No one expected 2007 to keep up the torrid pace of 2006 and late 2005, as the industry rushed new a/c and heat pump models to market. However, the current pace is more in line with 1994 shipment levels, a far cry from cracking the 8 million plus high water mark from a year ago.
The option to repair would appear to be weighing far greater in the minds of consumers as many are faced with higher replacement costs than they had previously been presented. Is price more of an issue? Of course it is an issue, as every customer will ask the $64,000 question at some point in a sales presentation: “How much?” But to what extent it is driving replacement sales depends upon what you are selling - inside or outside solutions.
Bill White, regional manager with M&A Supply, an American Standard distributor, who accompanies dealers on ride-a-longs for the purpose of sales training, said “One customer told us he had stopped every salesperson at the front door with ‘Here is the last price I got from the guy that was just here. Can you beat it?’ I told that customer I didn’t know if we could beat it, but if he would give me 30 minutes we’d find out. An hour and a half later, we left with a $13,000 sale, more than four times the amount of the low price.”
The customer confided in White that he had been surprised that so many other salespeople just gave him a price at the front door and walked away. “You are the first guy that explained the possibilities for giving me a more comfortable home. Most of them just knocked $100 off the price and never called me back,” White had been told. Interestingly enough, in White’s opinion, he and the local contractor sold the challenging customer a more efficient system because they first sold him on a whole-house air cleaning system. The rest just fell in place.
OUTSIDE LOSERSThe struggle to outsell, out-perform, or under-price the competition may never seem stronger as many contractors continue to focus on outside solutions, or simply “selling the box” as many have come to know it. There is no doubt that a baseline residential outside solution costs more than it did prior to the efficiency standard increase of early 2006. It is certainly natural for consumers to perhaps spend more of their hard-earned cash for repairing a system rather than replacing it. In addition, consider the fact that many systems are not properly commissioned after the sale, and therefore, the boxes are not delivering the expected savings, regardless of the promises in the sales literature - because they can’t.
Undersized return air ductwork plagues a majority of newly constructed homes in this country. That equates to reduced Btu delivery. Think of it as buying high in the stock market, and selling low. Not a very good investment strategy. An even greater number of HVAC systems fall victim to leaky ducts, a problem that has gathered the attention of the Environmental Protection Agency and the Department of Energy. Leaky ducts have the effect of mixing cool air with warm air, equaling tepid air; which isn’t what consumers want to purchase with their high-efficiency investment.
INSIDE WINNERSThe competition for more of the same old solutions, regardless of the efficiency level, may very likely drive the repair and service business to record highs for the next two years. Contractors who can forge a connection with consumers that reaches past traditional outside solutions are likely to discover that not only will their service business thrive, but that their new equipment sales can also flourish. Some options you might consider to set yourself apart from the outside box fray include whole-house air cleaning systems, duct sealing, whole-house diagnostics, and performance-based contracting.
The overall key may be in understanding that a true, measurable indoor comfort solution may be more credible in the eyes of the consumer than basing your success solely on a yellow sticker on the side of a unit.
Publication date: 09/17/2007