The secret of this Midwestern HVACR distributor's success lies in the profitability of its customers' businesses.

Karl (left) and Andrew Larson of Gustave A. Larson Co.: Karl's father began the business in 1936 supplying refrigeration parts in Madison, Wis. The company now has more than 30,000 SKUs from nearly 400 vendors and $25 million of inventory.
Success means different things to different people. To some, success means a six-figure salary and a luxurious home. Others view success as having good health and a close-knit network of family and friends.

To HVACR distributor Gustave A. Larson Co., success is measured not by what the company accomplishes, but what its customers accomplish.

"Everything we do is guided by a basic philosophy - we can only be successful through the success of our customers," says Gregg Turley, vice president/sales and marketing. "It's only through their success that we will grow and prosper."

Helping Larson's customers become successful involves not only customer training but also increasing the efficiency of the firm's own sales force. The firm's sales staff is responsible for consulting with its customers and helping them manage and expand their businesses. The "sales consultants" educate customers on how easy it is to do business with the company. They also educate them on ways to improve their internal processes and identify ways they can change their businesses to achieve their goals.

"Our mission statement is to be the premier customer-focused wholesale distributor in the HVACR industry," explains Andrew Larson, president of the Pewaukee, Wis.-based wholesaler. "We expect to achieve this objective through teamwork with our customers and our suppliers. Our ultimate objective is to exceed expectations of both groups by offering value-added services and quality products."

And the Gustave A. Larson Co. puts its money where its mouth is. Gary Katz, president and CEO of Total Comfort, located in Plymouth, Minn., says Larson Co. is more than willing to discuss any concerns or issues the contractor might have regarding their alliance.

"Instead of the traditional supplier/customer relationship, we are working to develop a closer relationship with each other," he says. "Instead of beating each other up over price, we discuss how Larson can give me the best service and still be cost-effective."

Katz's staff uses the training center at Larson's Plymouth branch every week. "It's definitely a value-added benefit for us," he says. "Any time we need training, either sales or technical, Larson provides it for us. We can even get customized training if we need it."

He adds that, because his firm doesn't have a conference area to conduct meetings, he sometimes hosts meetings at the Larson facility that have nothing to do with training. "Over time it has saved me thousands of dollars as I don't have to rent conference rooms in a hotel."

Greg Smith, president and owner of the Brookfield, Wis.,contracting firm Quality Heating & Sheet Metal, also enjoys a close relationship with Gustave A. Larson. "If we have a real nasty problem on the jobsite, someone from Larson will come to the site and help us work it out. It's a tremendous time saver for us, which in turn saves us money."

"You can buy product from anywhere," Katz adds, "but at Larson you get much more than product!"

Other customer-focused programs include:

  • Market leaders, or project managers, are segmented by customer market and focused on customer needs. They make sure that the company meets the needs of their customers.

  • Account representatives work with outside sales staff, ensuring that each customer has an inside relationship manager he can reach, even when his sales rep is on the road.

  • Dealer development leaders help Larson's HVAC dealers expand their businesses. They travel with a customer's sales reps and help them close more sales. They also call on builders to help customers get that business.

  • "On-the-spot" warranty credits allow Gustave Larson's customers to receive their money at the time of return, not 60 to 90 days later. This helps contractors' cash flow and profitability.

    Larson opened drive-through branches in Fargo, N.D., in 1995 and in Madison, Wis., in 1996.

    Building a better customer

    These are just a few examples of Gustave Larson's PACE Quality Process - Performance Above Customer Expectations. Responding and adapting to customers' needs is a key company goal; the wholesaler wants to be a leader in customer satisfaction.

    To achieve this goal, Larson is helping its contractor-customers be more efficient and more profitable.

    Most companies have emphasized streamlining the distributor-to-manufacturer relationship. "What we're really working on is the distributor-to-contractor connection," says Scott Larson, treasurer and CFO. "We want to help facilitate that part of the channel because the costs involved are very prohibitive. For example, at the contractor level, most can't afford to make heavy investments in technology. We can help them in this area."

    To help its customers clear the technology hurdle, Larson Co. developed a program that used its size and power to allow its customers to get a discounted price for the computer equipment they needed, thereby saving them money and increasing their efficiency.

    Beefing up the firm's Web site is another customer-focused initiative for this year. Frank Mirocha, vice president/operations, says that by the end of the year, will be a full e-commerce site, including online order entry, access to customer service, stock status, account balances and invoice display.

