Breaking up Is Hard to Do
Breaking up is never easy. Just ask M&A Supply Company Inc. After representing the same manufacturer for 21 years, the Nashville-based company signed an agreement to sell the York(r) brand of residential and light commercial HVAC equipment from Johnson Controls. The company remains pleased with its decision to change suppliers and committed to helping its dealers feel the same way. But it hasn't always been easy. According to Vice President of Sales, Bill White, breaking up is actually hard to do, on many levels.
Founded 42 years ago, M&A Supply operates 17 locations in Alabama, Arkansas, Florida, Georgia, Mississippi, South Carolina, and Tennessee. The company employs 165 people and boasts a dealer network that includes more than 500 independent dealers.
"From day one, our commitment to our dealers has always been to offer them the best product, the best programs, and the best people we can find," said White.
From start to finish, the process of identifying and securing a new supplier took M&A about two years: one year testing the waters and talking with a variety of manufacturers, and a second year exploring, talking, and eventually negotiating with Johnson Controls. In September 2010, the company notified its dealers of its decision to carry the York brand.
"Although it was a decision that was difficult to make from an emotional standpoint, due to many years of good overall relations with our previous supplier, it was a decision that in the end became very easy to make, because of one single, simple reason: It was the right thing to do for our customers," said White.
"What drew us to York was the absolutely driving commitment of their senior management to make that brand the premier quality brand in the industry, and they had a very clear roadmap of how they intended to get there," he explained.
York's programs were also important to M&A. According to White, many HVAC dealers go into the business because they enjoy working on the equipment. But in many cases, dealers need and expect support in helping them obtain the marketing skills necessary to grow their business.
"So, the role of a manufacturer and a distributor is to try and help dealers learn how to differentiate themselves and the products they represent. The programs that a manufacturer offers a dealer, and the training and things a distributor adds provide dealers with opportunities to enhance their relationship with their customers, so that their customers want to do business with them exclusively. As a distributor, we try to teach dealers how to increase their profitability while enhancing their reputations and customer satisfaction, and much of what we offer is built around manufacturers' programs. You can see that the choice we make in suppliers has a direct and important impact on our dealers."
After signing the distributor agreement with Johnson Controls in August 2010, M&A shared their choice with their dealers in a number of ways, beginning with a letter to dealers in September 2010, followed by a dealer meeting in Nashville in October. "Unfortunately, confidentiality agreements prevented us from sharing our decision until the contract was signed, so we took many of our dealers by surprise," said White.
Adam Hodnett, owner with his wife Kristy of Affordable Heating & Air LLC, Sylacauga, Ala., would have appreciated more information. When asked about his reaction to the news of a new supplier, Adam responded, "My initial concern was why, and what had happened to cause this. It was totally unexpected from my standpoint."
Another dealer, Jeff Jolly, owner of Jolly Heating & Air Conditioning Inc., Northport, Ala., offered a similar response. "My first reaction to the news was shock and disappointment. We couldn't believe that, with all that M&A had done with the prior supplier in conjunction with us dealers for so many years, they could suddenly make a change like that, where we had no idea it was happening until it was already done."
M&A followed the Nashville meeting with smaller dealer meetings within each of the company's market regions, as well as one-on-one dealer meetings. The goal of each meeting was to share the reasons for making the switch to York, introduce the York brand to dealers, and explain how dealers would benefit from the switch, which went into effect Jan. 1, 2011. In the end, however, the decision to make the switch to York was an individual decision for each dealer.
From Hodnett's perspective, the dealer could do one of three things. "We could stick with M&A and take on the York brand. We could stick with the previous brand and find a new distributor. Or, we could sever our ties with both M&A and the previous brand and seek out a new home. We carefully weighed the pros and cons of each option, and ultimately we decided to stay with M&A."
Affordable Heating & Air was one of many dealers who elected to stay with M&A and represent the York brand. "The folks at Johnson Controls told us we could expect 35 percent of our dealers to make the transition with us," noted White. "Although we beat those estimations, it was still tough. We absolutely knew that 2011 would be the transition year for us to build the platform for our next phase of growth. Going through this process really tested our resolve because it realistically takes 12 to 18 months to recover from such a change. But we looked at 2011 as an exercise in preparing for the future.
