Late in 2006 Blue Dot Services of Michigan closed its doors in suburban Detroit, ending an era of highs and lows for the former consolidated HVAC contractor. The highs were the days of three suburban Detroit locations generating more than $10 million in annual revenues and riding the coattails of a national organization that planned to make the name Blue Dot a household word among HVAC customers.
The lows surrounded the days immediately before and after the company closed its last location, leaving customers wondering if their service agreements would be null and void; and the remaining employees wondering if they would land on their feet.
And after the closing, at least two metro Detroit HVAC contractors began to advertise their businesses, attempting to add former Blue Dot service agreement customers to their own customer bases. Large ads in local newspapers appeared almost immediately and many customers found a new service provider to help them.
This was an obvious strategy: gain valuable customers who know and appreciate the need for service agreements and many of whom who had multiyear agreements with Blue Dot. These customers were the most valuable and only assets of the former consolidator worth going after.
THE CLOSING
Andy Piercefield learned the ropes at Blue Dot, running the Detroit locations for the corporate Blue Dot headquarters in Florida. When he had the opportunity to purchase the local company from Blue Dot, he weighed his options and decided it was the right thing to do. He acknowledged that going in he was aware of the mountain of debt facing the company.But he had a growing base of service agreement customers and his own experience in HVAC would play a huge role in turning the company around. He eventually had to let some of the employees go, whom he deemed were overpaid by an unrealistic salary structure set up by Blue Dot corporate. And he consolidated all three locations into his Livonia building. He eventually built up the service agreement base to 2,400 customers, the majority of them in the more middle-to-upper middle class suburban neighborhoods.
Piercefield said he put everything he could into making Blue Dot a success. He wanted to be the face of Blue Dot and not just a toll-free number where customers could talk to a nonlocal person. But the mounting financial burdens put him behind the eight ball. Suppliers wanted C.O.D. payments coupled with repayments on existing debt. He simply ran out of credit and options.
“We were just beginning to turn things around,” he said. “But there was just too much debt.”
When Piercefield closed the business in November 2006, many of his employees had already seen the writing on the wall and gone to work somewhere else. He was very concerned that his customers would be hurt the most.
“It tears me up not to be able to serve my customers,” he said.
Local newspapers ran stories of the closing and implied that Blue Dot had left customers holding the bag. Piercefield strongly objects to the picture painted of him. He said he was very close to selling the company to another local contractor but the deal fell through at the 11th hour and he ran out of options. He never intended to leave his customers in the dark.
ENTER MASTERCRAFT
Seeing an opportunity to gain a valuable new customer base, Jack Rolnitzky and Steve Bez, co-owners of MasterCraft Heating and Cooling of Redford, responded to Piercefield about purchasing Blue Dot’s phone numbers and customer records. Knowing that other metro Detroit HVAC contractors were anxious to bring former Blue Dot customers into the fold and that his former customers needed help right away, Piercefield and Bez began talking about what they could do together to help out the customers.“When Andy approached me with the idea, I figured that I had everything to gain and nothing to lose,” said Bez. He noted that MasterCraft’s service agreement base was very small. The 30-year-old family business was looking to expand, but also looking to help out people left in the lurch of the closing.
“We are the little guys in the business,” he said. “But we have been very successful.” However, Bez noted that the addition of approximately 90 percent of former Blue Dot service agreement customers would be a “culture shock” for his company.
“We had 14 employees when we made the offer to purchase the Blue Dot phone numbers,” he said. “Blue Dot had 80 employees at one time. Blue Dot had 70 phones lines. We have six.”
MasterCraft has since added three more employees and the purchase was finalized. In fact, MasterCraft currently is using one unpaid worker to help out in transitioning the customer base - Andy Piercefield. Piercefield has been helping Bez and Rolnitzky transfer the customer database. And Piercefield is developing plans for a MasterCraft service department that can effectively deal with this new customer base and culture.
“I’m not being paid to be here,” Piercefield said. “I’m here to help out my old customers.”
And Bez is realistic. He is not certain what this new influx of customers will do for his business. He is also not certain that all of the former Blue Dot customers will stick with MasterCraft.
“We are telling people that we are not Blue Dot,” he said. “We are just helping them out. I have the legal right to these customer files, but the customers are not necessarily mine. They can choose who they want to deal with.”
MasterCraft is offering one-year maintenance agreements attached to the back-end of guaranteed one-year agreements they will honor for former Blue Dot customers. Bez said that he is giving preferential treatment, i.e., same day service, for these former customers because he knows they are valuable. “Not one of them has had a problem with the changes to their service agreement programs,” he said.
Will this new influx of customers force MasterCraft to hire more technicians? Besides the two he recently hired, Bez said he is playing the waiting game. He wants to make sure that everyone has a solid workload. “I’d rather have my guys running 8-10 hour days than giving them 5-6 hour days,” he said.
For now, Bez is spending time learning about the Blue Dot culture, keeping company literature nearby in his office. He is also trying to learn as much as he can about former Blue Dot customers, many of whom live in communities not normally serviced by MasterCraft. And this is where having Piercefield around can prove very beneficial. “I am working on a plan now,” said Piercefield. “We may have to shrink geographic borders but it has been my experience that these changes lead to more profitability.”
As Bez put it, “Blue Dot has never gone out of business. It exists because we are taking care of the former customers.”
IF THE BORDERS SHRINK, OTHERS WILL COME
In the days and weeks following the shuttering of the Blue Dot building, two Detroit-area HVAC contractors - Thornton & Grooms, Birmingham, and Flame Furnace, Warren - stepped up and offered to help former customers and employees. In the aftermath, Thornton & Grooms hired several employees. Ironically, some of them had worked for the man who had originally sold his Livonia location to Blue Dot, Dan Bergstrom. Bergstrom’s son, Matt, runs Thornton & Grooms.“I had worked with some of these people before,” said Bergstrom. “We hired two salespeople, two plumbers, an HVAC installer, and an inside person. I wish we could have given everyone a job who wanted one. Some of these people had very good track records with Blue Dot.”
But the ultimate prize was bringing aboard a new customer base. Thornton & Grooms ran newspaper ads inviting service agreement customers, and even tried appealing to nonservice agreement customers, stating in the ad, “Simply mention that you are a Blue Dot customer at the time of service and [we] will provide a 10 percent discount for any service rendered.”
Bergstrom knows that running ads are costly - but so too are the costs of getting new customers. “The cost of acquiring a customer is $300,” he said. “We have picked up 30 customers, which using this math, would have cost us $9,000. We have spent maybe one-third to get this result. And these are good customers, not the low-end kind.”
Gary Marowkse, owner of Flame Furnace, also knows the value of a good service agreement customer. He took out full-page ads inviting former Blue Dot customers to switch over to Flame. The efforts have produced few leads. Marowske isn’t discouraged. Many of the former Blue Dot customers are located in areas that his company does not normally service and some of the customers just aren’t worth taking, according to Marowkse.
“The normal, nonservice agreement customer base of a business that has gone down is not that great,” he said. “And then again, a lot of the former Blue Dot customers were customers of Bergstrom’s [connection to Thornton & Grooms].”
But Marowske knows the best thing about losing a competitor. “When you sell a business, it is still the customer base that is the biggest asset - and that’s what you get from Blue Dot.”
For now, that customer base keeps the competitive fires glowing brightly during the frigid Detroit winter.
Publication date:03/19/2007