    Two years ago, the company began a program for its HVAC dealers called STOP - Strategies To Optimize Profits. Larson brings in an outside consultant to conduct the 10-month program, which is geared to helping customers be more professional and, in turn, be more successful in business.

    "Many of our customers grew up carrying a tool box and were not formally educated on how to run a business," Andrew Larson says. "For example, this program teaches them how to read and understand a financial statement, how to job cost, how to run a service department, how to properly market their companies and how to sell value in the marketplace."

    The open communication between Gustave A. Larson and its customers fosters sharing business philosophies, too. When Katz realized he had a major inventory-management problem, he asked Larson for advice.

    "The company looked at our records and our usage; we had quite a bit of overstock," he notes. "Larson's staff taught us how to implement just-in-time ordering and how to set minimum and maximum inventory levels."

    Smith's problem was getting the builders he worked with to sell upgraded HVAC systems to homeowners.

    "When building a house, a builder will send his clients to a showroom to pick out some nice faucets or sinks or showers," he explains. "But HVAC equipment is in the basement; no one sees it, so builders don't give homeowners a choice in the equipment. They put in what is least expensive."

    He adds that less than 5% of builders talk to homeowners about their HVAC systems. Most homeowners don't realize the types of high-end equipment available to them when building their homes; they usually find out during a remodel project.

    Larson brought in Danny Carbaugh, a building and construction consultant from Florida, to work with Smith's company in establishing a builder upgrade program.

    Builders will see how they can make more money by upgrading HVAC equipment, such as suggesting total comfort systems. Smith says his company is in the final stages of project planning. "With this program, Gustave Larson is helping us grow our new-construction business," he says.

    The Gustave A. Larson management team (from left): Scott Larson, Gregg Turley, Chairman Karl Larson, Andrew Larson, Sue Sinclair, Corporate Secretary Madeleine Larson and Frank Mirocha.

    Manufacturers at the PEAQ

    Despite all the emphasis on distributor-customer relationships, Gustave A. Larson hasn't forgotten its manufacturer partners. In fact, the company is working harder than ever to secure a good working relationship with its vendors.

    Each spring, the wholesaler presents its PEAQ Awards to its top five suppliers. The Partners in Excellence and Quality program rates the company's top 50 suppliers on nine different criteria - merchandise quality, pricing, warranty and return policy, payment terms policy, percentage of orders shipped complete, percentage of orders shipped within expected lead time, service on emergency orders, sales support and electronic commerce - on a scale from one to 10.

    The e-commerce category also evaluates the percentage of products bar-coded, the type of bar code, electronic data interchange capability, the availability of electronic catalogs and electronic price sheets, and whether the company has taken steps toward a vendor-managed inventory or supplier-assisted inventory replenishment program. In addition, Larson Co. weighs the complexity of each company's products.

    The company recently announced the 1999 PEAQ Award winners: DuPont Fluoroproducts, Mitsubishi Electronics America, Research Products Corp., Sporlan Valve Co. and The Trane Co.

    Making it easy for manufacturers to do business with Gustave A. Larson is one of the reasons the firm began using EDI in 1991 with Trane. Honeywell, Johnson Controls, Sporlan, Copeland and DuPont followed.

    "Through our supplier-evaluation program, we found some other EDI-capable manufacturers that we didn't know about - Research Products, Superstrut and Thomas & Betts, to name a few," notes Sue Sinclair, vice president/inventory management.

    The company has since established EDI relationships with all of these vendors.

    "We cannot overemphasize the importance of EDI for the future," Andrew Larson says. "It's not going to be through value-added networks, or VANs, but through the Internet. It's critically important because EDI capability allows for integration between systems and is the first step in the supplier-assisted inventory replenishment process."

    Gustave A. Larson has an SAIR relationship with Johnson Controls in Milwaukee. Mirocha says that testing has been successfully completed and the two companies are establishing ideal stocking levels as the final element before going live.

    He adds that the company is pursuing similar relationships with Honeywell, DuPont and Research Products.

    "Our goal is to find ways to make sure that not only are we a player in the industry, but also that our industry continues to remain viable in the future," Andrew Larson says.

    "That is going to occur through supply-chain optimization from manufacturer all the way down the channel to the ultimate end-user customer."