The Post-Commodity Revolution
Service, consumer perception, and image add so much more to the value of a product. These intangibles lift it up from being a box (like a window A/C unit or outdoor condensing unit) to an environmental system under the care of an attentive company.
According to Matt Peterson, vice president of sales and marketing for York UPG, Norman, Okla., "The HVAC industry is in an evolution from commodity to value-added products."
As the market started maturing, its players competed more often on price - and a product, window units, which could be purchased retail and installed by consumers themselves. These factors helped turn HVAC into a price-based commodity industry.
Can it evolve beyond this? According to Peterson, it already has. In fact, "I think they [other evolved markets] are everywhere."
It boils down to the consumers' perception of a product's value. "If you provide more value to the consumer," Peterson said, "consumers will buy it."
Getting In On The ActionPeterson pointed out that for most consumers, their largest in-vestment is their home. The largest investment in the home is its HVAC system. Now that baby boomers are hitting peak income years, he said, they want to spend their money on their homes.
In the past, "We have not given consumers a good reason to replace the product before it dies. We have built brown boxes that heat and cool."
The role of women in the buying picture has been studied up, down, and sideways; the consensus is that yes, women are a critical component in the buying decision. Female buying cues, Peterson said, are largely based on aesthetics.
"We want people to buy that unit, in part because it is aesthetically pleasing," he said. The company's Affinityâ„¢ line includes several color options for the outdoor unit. A demo on the company's Web
site (www.yorkupg.com/affinity) shows visitors how they can change the unit's color to complement their home's siding or brickwork. "It's up to us to keep innovating."
However, "We're not talking about quality and comfort," Peterson said. Those features are assumed. "We are talking about consumer product appreciation."
Residential HVAC products have become much more visible, thanks largely to Sears' circulars and commercials, the Internet, and other retailers such as Home Depot. A York-commissioned consumer preference study, though, confirmed that retail sales are driven on price - not the way you want to go if you don't want to sell a commodity.
Twenty percent of the market is price driven, he stated; "80 percent of the market represents the opportunity to sell up," using value-added sales. (See Figure 1.)
In addition, the study showed that "The consumer still wants to buy from an independent dealer," Peterson said. The consumer's perception of the dealer-contractor is at least as important as the perception of the brand.
The Contractor PartnerContractor sales are becoming more professional, he said. Factors such as brand awareness and dealer marketing tools tend to get more contractors to buy into the concept of selling up.
"Our dealers need to view us [York] as a partner," Peterson said. "We hold dealer meetings here in Norman every week. We are getting them closer and closer to us."
Claude Drabek, owner of Drabek & Hill, Oklahoma City and Norman, used to be a dealer for several unitary manufacturers' brands. Now the contractor only carries York UPG.
Advertising from those big retailers "helped us a lot," he said. It got consumers thinking about air conditioning in a very cool summer out West. However, "I want the customer for life," he said, not just for one purchase. In the end, this contractor is willing to work hard for the privilege. "There's no reason to fear competition," Drabek commented. "We don't want it handed to us on a silver platter."
"I don't see HVAC as a commodity at all," Drabek continued. "We truly believe people want service. Most people don't even know their square footage. They expect us to design their system."
Drabek noted that there are contractors out there who don't design or install systems properly. After homeowners deal with Drabek & Hill, "I'd say 80 percent of our customers never get another bid."
It's important to be able to explain to customers why it's in their best interest to replace their systems. "Why do I have to re-place mine," is a common question, he said.
"A lot of the problems we see are caused by improperly sized equipment, ductwork, or sealing problems."
Bring It HomePart of this contractor's success in selling up is based on the features of the products he carries. These go beyond efficiency. "Fact is, most of our sales are higher efficiency products," Drabek said. "13-SEER is a noble goal, but ..."
"The 13-SEER ruling will make manufacturers need to create more consumer-driven features," Peterson commented.
When a product's features go beyond efficiency levels - IAQ for example, and better sound levels - "It's easier to sell up," Drabek said.
"A lot of customers are focused on noise reduction. They also want two-stage comfort."
His company sells improvements. "First we measure every house. You have to be thorough." Then he asks about various complaints, such as hot spots, cold spots, allergies, and asthma.
"We come up with a comfort concern list."
Drabek said his company keeps in touch with its customer base through 10,000 quarterly newsletters, with real, helpful tips, such as how to clean or change filters, check the coil, and where to call if the customer smells gas. Postcards also are mailed seasonally to specific demographics.
Drabek & Hill also helps out in the community, such as servicing a women's shelter or a church. "Your heart just goes out to them," Drabek said.
"Be committed and love what you do," he stated. "I can't think of another business that offers families this kind of opportunity." In addition, "You've got to take care of everybody. You can't just service the $100,000-plus customers.
"Keep a good image, a clean image," he added. "You truly reap what you sow."
Finally, "Work hard. We've teamed up with a manufacturer that provides support, but we branded ourself."
"To us," said Peterson, "the best selling situation is when the customer recognizes both brands," both the contractor's and the equipment's.
Publication date: 11/15/2004