Consumers nowadays can’t turn on the TV without seeing commercials for smart home products like Google Home or Amazon Echo. In turn, these trending voice-controlled digital assistants have helped raise consumer awareness of other home automation products, such as smart, connected thermostats. In fact, the global smart home automation market is expected to reach $130 billion by 2025, according to a report by Grand View Research Inc.

With the growing interest in smart home products, if HVAC contractors want to cash in on new opportunities, they’ll have to compete with security contractors, cable providers, utilities, and even big box stores. However, many industry experts say this market presents countless opportunities for HVAC contractors, who are better positioned than most simply because they are already in the home and have the consumers’ trust.

OWNING THE HOME

“If you own the wall [thermostat], you have to offer a whole home solution due to the connectivity of today’s market,” said Matt Marsiglio, operations manager, Flame Heating, Cooling, Plumbing, and Electrical, Warren, Michigan. “If you had a name on the thermostat, you now need to be connected to the whole home.”

Flame Heating began offering smart home products nearly two years ago. The company carries the full line of Nest products, as they are one of the most recognized brand names, Marsiglio noted.

“With our manufacturer-specific items — Bryant Connex — it allows us to better serve our customers by allowing us to be notified of faults in the system,” he said. “The customer, of course, has to allow us this access.”

Columbus, Ohio-based Fire & Ice Heating & Air Conditioning’s smart home offerings include not only Wi-Fi connected thermostats, but indoor/outdoor cameras, indoor lighting, door locks, water shutoff valves, and more. Scott Merritt, owner of the company, said he decided to start offering these products to customers in part to meet consumer demand.

“Owning the home is important because if we don’t get in there and provide the needs and wants, other companies will,” he said. “Security companies have no business putting in thermostats, yet they do it all the time.” 

As an added bonus, adding these products and services has benefited the company overall, Merritt said.

“First of all, you’re tapping into the inner curious child that everyone has inside them,” he said. “Being curious, just pushing buttons while seeing things turn on and off is always cool, mostly when it’s not something you’re used to happening with, such as water shutoff valves, door locks, etc.  Secondly, it offers the homeowners more options to accomplish things at home even when they are not, such as letting a technician in with the door lock and watching him/her with a camera.”

Frederick Air Inc., located in Frederick, Maryland, offers Carrier Cor as its central hub/home security based solution in addition to installation services of customer-supplied products from various other manufacturers.

“We are always looking to be on the cutting edge of our industry,” said Dave Schmidt, operations manager, Frederick Air. “We began offering smart home products as early as 2015. Our customers depend on us offering them the right solution to their home comfort needs. That requires Frederick Air knowing what technology exists, what has been proven to work, and where it can be leveraged to give them a better solution.”

Schmidt said offering smart home products and services helps to reaffirm the company’s expertise and relevancy within its market.

“We want to create every possible opportunity to interact with new and old customers,” he said. “Our industry has had a very hands-off relationship with customers in the past. We see them when there are issues or for routine maintenance. Smart homes/IoT gives us additional ways to access revenue opportunities in our customer base.

“We want to generate as many calls, emails, or texts from our customers as possible,” Schmidt continued. “We love fielding questions about all sorts of products and home issues. Even if we don't sell the product or provide the exact service they need, we serve as a clearinghouse for all their home needs. This continues to build trust in our brand, and makes it even more likely they will choose Frederick Air for the products and services we do offer.”

Mike Ritter Jr., owner of Great Lakes Heating, Air Conditioning & Electrical Inc., South Bend, Indiana, just started offering smart home products this spring. The company currently offers Nest and Honeywell devices. Ritter said he began looking into these products after Service Nation Alliance announced it would be assisting their interested members with a training class during Service World Expo last fall. 

“After looking into it and doing the research, it made sense to offer this to our current customers,” he said. “We have been steadily growing for the last seven years, and we were seeking other HVAC companies in our area to purchase in order to continue our growth and market dominance. After seeing what we can offer our current customers with connected homes, it made better sense to invest in this endeavor, which will increase our growth long term without increasing ancillary expenses that adding more customers through the purchase of another company would.”

Ritter said that while it’s still too early to say what all the benefits or setbacks might be, his company has seen a few already.

