My friend commented on how five years ago he couldn’t have foreseen paying over a $1.00 for a cup of coffee. In my eyes, the packaging is almost the same as a good cup of 7-11 coffee and the cost to produce my cup of latte is probably close to the cost of producing a $1.00 cup of coffee.
So, why am I paying $2.50 for something I really didn’t want in the first place? It’s probably because I am drinking at Starbucks — and I expect to pay more. Every day thousands and thousands of Americans pay $2.50 for a Starbucks latte, because it is Starbucks.
The Starbucks people have it figured out. My question is: When will someone in our trade figure it out?
IT’S NAME RECOGNITIONMy contractor friend had an interesting perspective. He talked about the need for a brand name image in the HVACR trade, similar to Roto Rooter in the drain cleaning business or Orkin in pest control. We scratched our heads and tried to think of a familiar name in the HVACR residential replacement and service business. And we scratched our heads some more.
That’s a tough one.
Consumers may — and, then again, many may not — recognize the names of Trane, Carrier, Lennox, Rheem, etc. In this industry, these are familiar equipment manufacturers. But name one familiar residential replacement and service contracting group.
Time is up. There is no familiar name. At least not yet.
“When someone figures it out, they will have a corner on the market,” my friend said.
The consolidators tried it. They bought some of the best HVACR contractors in the U.S. with the intention of creating a national brand name. But, the formula was flawed — too many “independent thinkers” trying to merge under one thinking cap. Without everyone on the same page, consolidators were foiled in their attempt to create a marketable name brand. They had to get their own house in order first, and it appears they are still attempting to do that.
There is still this void for a recognized leader in replacement and service. Will someone outside of the traditional HVACR market come in and corner the market? Possibly.
It is conceivable that a parts/ equipment distributor may “figure it out” before a contractor does? Possibly.
Is it conceivable that “do-it-yourself” national chains — such as Home Depot, Lowes, True Value, and ACE, to name a few — can take the knowledge they have learned from selling HVACR replacement parts and equipment and use that information to start their own service and replacement departments? Possibly. (After all, these companies have great brand name awareness and reputations for having large inventories of competitively priced products.)
Do I think any of them will get into the service business any time soon? No. There have been too many examples of failed attempts in other trades — well-oiled companies whose business plans went awry after they tried to wear too many hats.
No, I would have to believe that the company that “figures it out” — combining a familiar name with a national presence and backed by a reputation for good customer service — will walk away with a huge slice of the HVACR service and replacement pie. And price will no longer rule the buying decision; it will be name brand customer service.
My friend takes this approach: “Home Depot has the name and the marketing. If they can figure it out…”
I’m not suggesting that “Big Box Heating & Cooling” would be such a bad thing anyway, especially for the HVACR contractors who have spent their careers doing quality work, building reputations, yet only “hovering” at or below the $1 million mark, when it is their intention to break over $1 million or beyond in revenues.
There will always be the need for niche contractors, those who specialize in a certain market and have no desire to expand. For those who wish to expand, aligning with a “big box” may be the best way to increase customer traffic and, eventually, a bigger slice of their local market.
When anyone figures it out, please contact me. Now where can I get that $5.00 cinnamon roll?
Hall is business management editor. He can be reached at 734-542-6214; 734-542-6215 (fax); firstname.lastname@example.org (e-mail).
Publication date: 06/24/2002