Thanks to those who responded to my last Hotmail article, The Impact of Online HVAC Equipment Sales. Many of you shared positive actions you are and will be taking to capitalize on this shift in our industry. Let’s take a look at several of them.
Growing Online Equipment Sales?
HVAC equipment manufacturers are selling HVAC equipment online, direct to your customers. Your customers, who are in the habit of buying products online weekly, see equipment as a commodity, like a refrigerator, that is just a few clicks away.
Yesterday, you offered your customer a $6,430 replacement proposal. While considering your proposal, they Google the equipment manufacturer and model number listed on your proposal. In less than a minute they find they can buy the same unit online for only $1,137 and have it delivered to their home in a few days.
Then an icon pops up on their screen offering local installation by a licensed contractor for $1,991. Your customer sees an opportunity to get what they need for $3,128. Less than half your price.
Hopefully, the offerings you bring your customers are far beyond the cost of new equipment they can get anywhere.
Meet the newest and most aggressive competitors you’ve ever faced. Love it or hate it, online retail sellers are here to stay, and they are in our business.
As with all major changes, threats and opportunities often appear at the same time. How you plan for and respond to these changes, will dictate your success or failure in the coming years.
Equipment Becoming More of a Commodity
The change in how HVAC equipment is sold continues to turn it into more of a commodity. We believed for decades that equipment margin was key to contractor profitability. The move to online distribution challenges that idea and calls for installation and service companies to redefine their real value to customers. Hopefully, the offerings you bring your customers are far beyond the cost of new equipment they can get anywhere.
The new question becomes, what are your customers willing to pay you to do it for them?
The key to discovering the opportunity is to define the difference between the two products you sell. The first product is “the box.” It consists of equipment built by the manufacturer and shipped to you, or directly to your customer. The second product is “the system.” It is designed, built, installed, commissioned, and maintained by you, the contractor.
Many customers think of HVAC equipment like they do a refrigerator; get it inside the house and plug it in.
Understand that the system controls equipment efficiency, comfort, and safety, not vice versa.
Of course, many customers think of HVAC equipment like they do a refrigerator; get it inside the house and plug it in. That’s all there is to it. Now, more than ever, they’ll believe this unless you help them understand otherwise.
Innovative Contractor Solutions
In response to the previous Hotmail article, one contractor wrote: “When we are consulted concerning a price for installing a piece of equipment purchased on the Internet, we quote them our normal price. Our price is the same, no matter who supplies the equipment, us or the homeowner. HVAC systems are not a commodity. Each system is assembled and customized.”
This good fellow understands the real value he brings to his customers and has a plan in place to meet equipment sales direct to consumers.
Other contractors are preparing to offer HVAC equipment to their customers at the same price available on the internet. The difference is that when coupled with a top-rate installation, their installed system will be far more efficient than what customers will get online. That is how these contractors will maintain their margins. Yes, they must sell the higher price and deliver the promised benefits.
To make certain their customers understand and appreciate the value of the installation, progressive contractors test and diagnose the existing system’s installed performance. If present, defects in the previous installation are made visible to the customer. They soon understand that installing new equipment will not solve the comfort, efficiency, and safety problems they now know they have.
This is only possible with diagnostics to pinpoint and identify specific custom repairs that are needed before equipment can function to manufacturer specifications. Immediately, customers understand the equipment they are considering buying online is an incomplete package.
These contractors will then offer additional services to support the value they bring to their customers. These services include:
- Adequate airflow verified to each room
- Filter systems matching the capacity of the fan
- Duct system repairs that assure proper airflow and temperature
- Assurance that proper venting and combustion air will provide safe equipment operation
- Conduct testing, adjusting, and balancing to a system to verify it performs as intended.
Face it, companies offering only low-price equipment and installations will be left with only low-price installations. Today, their business model depends on the margin they get on the equipment. With that margin evaporating because of online equipment sales, they have little, if any future.
Better Contractors Build System Value
To perform in the field as the online equipment information claims, system performance must meet equipment operating specifications. Online marketing content insinuates installations are all the same and the system is the equipment.
For the time being, better contractors will educate their customers through informative marketing and face-to-face educational selling. The repairs and upgrades needed and wanted by customers can be purchased with the equipment changeout or offered later when the online-purchased system fails to operate as the “cheap-o” installer implied.
Planning is underway to offer service and maintenance agreements that include the system, not just the equipment. This effort is directed specifically to online equipment purchasers. Then low-price shoppers will have the opportunity to buy comfort and efficiency unavailable online. The service provider will then receive a well-deserved harvest.
Contractors planning to succeed by adapting their sales approach to respond to this new HVAC equipment distribution model are intent on offering custom built and upgraded systems. They understand there is no competition where they’re headed.
Soon, equipment price will be seen for what it is, the cost of a single system component.
Any bets on additional upcoming distribution changes manufacturers have planned? Might they set their sites on better contractors to truly partner with to offset skyrocketing warranty costs? Do you realize manufacturers don’t have the manpower to do their own warranty work? Will a new service market develop to harvest poorly performing systems? As Isaac Newton says, “For every action, there always is an opposite and equal reaction.”
Rob “Doc” Falke serves the industry as president of National Comfort Institute, Inc., an HVAC-based training company and membership organization. To discuss your ideas about online HVAC equipment sales, contact Doc at [email protected] or call him at 800-633-7058. Go to NCI’s website at nationalcomfortinstitute.com for free information, articles, and downloads.