One example can be found in the hvacr industry — the practice by manufacturers of selling hvac system upgrades to homeowners through their dealer contractors. It is nothing new in the trade; manufacturers and contractors have been doing it for years, although some prefer to call their programs “custom” and, therefore, are very protective of the confidentiality of their upgrade programs.
One company that specializes in custom programs for its dealers, American Standard, was willing to share some of the highlights of its program in a recent interview with The News.
American Standard’s Lee Henrickson said that selling system upgrades — packages that allow new home buyers the option of selecting a more efficient hvac system — is not for everyone. There are prerequisites to selling an upgrade program.
“The dealer has to have an existing relationship with the builder,” said Henrickson. “The dealer should actually be an extension of the builder’s workforce.”
Henrickson said his company puts together packages for each dealer and can also train dealers and distributors on how to sell the upgrades. “We can even schedule meetings with dealers or builders to discuss the packages,” he said. “The dealers also are given packages [explaining the program] that go directly to the home buyers.”
The most common scenario is for builders to send home buyer contact information to the dealers, who, in turn, send the upgrade information to the customer.
“The dealer explains to the customer that their builder is suggesting plans other than the normal hvac system,” Henrickson said. “The dealer never downplays the normal system and describes it as ‘very good.’
“The dealer has the opportunity to discuss zoning products, programmable thermostats, filtration products, etc., with the home buyer. Of course, it is best for dealers to have a showroom for customers to see the various pieces of equipment.”
Once the customer selects the system s/he wants, the dealer makes an addendum to the original contract, obtains the signatures of the home buyer and the builder, and completes the upgrade.
“It’s a win-win-win program. Everybody wins,” he said. “The customer gets a better, more high-efficient system, the builder makes a little more money because he really doesn’t make a big overall profit in new construction, and the dealer sells a higher-markup product.”
If an upgrade program has the potential for great success, why not market it as a formal package?
“We don’t outline the program,” said Henrickson, “because a lot of people would want to go in and reinvent the wheel — mess it up. Builders may decide to offer a higher-efficiency system in all of the contracts, which would eventually drive the prices down.”
Contractors’ Perspectives
Kennie’s Indoor Comfort Specialist is located in Hanford, CA. According to Kennie’s Alan McIntosh, there hasn’t been a great urge among homeowners to upgrade to higher efficiency equipment, but that might change.“Due to the energy problem in California, people are looking to move up the scale,” McIntosh said.
He added that his company began offering upgrade packages to local builders a year ago, but the process has been slow.
“Local builders have been reluctant to hand their customers over to us,” he said. “We have had to build up a trust with the builders. Now they are getting more comfortable with us talking to the customers.”
McIntosh said that each time a builder plans a new subdivision, a model home will be built that includes a basic furnace and a/c system. Kennie’s displays literature in each of the model homes, detailing the available upgrades.
“When the customer selects an upgrade, they will usually work with us,” McIntosh said. “The one thing we don’t do is put a lot of pressure on homeowners to buy. We are more down-to-earth and conversational with the home buyers.
“We were the first contractor in the area to offer an upgrade program, and now things are getting better day by day.”
Holl’s Heating & A/C recently started working with local build-ers on an upgrade system. Jason Holl said his Merced, CA-based business began talking with three builders earlier this summer because he “is always looking for another angle to make money.” He has been able to establish an upgrade program with two of the builders.
“We discussed our plan with the builders and showed them the American Standard upgrade program,” Holl said. “We showed the percentage of markup they could make selling a 16-SEER system.
“The two builders realized they could make a good profit on upgrades.”
Holl said he recognizes there are stumbling blocks to making an upgrade program a success. The first is the reluctance of builders to turn over customers’ names to his company. The second is getting customers interested in hvac.
“Home buyers have no problem going out and picking tile or carpeting,” he said. “But sometimes they just don’t understand hvac systems and why they are talking to us.”
Boll does not work with builders who have model homes in tract subdivisions. His “partners” are custom home builders. That necessitates having a showroom to let homebuyers touch and feel the products. However, some customers are sold on upgrades even before signing their contracts.
Publication date: 10/29/2001
