In some ways we create our own problems. This certainly applies to the frustration most salespeople have with potential customers who “just want the low price.” We fall into this sticky declaration by the customer and, over time, start anticipating it, eventually believing it, then acting as if it were true for everyone.
It isn’t. Even customers who generally buy the lowest price don’t always make that choice. And some just want what they want — and happily pay whatever is asked.
One of the most compelling, value-adding stories we have when selling high-efficiency HVAC systems is the excellent financial return-on-investment (ROI) we have to offer. As you will see, there will nearly always be a ROI that exceeds other investments such as savings accounts, certificate of deposits, and certainly the recent stock market returns — at very low risk.
Selling With ROI
So what is return-on-investment? Simply put it’s the money returned by an investment, divided by the investment amount. For example, if you invest $100 and receive $3 interest, then the interest (return) divided by the investment is $3 ÷ $100, or 3%. We call this a 3% return on investment, or 3% ROI.
In HVAC terms, the investment is the total amount we are asking a customer to spend. We typically call this the “price” or “cost.” I suggest we start calling this the “total investment.”
The interest or return is represented by the estimated annual
energy savings.*
For instance, you might propose a system, including a high-efficiency variable speed furnace, high-efficiency air conditioner, high-efficiency air filter, and programmable thermostat for a total investment of $7,000. Depending on the weather conditions, utility rates and customer usage, the annual gas and electric energy savings might be $350. The ROI would be $350 ÷ $7,000 = 5%. Pretty darn good!
It gets even better.
If you invested this same $7,000 in a passbook savings account, you might get 2% to 3%, or a CD might get 3% to 5%. But these returns are taxable! That means that the net return-on-investment will be the initial ROI, less the customer’s tax rate. This can be calculated by multiplying the ROI percentage by (1- tax rate). For example, a 3% taxable ROI for a customer with a 28% tax rate would produce an after-tax net ROI of 3% X (1-.28) = 2.16%. Yuk!
But when your customer invests $7,000 in a high-efficiency system and gets a $350 annual energy savings, those energy savings are NOT taxable — so the 5% ROI is all net to the customer!
Will ROI be important to all your customers? Probably not. Will ROI be important to some customers? Absolutely. How do you know which customers will be interested? Ask them: “Would you be interested in knowing how the energy savings from a high-efficiency system will produce a better return on investment than almost anything can put your money into today?”
Closing With ROI
Now here’s my suggested Selling With T.R.U.S.T. ® sales strategy for ROI. Make sure you first show customers how they’ll get the other fantastic benefits they asked for, including more comfort, quieter operation, more convenience, the peace
of mind from longer equipment life, and fewer problems. Then, when you need it, show them how the return on investment is better than almost any investment they
can make today. In other words, use the ROI story as a closing tool.
ROI vs. Payback
Some of us are used to telling this story with the “payback” comparison. Is that as effective an illustration as ROI? I don’t think so.
Most consumers don’t think about or are exposed to payback information everyday, while, on the other hand, we’re pretty highly exposed to ROI information from banks, investment companies, and the news. ROI is a common consumer concept. Let’s think like our customers think and use ROI.
Objection Handling With ROI
Can ROI be an effective objection handling tool? Absolutely! Let’s say the customer says the $7,000 system might be nice, but they thought they could get by with only spending $5,000. On top of that, the other two “bids” were around $4,000 for good, basic efficiency systems.
It’s time to again make your points about the incremental benefits of the high efficiency system: more comfort, quieter, more peace of mind from better equipment — and an overall 5% ROI. For some customers that will be all it takes to convince them.
Upselling SEER With ROI
Should you try to upsell SEER with ROI? You can run the numbers, but in most areas of the country the incremental savings are small. Besides, upselling to high-efficiency air conditioning is better justified with other benefits including more quiet, more peace of mind from better warranties, and the other benefits unique to each manufacturer.
Selling Variable Speed With ROI
One of my favorite HVAC features is variable speed blower motor operation in furnaces and air handlers. It may have one of the best ROI stories we can tell. If your customers have been running their blowers 24/7/365 for comfort, quiet, or the improved health benefits of having the high-efficiency filters constantly working, then the savings can be $3 to up to $400 per year.*
To calculate the ROI, divide the return/estimated energy savings by the incremental investment for variable speed.
For example, the $300 (estimated annual variable speed electrical savings) ÷ $1,000 (incremental investment for the variable speed furnace ÷ air handler = 30% tax-free ROI.
It doesn’t get any better than that.
So if you have a customer running their old system blower constantly for any reason, selling them a variable speed system should be a slam-dunk.
What is Total Comfort?
According to Contracting Business research, What Consumers Want From Their Comfort Systems, nearly two-thirds of all homeowners can identify specific improvements needed in their home comfort systems. Many of these improvements can be addressed through common HVAC accessories and contractor services. But, before consumers can buy, they have to know what’s available. Many contractors are leaving money on the table by simply not asking lifestyle questions.
In our August 2002 issue, we presented a special pull-out poster, Guide to Total Comfort, which was developed to help you sell quality comfort systems. You’ll find a list of qualifying lifestyle questions entitled, "Things to Think About." Ask your customers these questions, so you can deliver customer comfort and put more money in your pocket.
Following is a checklist of 12 actions to take when calling on customers. Cut them out and practice them before you make your next sales call.
- During my presentation of The Guide to Total Comfort, I shall record their responses to the "Things to Think About" lifestyle qualifying questions
- I shall conduct Manual J and D calculations, then show them to my customer and explain their importance.
- I shall present the benefits of properly designed, sealed, and balanced duct systems combined with two-stage, variable speed high-efficiency furnaces, air conditioners, and heat pumps for maintaining the ultimate in comfort, quietness, and low utility bills.
- I shall match the indoor evaporator coil with the right outdoor unit to provide optimum comfort, efficiency, and performance.
- I shall recommend comfort controls and zoning. Zoning allows customers to save up to 20% on utility bills while meeting the room-to-room temperature and humidity requirements of each family member.
- I shall propose fresh air and positive pressure options when needed: HRV/ERV and whole house HEPA filtration and dehumidification systems.
- I shall offer humidification to replenish the moisture lost in homes of colder climates, reducing dry throats and skin, cracking woodwork, and even static electricity.
- I shall commission the system by measuring and balancing airflow and testing the refrigerant charge. Measure for customer pleasure.
- I shall provide customers with a maintenance agreement to maintain the peak performance and comfort of their homes. Explaining the benefits of maintaining their comfort system is just as important as changing the oil, lubing the chassis, and replacing the dirty air filter in their car.
- I shall impress upon them our reputation and professionalism because our company is backed by NATE-certified installers and technicians.
- I shall visualize my close with the Total Comfort House.
- I shall have anything I want if I help my customer to get what they want first.
Tom Piscitelli is president of Applied Learning Associates, Inc., an HVAC sales training and consulting company (www.alainc.com), and partner of Chameleon Management Solutions, Inc., a Web-based provider of HVAC contractor business management services. Visit www.chameleonmanagement.net, or call 425/985-4534, or e-mail [email protected].