“It seems most people are interested in digital things and the new tech that comes out even if they are not tech savvy,” he explained. “Our team found a new spark of excitement in what we do, and they are taking even greater pride in their jobs of being the cutting-edge experts in our area. The increased marketing in this area has given our existing customers and new customers an even greater sense of trust that they are getting the best when they call us, even for the ‘simple’ HVAC repairs that are not associated with a connected home. After all, if we are experts in connected home high-tech stuff, we must be the experts at the easy, currently normal, systems repairs and replacements."

Owning the home is important for HVAC contractors because it allows them to stay relevant in their space, Ritter noted.

“Any seasoned CSR will tell you the majority of troubleshooting calls are for a ‘broken thermostat,’ and as contractors, we know that is not generally the case,” he said. “That was yesterday, and pretty soon, I can see the majority of troubleshooting calls becoming an issue of their connected home. We need to be on top of that and remain the go-to people that customers contact for repairs. If we don’t own the home, we won’t own the thermostat, which means we won’t own much, if anything. It will push us to the back of the customer's mind. We need to remain at the forefront of the customer’s mind, or at least at the forefront of their digital mind, be it Siri, Alexa, Cortana, or the like.”

CHALLENGES

If and when HVAC contractors choose to enter the home automation market, they will face challenges, just like with any new venture.

“The toughest part for us was picking the product,” said Marsiglio. “There are several out there, and we wanted to pick one and run with it to reduce confusion among both our clients and staff. My advice is to commit to one offering, and don’t try to mix and match too much.”

Most contractors are resistant to adding connected products due to extra on-call possibilities for techs, or they believe it to just be a hassle, Merritt noted.

“I implore them to step back and look at the big picture,” he said. “That customer is yours: Give him/her what they want and need. Do it in a profitable way, and they won’t look elsewhere; if you don’t, you might get replaced in the process by a company such as mine. Training and education are the keys to overcoming these hurdles. Nobody wants to install or repair something they don’t understand. But once you understand it, you will most likely wonder why you didn’t start this sooner.”

It’s a whole new world, and while it’s easy to just do the same thing every day, recognizing change is not only inevitable but necessary, said Schmidt.

“Just because you understand how to service and install HVAC products doesn't mean your company will survive,” Schmidt said. “There is a ton of technical information and a large knowledge base needed to understand home automation and IoT. It requires a unique perspective on home comfort. That means a lot of learning and studying. There is no substitute.

“We have to create a culture inside our business that change is positive,” he continued. “New and exciting challenges are going to be an everyday occurrence. This starts at the top. The ownership/management teams have to champion and celebrate changes. Anything less than being a cheerleader, and the staff will adopt management's standoff attitude towards alterations to habits and known processes. That is how well-liked and profitable brands die slow, ruinous deaths.”

For Ritter, it all comes down to a mental shift in how contractors look at financials.

“While we have a hint of what it will look like through our monthly service agreement revenue, we don’t have an initial outlay of equipment and expenses like we will with connected home services,” he said. “We need to have a solid strategy and mindset that this is a longer endeavor to see profits. We will be looking for recurring monthly revenue [RMR], which won’t begin to be profitable for a couple of years. We will also need to compete with the likes of the larger, full-fledged security companies.  On that note, the largest hurdle we have already come against is our customers do not know what connected home or home automation really means. In all actuality, I not only had to bring my entire team up to speed on what all is possible, I also had to learn it myself.  The capabilities of what can be done and the conveniences people can realize is beyond what I imagined, and I have a pretty good imagination.  I keep adding more and more to my own home each week. Security companies have a leg up on us because people know and understand what they do; it is a common thing today.”

Ritter said it also helps to have a team that is fully committed.

“Our current team is part of a profit share with Connected Home Service Contracts only," he said. "Any team member who gets a signed contract will receive $2 a month for as long as that customer stays with us, and the minimum contract is five years. 

"Two dollars doesn’t sound like much, so we put together a graph, and using their numbers, we showed them what they could get every month if they sold just one a week," Ritter continued. "At the end of four years, they will be getting a check each month for $384. If you have a security system, ask yourself when the last time you saw someone from that company was. Then think about the fact that your maintenance customers are seeing you twice a year at minimum. Who would you trust more? Who are they going to trust more?”

Publication date: 6/11/2018