Why do contractors buy one brand of PHC equipment and not another? It's either because they get 1) a better price, 2) a better product, or 3) a better service. So which is it?
Price Advantages Are Ephemeral
You can buy market share by dropping your price, but this can be quickly countered. Price shoppers are not loyal. They're your best friends this morning, but they will abandon you this afternoon for $10 a box.
Unless you represent the low cost producer who's committed to buying market penetration, you cannot compete on price alone. For that matter, even if you represent the low cost producer, how long will they hold that position? On the plumbing side of the business, we've already seen an invasion of Mexican water heaters and Far Eastern faucets. How long will it be before acceptable quality split system air conditioners from Mexico or mainland China show up in the domestic market?
Product Differences Are Slight
It's true that there is variation in product, but how significant is it? Be honest. Take the HVAC industry. Product manufacturers essentially bend sheet metal and assemble components made by others. How many gas valve manufacturers are there? How many companies still make small hermetic compressors? How many sources are there for refrigerant metering devices? It's true that manufacturers often make their own coils, but how many companies make the fin presses used to produce coils?
While there are differences in product, they're pretty darn slight. It's even tough to find meaningful points of differentiation through efficiency. Every time the government raises efficiency standards the differences lessen and the product becomes more of a commodity. The manufacturers in the HVAC industry are all pretty good and more equal than different. There's a lot more variation in toaster ovens than furnaces and air conditioners.
Service Does Make A Difference
We surveyed Service Roundtable members about why they pick one brand over another and more than two thirds (69%) cited local manufacturer or distributor support. In a world where everything in the industry is more and more equal, service spells the difference.
What is service? What do dealers mean when they say they want good service? Here's some of what they told us:
"They should be concerned with helping us grow our business and in so doing their market share increases in our area. They should be 'solution' people instead of 'buck-passers.'"
"Training and simple-to-use effective programs support the movement of product."
"Technical support - when we are stumped, help us fix the problem. Training at reasonable rates, and times that do not curtail normal operations, pricing that is in line with the product value, and top TM support. Give us what we need (i.e., meet our requests with new programs to meet our needs locally). Inside support. Co-op flexibility to do what is best for each dealer area, not as a group. And continue to give us products that meet our customers' needs."
"Reliable equipment, local stock, prompt delivery, good brand name, product training, marketing co-op programs, product literature, rebate information, prompt warranty credits; being treated by the distributor as a customer, not as a child or as a competitor."
It sounds like they want it all. But look closer. These aren't unreasonable requests. They need available product to sell, technical support when there's a problem, and help growing their businesses.
Breaking The Paradox
Your dealers want to move product as badly as you do. Between the lines of their requests is a plea for help. They need help selling your products. Give it to them and they will steer business your way, even if your box is the same as the next guy's and costs a little more.
This is a no-brainer, right? Sure. But if it is such a no-brainer, how come so many contractors are crying for help?
The answer lies in the term, "costs a little more." Your dealers will pay more for better service, but not that much more. And good support is expensive. That's why it's one of the first places manufacturers cut when price pressure intensifies.
The products are similar and you have no control over product in any case. So, if you can't afford to provide better support, you're back to playing the price game, which is a loser for everyone but today's low cost supplier.
Once, marketers would tell people that a buyer can get any two of the following three: price, quality, and service. And here's where we're stuck. It's a paradox. The market won't accept much of a price premium, the quality is relatively close, and that makes it hard to improve service, right?
There is a way to break the cycle and move more units through better service, but it requires thinking outside of the box. It requires using existing resources differently. It requires acting independently and in advance of manufacturer direction. It requires going outside for supplemental resources. It requires leveraging technology.
Distributors are used to going outside for training, using people like Charlie Greer, Tom McCart, Steve Howard, Tom Grandy, Maurice Maio, and a host of others. Now it's time for distributors to establish relationships with other industry service companies.
Tie Dealers In With Flat Rate
For example, a distributor can work with a flat rate publisher to integrate the distributor's entire catalog into their flat rate books, simplifying parts orders for the dealer and strengthening ties to the distributor. Once a dealer starts using a distributor's parts numbering system in his flat rate, it's a practical lock for re-ordering. That's worth subsidizing the cost of the books if that's what it takes to encourage adoption. But how can you afford to subsidize flat rate books when your margins are thin as it is?
Simple. First, by pushing the flat rate books for the publisher, you reduce his marketing costs. Ask the publisher to pass the savings along in the form of a discount for your dealers.
Second, get the publisher to slap a few manufacturer brands on the cover and appropriate pages, and then submit it for co-op. A lot of co-op goes unclaimed. What better way to use it than by leveraging it to better tie your dealers into your ordering system.
Third, make the reduced price books available to the dealers who give you the majority of their purchases. That alone should bump your sales.
Provide Dealers With Training On Demand
Flat rate is just one example. Making use of new contractor resources is another. HVACchannel.tv offers round the clock, training on demand for HVAC contractors at an affordable price. The company is willing to work with distributors and manufacturers to bring them existing and customized training.
HVACTV.com also offers online training available at any time from some of the most knowledgeable people in the industry. Talk to them and find out how you as a distributor can hook up for mutual benefit.
Contractors want training, but they can't always afford to take the time off to get it. This is especially true for smaller contractors who need it more than most.
Since the platform's already in place to allow you to offer training at your customers' convenience, why not take advantage of it? It doesn't need to cost more. Merely shift the training budget around.
From Order Takers To Business & Marketing Consultants
The Service Roundtable offers an example of how the use of outside resources can improve the effectiveness of existing personnel. It offers HVAC and plumbing contractors a weekly stream of sales, marketing, and business tools delivered over the Internet for a ridiculously low price. Promote it to your dealers and the Service Roundtable will give your territory managers complimentary subscriptions. Armed with material from the Service Roundtable, a TM can transition from an order taker to a business consultant.
The Service Roundtable even offers branding opportunities where your name appears on every page of the site when your dealers log in. If you want, the sales and marketing nature of much of the material qualifies it for co-op. Plus, the Service Roundtable has programs where it will even pay royalties to distributors for the dealers they bring to the table, making it an enhancement and a profit center.
It is possible today to offer the competitive prices and quality products your customer requires and the enhanced services they so desperately want. With some of the new technology and service offerings, you can help your dealers buy more by helping them sell more. You can move more boxes if you'll only step outside of the box.