"Along the way, we learned an important lesson," White continued. "Many of the things we had done as a distributor were built around the brand that we carried, and as a result, the message that we sent to our dealers was that the brand was more important than anything else, including M&A. What we learned is that, like our dealers, we need to sell ourselves better, including the things that differentiate us to our dealers. Above all else, including the brand, we need to focus on the services we offer and the things we do, allowing the brand to complement the way we position ourselves rather than define who we are."
Dealers like Affordable Heating & Air and Jolly Heating & Air Conditioning made the switch to the new line of equipment in large part as a result of the relationship they had forged with M&A Supply. "It felt more as if we were sticking with M&A than switching to York," Hodnett reflected. "As we weighed the pros and cons, the pros were definitely the people and the service that M&A represented. We were accustomed to dealing with them, and we trusted them. That's important, because I often say that the service we're able to provide to our clients is only as good as the service our distributor delivers to us."
Jolly agreed, "We made the decision to switch to the York brand based on our relationship with M&A. We've trusted them for 16 years, and the support that they have for us is unmatched by any other distributor that we have ever dealt with."
Having said that, Jolly admitted the transition was not an easy one. "The switch was very uncomfortable at first because we needed to learn about a new line of equipment and its technical issues."
When asked how M&A responded to this challenge, which was common to most of its dealers, White responded, "Training, training, and more training. You have to make training available to your dealers to ensure a smooth transition to a new brand. So, we did and continue to do a lot of training - some at dealer locations and some at our 17 branches."
According to Hodnett, the training has been ongoing. "M&A has a state-of-the-art facility in Birmingham, and twice a month they offer some sort of training, most of which is specific to York equipment. But we've also learned about York's In-Home Selling Tool, Liberties(tm) program, and the other business tools that York makes available to us. In addition to the quality of the York line of equipment, it's this training that tells us we made the right decision."
Training is just one part of a successful transition to a new manufacturer. "It takes a tremendous amount of work - hard work - to help dealers make the change to a new product offering," admitted White. "Remember, we worked on the transition for over a year as we met with, became acquainted with, and eventually negotiated with Johnson Controls. Our dealers had far less time to reach the same decision we did. That's why those early meetings, in which we tried to lay out our reasons for moving to York and describe the benefits the brand offered us, our dealers and their customers, were so critical."
It is important to note that this transition to a new brand did not come without financial ramifications. During their affiliation with M&A, many dealers opted to include the previous brand on their invoices, stationery, literature, trucks, uniforms, buildings, signage, websites, and advertisements. It required a significant amount of money to replace that brand with the York brand.
In the case of Affordable Heating & Air, the company branded itself and used few items that displayed the previous manufacturer's name. "However, we did have some printed materials and uniforms that needed to be updated, and M&A and York helped us with the associated costs," said Hodnett.
M&A also ensured that its dealers would have the inventory they needed when they needed it. "When we made this transition, we invested $35 million in equipment and parts inventory," explained White. "As a distributor, one of the things that gives value to a dealer is if they need something, you as a distributor can provide it. When you ask a dealer to switch brands, and then you don't have what that dealer needs, it doesn't take many strikes to strike out. So, we purposefully ordered enough inventory to make ourselves as bulletproof as we could with the new brand."
"It's this level of commitment to dealers like us that enables M&A to continue to offer us outstanding customer service," concluded Hodnett. "They have provided training on the new products, assistance with the financial costs of the transition, and the service that we've wanted when we've needed it."
To other dealers facing a similar transition, Jolly offered this advice. "Make the change with a distributor and a manufacturer that are going to be there and support you every step of the way, no matter what. Over my 17 years of experience, I have been involved in every part of the business, and I've learned that most manufacturers offer equipment with similar features and quality. The way you differentiate yourself is how you install that equipment and the service you offer before, during and after the sale; and how the brand you choose helps you do that."