Smart Thermostats Demand Smart Strategies for Avoiding Pitfalls
Pricing structures, brand synergy, and compatibility present complications, but opportunities await
It is hard to blame consumers for noticing readily available information about important equipment they might bring into their own homes, or for buying thermostats that companies market directly to them every day (and noticing the price as they click “place order”). However, it is easy for that same homeowner to lay the blame at the feet of a contractor if things don’t go well, regardless of who recommended or bought what.
From the first mention to pricing and installation, smart thermostats represent a variety of decisions and possible pitfalls. Contractors are best served by getting out in front of the most common scenarios, well before their phone rings or their tech rings the doorbell.
“We find that the consumer who inquires for a smart thermostat is the same consumer who invests in the higher-end system,” reported Paul Sammataro, president of Samm’s Heating and Air Conditioning in Plano, Texas.
While that sounds promising, it also ties into some potential downsides, according to Amy O’Grady, general manager for Charlie’s Heating & Air in Jacksonville, Florida, and 2019 North Florida Air Conditioning Contractors Association (NFACCA) vice president.
“The most common problem we have [with smart thermostats] is when it won’t work with specific high-end, higher-SEER communicating systems. This can be very confusing to the consumer who is not versed in the mechanics of the system or even HVAC in general.”
At George Cunningham Air Conditioning & Heating in Harlingen, Texas, service technicians tend to initiate the idea, often during a customer visit. President J.M. Salazar knows one reason why.
“We bought one for each of our technicians and allowed them to experience the product at their own home,” he said. “This gave the technician the firsthand knowledge of how the smart thermostats benefited them as a user/consumer.”
The company then made the most of that investment by having technicians come back to the group with key points that allow them to recommend smart thermostats more often.
In that way, the company took it upon themselves to create the demand — or at least pique homeowner interest — themselves. A customer base that Salazar describes as “primarily retired individuals 60-plus years of age” was less likely not to bring up smart thermostats themselves, but they were just as likely to appreciate their benefits if discussed with a trusted vendor.
O’Grady also sees some customers who prefer to hold on to older thermostats, but she says Charlie’s Heating & Air is just now starting to see the emergence of the technologically driven consumer. Sometimes, it takes being on the premises to understand that the homeowner is already primed for a next step that includes their HVAC system.
“They may not ask for a stat specifically that has voice command,” she explained. “But we can see that they have all the products that easily connect, just by servicing their home. Often, they already know they have the ability to connect the devices, based on their familiarity with their Alexa and Google Home products.”
CHOOSING A BRAND
Some brands get into the public consciousness more than others, but most contractors only offer so many different options. George Cunningham Air Conditioning & Heating does sell more than one brand and gets requests for the higher-profile brands.
“However,” Salazar said, “our goal is to have the compatibility to communicate with our Lennox line equipment for future business.” That can leave initial customer preference and contractor priorities askew with each other, if not quite directly at odds. The contractor’s position as the expert in the room can help, if only to a point.
“In most cases, the customer is going with the recommended stat from the sales rep,” O’Grady said. “In most cases, it is a matched thermostat to the specific dealer product.”
Charlie’s is a Bryant factory authorized dealer, for example, so many of the promotions they offer may require a specific thermostat that is sold together with the system.
“This can often take certain popular smart thermostats out of the picture,” O’Grady said.
THE ELEPHANT IN THE ROOM
Other times, the certain popular smart thermostat is not out of the picture because it is already sitting in a box on the customer’s kitchen counter.
That opens up a set of questions for a contractor. Do I install a thermostat the customer bought? How do I price that? Do I make any changes to my guarantees? What do we need to talk about with the homeowner? The combination of a customer-desired thermostat (either existing or waiting to be installed) plus a newly purchased HVAC system creates risks that cut two ways.
Sammataro noted that sometimes the thermostat has to be replaced anyway, in order to allow full functionality of the other equipment the customer is purchasing or has just purchased.
What his company works hard to avoid is for a customer “to replace a system and leave an older, out of warranty thermostat installed, only to have a service call due to the older stat.”
While a contractor can explain what’s going on to a customer who may have resisted thermostat replacement at the time of the original work, Sammataro understands that often, “all the customer knows is ‘my new system is not working that you just put in a month ago.’”
O’Grady’s team will install a customer-purchased thermostat as long as it is compatible with the homeowner’s system, but even that isn’t entirely worry free.
“This becomes more complicated because then it sets the expectation that they can do this with all things HVAC, which we would not want.”
As for pricing, Salazar’s policy at Cunningham is to give a flat-rate price for replacing a thermostat, regardless of who is providing it, while advising the customer of potential additional charges related to new wiring or relocation.
Sammataro includes this in the company’s general parts/labor/tax approach for pricing, regardless of whether the customer already bought a thermostat or not.
O’Grady has found that the advent of customers purchasing their own thermostats does complicate matters.
“It takes away a lot of the ability to have any markup and leads to a flat labor rate,” she said. For contractors who don’t make a habit of splitting out pricing for the consumer, this can have a ripple effect for how the company introduces pricing, according to O’Grady.
“We want to be transparent, but we don’t want to get into a debate with the consumer about how much markup an item has.”
She sees this dynamic as a developing pressure point that a customer may use, comparing contractor’s quotes for this or that with equipment costs the customer has Googled.
A GROWING WAVE OF SMART SALES
Just how popular are smart thermostats?
“Smart thermostats are 95 percent of our thermostat sales,” said Sammataro, adding that “margins are consistent with our dumb stats.”
A key philosophical decision gets into the process at this point. Is the contractor looking at the thermostat-related work as a standalone business transaction, or as more of an entré to expand the scope of work?
In Samm’s Heating and Air Conditioning’s case, it’s the latter.
“In selling these thermostats, we usually integrate one other smart device with the sale, such as light bulbs or appliance modules. There is always an expectation to develop future device sale options.”
The wave “has almost taken us off guard,” said O’Grady. The related trend of customers doing their research online and finding cheaper pricing there than the dealers are getting from vendors in some cases has created a real challenge.
And back in Harlingen, Texas, Salazar is unequivocal when asked if he has embraced the smart thermostat’s value as a key to more overall revenue.
“Absolutely! … When you supplement your HVAC business with smart home electronics along with IAQ, insulation, etc., your net margins are so much greater, given the lower overhead.”
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