Cost is No Obstacle

There are a number of reasons why HVAC equipment is so expensive right now. The pandemic was a primary catalyst, triggering disruptions in the supply chain that impacted both the production and delivery of equipment, which coincided with a huge increase in consumer demand. Escalating prices of raw materials, such as metals and electronic parts essential for manufacturing these units, also contributed to the increase. In addition, overall inflationary trends are raising prices across the board, and labor costs are higher due to the scarcity of skilled workers.

The result is HVAC equipment that can cost far more than it did just two or three years ago, resulting in sticker shock for some consumers. Still, that’s not a deterrent to Green Energy Mechanical’s customers, many of whom are still opting to buy high-end equipment. According to Jonathan Neves, CEO of the Canton, Massachusetts-based company, more than 90% of their customers buy a high-end system.

“Clients purchase high-end equipment because of how it makes them feel,” he said. “They feel better about themselves when they contribute to a reduced dependence on fossil fuel. They feel better about a system that is quieter and more comfortable. They feel better about a more reliable system that is paired with air purification and upgraded filtration. They feel better about doing the best they can for their family.”

To that end, Neves’ most popular system is a 96% AFUE gas furnace paired with a 20 SEER variable-speed heat pump system. An integrated controller allows customers to run the heat pump in milder weather then automatically switch to the furnace during colder weather. IAQ accessories, such as air purification and upgraded filtration, are usually part of the package as well.

“The price of these systems has increased by at least 25% in the last two years,” said Neves. “But I don't believe the high prices will affect sales, because everything has increased, and this is easily explained to the consumer. In fact, we are selling at a higher closing percentage this year compared to last year and at a higher average ticket cost. The contractor worries more about the prices than consumers do, from my experience in speaking to other contractors around the country.”

Between 70% and 80% of customers at Green Valley Cooling and Heating in Green Valley, Arizona, opt for the more expensive two-stage or variable-speed systems, said Joanna Buglewicz, president and owner. Customers are buying this type of equipment primarily because they’re looking for better comfort, she said.

“If it is communicated properly, there are many benefits about upgrading to a higher-end system, but improved comfort is the most popular reason,” said Buglewicz. “We have had substantial price increases from our vendors on equipment, with increases of 30% to 40% in the last two years. However, price doesn’t seem to affect the outcome; if we can show we are worth what the homeowner is paying for, then there isn’t a question of the value.”

At Abacus Plumbing, Air Conditioning & Electrical in Houston, Texas, about 60% of add-on/replacement sales consist of high-end, full communicating systems, with the Lennox XC20 air conditioner being the best seller, said Lance Ellison, operations manager. Even with price increases of nearly 30% over the last two years, he said that sales have increased by double digits during that same time.

About 60% of add-on/replacement sales at Abacus Plumbing and A/C consist of high-end systems. (Courtesy of Abacus Plumbing, A/C, and Electrical)

“Customers are interested in energy savings and better home comfort, which includes humidity control as the primary driver,” said Ellison. “However, I anticipate demand to decrease in 2023, due to the ongoing recession along with increased interest rates and tightening of credit criteria.”

Making the Sale

Ellison has found that the best, better, good method (top-down) works very well during sales presentations. He has also discovered that almost all customers are receptive to learning more about the features and benefits of communicating equipment.

“In Houston, due to our proximity to the Gulf as well as high temperatures, we find that all customers need a communicating HVAC system for the best humidity control and general home comfort,” he said. “We use an energy cost calculator to show the potential energy savings along with repair cost savings to mitigate the monthly payment sticker shock.”

In addition, Ellison offers financing with every system sold, which nets the company a substantial increase in close rates on high-end systems, he said.

“We only offer maximum term, no-dealer fee financing options. There are manufacturer and third-party rebates, although we don’t rely heavily on those, as we build value in our brand, the warranty, and the features and benefits to our customers.”

Buglewicz also offers a variety of equipment options during the sales presentation but relies on asking questions to help identify solutions that cater to what the homeowner values. She has found that most customers are open to learning about other solutions.

“We present solutions based on what the customer values and what they are trying to accomplish for their home,” she said. “It is important that a design consultant be equipped with a caring mindset and good communication skills. It is easy to teach the technical side, but you can’t teach personality, so hiring the right person based on personality is critical for that position. I have found that if you have a traditional ‘salesperson’ who is trying to upsell a product or service, it tends to come off disingenuous and sleezy, resulting in not making the sale.”

Financing options are offered to all customers, said Buglewicz, and rebates, along with a customer’s credit score, will determine how attractive the financing terms will be. She said her company is able to offer solutions of 0% interest, as well as long-term, low-monthly payments with interest.

Asking customers questions about what is most important to them is the approach that Neves takes during the sales process. For example, he will ask, “What does an ideal new HVAC system look like for you and your family?” He also likes to use the top-down sales method of presenting the best equipment first, then removing options as he offers equipment with fewer features and a lower price tag.

“I also don't try to upsell anyone,” said Neves. “I start with the most expensive options first and work down from there. This lets the client determine which options are the best for their family. Top-down selling and using the psychology of perceptual contrast to sell higher-end tickets is a must. The top-end options must give better value to the consumer in the form of enhanced company services, system safety, reliability, indoor health, and energy efficiency.”

Offering financing is also necessary, said Neves, and he uses a combination of their own financing, as well as rebate financing.

“We use GoodLeap and Service Finance, and we only offer low- to no-dealer cost options to our customers. You don't have to offer 0% interest for customers to buy higher end systems.”

That said, Neves has seen a bigger increase in clients looking to repair their systems rather than replace them. He believes this has more to do with the uncertainty about the economy and a looming recession rather than the rising cost of equipment.

“I am not worried either way,” he said. “At the end of the day, it is about doing what's best for your customer. Now may not be the best time for them financially to replace their system. However, if we are honest, deliver great service, and stay in front of them throughout their journey with us, we should be top of mind when the time comes to replace it in the future.”