directly to them are bad for the industry.
“Providing equipment directly takes away the best part of what a qualified contractor provides,” Lauten said. “HVAC systems come in a cardboard box and work as good as the people who put them in. There is no way to properly quote an HVAC system replacement over the internet. To provide a proper installation, a contractor must visit the site, perform a load calculation, and execute duct sizing/duct leakage testing. I see no advantages [for contractors] in this model and many disadvantages. These websites offer no loyalty to contractors. It turns us into labor brokers and takes away the relationship between contractors and end users.”
Lauten noted that sites like Google and Amazon can’t succeed if HVAC manufacturers don’t allow them to sell their equipment.
“I see the responsibility primarily on the manufacturers to protect the value proposition in place if they truly care about their contractors and consumers,” he said. “Additionally, online instant quotes only offer one thing, and that is price. They can’t offer customers your company, service, support, or anything you would normally get from a qualified HVAC contractor. This is an industry issue that requires industry partners to band together. I highly recommend that all parties support the ACCA Quality Installation initiative. If industry partners follow the ACCA Quality Installation Initiative, no online company can provide the type of installation work these sites offer.”
While some insist websites offering instant quotes and selling HVAC equipment are no good for the HVAC industry, the fact remains that consumers want to be able to make purchases instantly or at least learn the cost of the item before footing the bill.
Several HVACR manufacturers are coming up with creative alternatives to the traditional model to meet these needs.
Trane debuted its Trane Go platform this spring, which offers online visitors more educated product choices, gives them price range estimates, and simplifies the dealer scheduling process.
“A lot of our dealers were approaching us and telling us they were seeing a lot of these different pricing sites out there and that they were not relevant, actionable, or they were focusing on the wrong questions,” said Steve Ortley, product management and market segment leader, Ingersoll Rand. “We started working with them to figure out what a good scenario would be. We focused on the experiences people in the market are seeing. So, from a homeowner standpoint, they will go online to look for a piece of furniture before they go into a store and talk to a salesperson. That is more of the traditional way, but even doctors and dentists now have pricing online. If I have to get a root canal, I can see how much it’s going to cost. Nobody’s teeth are the same, and you’re clearly not going to buy teeth online, but you can start the conversation there.
“A lot of our dealers are pointing out that homeowners have misperceptions when they pick their systems out online,” he continued. “With Trane Go, we wanted to really communicate with consumers on what is going to be right for their homes. And, because homes aren’t built for HVAC, a lot of our dealers’ expertise is really built on scenarios. So, we’ve come up with a good set of questions to get a lot of information back to our dealers. Everything is a trade-off. We’re exchanging price ranges that dealers are offering on the caveat that dealers are getting information that can really help them prepare for the sales call.”
Unlike other websites offering instant quotes where a consumer enters his or her zip code, and the information is sent out to multiple contractors at once, Trane Go provides contact information for three of its Trane Comfort Specialist dealers, and the consumer picks who he or she would like to contact.
“Just blasting a lead out to a number of dealers at the same time and making them compete is not something we wanted to do,” Ortley said. “From our perspective, this is a big change, and we recognize that, but a lot of it has to do with the changing dynamic. People are shopping online. We made a huge investment in our digital offerings, specifically with our dot-com experience. This is just a tool in the toolbox. It’s not going to be the answer.”
Donna Self, owner of Lakeside Heating & Air Conditioning, Denver, North Carolina, said her company has been using Trane Go since its inception.
“The new website is designed for customers to go online, configure a system, and get pricing,” she said. “I’ve been such a big advocate of this with all manufacturers, especially Trane. It is time for our industry to go live with this online pricing, simply because everything else in the home already is utilizing this. You can pick out a plan, design a home, and get pricing for it. You can get online pricing for a car or a refrigerator, so it’s certainly time for consumers to be able to get a range of pricing for heating and air conditioning equipment. I think the process of giving homeowners the option to come up with a price range before we make an on-site visit is very beneficial to the sale.”
Self said the tool is helping her company close more proposals on the first visit.
“That is monumental in our industry — that’s the dream,” she said. “I’ve been doing this for 35-plus years now. This is absolutely the future [of our industry], and, as I said, it is past due simply because it’s a digital world now. We are not allowed as much face-to-face time with customers as we used to have. Everybody’s lives are really busy. So, if they can go on a manufacturer’s website, educate themselves, make their system selection, get pricing, and book an appointment all at the same time, then that’s wonderful. A more informed consumer allows us the ability to upsell more highly efficient systems.”
Trane Go offers validity to equipment pricing, Self explained.
“In customers’ minds, there is already some validity because the pricing came from the manufacturer, and manufacturers are generally viewed as more trustworthy,” she said. “We’ve found it to be a good thing, and we’re really having success with it. My customers who have booked through this online pricing tool have used words like ‘easy’ and ‘simple.’ They have told us that it was nice to get a price and book the appointment all at once, sitting in front of the computer. This is a very positive thing for our industry. We need universal pricing, and we need to be validated by the manufacturers. This is granting us validation we haven’t had in previous years.”
Matt Mauzy, president, Mauzy Heating, Air & Solar, San Diego, believes Amazon and Google Home Services are the largest threat to the HVAC industry at the moment.
“I’m focused on building a software platform to recapture my customers, so I don’t lose them to Google and Amazon,” he said. “It’s called the virtual salesperson. My customers are going to be able to build their own quotes in their homes. They are the ones who know what their budgets are and what things are most important to them, so the platform I’m building will help them get the systems they want.”
Mauzy said the idea of calling three contractors to come out and give quotes on a new system has become the old-school way of doing things.
“That’s going by the wayside; people aren’t doing that anymore,” he said. “They are moving to the model where they can go on Amazon, buy an air conditioner, and then select to have it professionally installed. They can ship it to their house, and somebody shows up to install it.
“However, models like these are constantly looking for subcontractors, and they can’t guarantee the quality that I can as a reputable HVACR contractor,” Mauzy continued. “My customers already know the Mauzy name and have known it for 45 years. But, now, they won’t have to leave their homes to get a quote from us. They will be able to go online; go through a series of photos and videos; answer some questions; and put together a really good, solid quote. They can also get financed right there at the same time and schedule the job.”
After a customer schedules the job, the order comes to Mauzy, who then sends someone out to verify the customer picked the system that is going to work for their home.
“That way, they get the exact system they want for the budget and monthly payment they want,” Mauzy said. “There is so much data right now through Google and other sources. By asking online what year the home was built, we can take a look at what the standards were back then, and it will tell us the thickness of the walls and insulation. Then, through a few questions, such as, ‘Have you upgraded the windows in your home?’ or ‘Is there insulation in your attic?’ plus the public data we can now access, we can get the system sizing almost spot on every single time.
“The days of going out and doing a Manual J calculation for people are pretty much gone,” he said. “Through that data and homeowners’ answers to our questions, we can quickly determine what size system the homeowner might need. When we go out and do the field verification, we will double check everything. About 95 percent of the time, there would be no changes to the customer’s request as far as system size or ducting.”
Mauzy said he plans to have the virtual salesperson platform up and running by April 2018.
“This puts the control in the consumer’s hands, which is what they are used to with smartphones. It’s all about convenience and letting customers pick exactly what they want because they know what is affordable. Going out and trying to read the customers’ minds and guess what we think they want just doesn’t work anymore.”