The early returns for 2023 are that business is slowing down in the HVAC industry. AHRI has only released the shipment numbers through February, but the results have been a decrease when compared to 2022.
Gas warm air furnaces saw a 19% decrease, while air conditioners and heat pumps went down by 15%. Now, again, it is important to point out that it is very early. And a hot summer can certainly help shipment numbers skyrocket. We are all hoping for that to happen.
But let’s not be naïve. The HVAC industry, most specifically the residential HVAC market, just went through three consecutive great years where in many cases demand for services outweighed the services a contractor could provide. Contractors could not keep up with the work mainly because of the difficulty many HVAC businesses had in finding good labor.
As the saying goes … all good things must come to an end. While it might not necessarily happen this year, it is still important for HVAC contractors to have a plan for when the market does in fact experience a downturn.
So what should contractors be doing if business continues to slow? Well, here is what not to do. Do not cut down on your ad budget. Of course, that does seem counterintuitive to some folks. If business is going to slow down, you want to maintain your profit percentage so cuts need to be made, right? Certainly, a tightening of the belt is warranted. But not when it comes to marketing and advertising.
This has been the case for some time. In fact, one of the most famous examples of this dates back to the Great Depression. Back in the early 1930s, Post and Kellogg’s were the two heavyweights in the cereal market.
They were very close in market share. Then the Depression hit, and the two companies took very different approaches. Post decided to shut down their advertising. The thought process was without the normal money coming in, they should not be spending as much on advertising. Kellogg’s took a different approach and doubled its ad budget. By 1933, while the economy was still struggling along, Kellogg’s was not feeling the effects, as their sales had risen 30%. Fast forward 90 years later, and they are the dominant player in the cereal market.
Now, maybe a company that passes off Grape Nuts as a viable breakfast option would never have been able to rule the cereal market. But if different decisions were made many years ago, perhaps you would have been eating Raisin Bran this morning rather than Corn Flakes.
No matter what HVAC market you are doing business in, I guarantee you some of your competitors will make the same mistake that Post did. It seems strange, but a glass-half-full individual would looking at a minor downturn as a great opportunity to distance themselves from the competition.
Make the right decisions and you can gain market share. You can make the type of gains that simply are not possible during the good times. That market share will still be there when the industry inevitably bounces back.
To be honest, some of these competitors might not make it out the other side if they are making poor decisions when things get tough. They are probably not getting all this great information from reading The ACHR NEWS.
And if this is not just an HVAC downturn but rather a complete economic downturn, that is all the more reason to follow this strategy. Without fail, during bad economic times media usage goes up while the amount of advertising dollars spent goes down. This has happened during the Great Depression, after the dot-com bubble burst, and during our most recent economic troubles when the housing market lead to the Great Recession.
Hopefully you will not need to use this advice in 2023, but it is important to know.
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