Earlier this year, Supply House Times headed down to Ashland City, Tennessee, to visit A. O. Smith’s residential water-heater facility where it chatted with Vice President of Marketing David Chisolm and Senior Manager, Commercial New Product Development Matt Schulz. Chisolm and Schulz talked about A. O. Smith’s push into smart technology, its relationship with distributors, emphasis on training and what’s next on the horizon for the manufacturer.
What’s new on the residential water-heater front?
DC: One of our interests is centered around heat-pump water-heating technologies. This continues to gain momentum to the point we are seeing rebates upward of $750 for installation of a heat-pump water heater from utilities to end users. Our efforts have been about educating our channel partners to the existence of these rebate programs so they can utilize that information in their selling efforts. One of the biggest barriers with this technology is upfront cost. An end user wakes up in the morning and they are not planning on spending money on a water heater, but they took a cold shower and now that’s No. 1 on the list. This type of purchase typically isn’t something you are thinking about today or the day before. You are looking for the quickest and most cost-effective way to get back into hot water, so in that environment trying to sell an alternate energy-efficient technology is a challenge. The rebate dollars are there to offset that upfront cost.
We’re training contractors on what that sales message looks like. If you walk into a home and see an electric water heater in a garage or basement, that’s a perfect application for a heat-pump water heater. You are saving the end user on energy costs by putting in a more energy-efficient water heater and the contractor also can make more margin — so it’s a win-win. It’s just a matter of getting broader adoption and broader awareness for these alternate technologies.
What is one key trend A. O. Smith is seeing on the commercial side?
MS: All products in our Cyclone line leave the factory with onboard WiFi and connectivity capability. Now the end user can get data on how the unit is performing, how it is applied and if there is troubleshooting needed. There is much more visibility into the historical performance, as well as very clear alerts into what is going on with the product today. With the connectivity push from a service and support standpoint we are sending support agents out to the jobsite with very clear information. They go there with the right part and come to the jobsite already aware of what they need to do.
DC: Connectivity also is helping us with product-design elements. We can take that intelligence on how products are performing in the field and use that in our product-development cycle. It allows us to be much more intelligent in the way we design products because we are getting much better visibility into end-use applications.
What are your customers asking for?
MS: They are looking to us for direction and help choosing the right technology and the right product. With more options out there, we’re getting more questions asking which water heater is right for a particular application.
DC: The game is getting more complex with condensing technologies, tankless, heat pump, solar and the list goes on. A consumer walks into a situation where they took a cold shower and now they have to make a selection quickly under duress. We are the experts. We are the technology innovation leaders in the space. We know all the complex attributes and we are able to take all that knowledge and simplify it for our customers who are in the market maybe a day every decade. Our selection tools are more oriented around questions customers can easily answer. How many showers a day do you take and how long do you take them? What is your fuel source? At the back end we have a large database of different attributes and they get adjusted based on how a customer answers these questions, and then we give them product choices based off that information.
MS: It’s the same dynamic on the commercial side. Our position is we want to put the right product in the right application and we can do that by getting a few questions answered around end-use application and that will help us narrow down the selection process.
What is A. O. Smith’s relationship like with the distribution channel?
DC: It’s as strong as it has ever been. We’re focused on generating demand and sending business to our channel partners. That helps drive loyalty. If your channel partner’s phone rings and you are helping them grow business, that solidifies relationships. A lot of our customers are seeing that growth and participating in that growth, and much of it is due to our partnership orientation that helps drive business.
It plays both residentially and commercially. We are doing a lot commercially with our specification efforts with new products. We have a big focus on national accounts and driving business with those customers. All of that business is driven through the wholesale-distribution channel, so our national accounts efforts are very much partnership-oriented. Distributors appreciate the demand we are bringing their way.
How important is educating distributors on your products?
DC: We see that with those distributors who want to differentiate themselves. We are seeing distributors going omni-channel and serving customers through a number of different venues. How a customer transacts, as well as the end-user’s and contractor’s needs are evolving. This translates into the evolving distributor. They are focused on these shifts. How do I serve my customers today and what role does mobile and e-commerce have in those transactions and how do I build platforms to support future growth?
MS: We met with some distributors recently and both had the same request. They want more digital content to use on their platforms. They wanted updated information and images because they are seeing more traffic on their digital platforms.
DC: It’s about getting closer to customers and what their needs are. Customers tell us e-commerce is a big deal and in order to be partnered with us and help support us they need that rich content to be best able to portray our products through their venues. Developing core competencies in that arena and having tighter connections with our customers to provide that also is a big focal point of ours.
A. O. Smith has an impressive training studio here in Ashland City. How much of a game-changer has it been?
DC: The more training we can offer as a service to the channel, the more effective we are at doing our jobs and the better our products are applied. Everybody wins in this scenario. We’ve put a lot of money and effort into the training studio. It is near and dear to our heart. Now we can generate content in our training studio where we can record it, stream it and conduct Q&As at the end. We have the ability to push a lot of content to our channel, and as a result we have seen exponential growth in the number of people we can effectively reach in a given year.
What’s next for A. O. Smith?
MS: Connectivity is the obvious path. We have a lot more products that we can put that technology on. We are unique and ahead of others in that our iCOMM technology is standard on our premium Cyclone product.
DC: Connectivity gives us a lot of future options with product design and establishing those tighter connections to our customers. We’re on a journey to get closer to our end-user customers based on very intelligent data.
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