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Buggy-Whip Marketing 101:The R-22 Phaseout

A buggy whip is a horsewhip that buggy drivers once used. When cars replaced buggies, the buggy whip became a symbol for anything that is hopelessly outmoded. Some buggy whip manufacturers went out of business because the industry of transportation went through a major change with the invention of the car. Although there wasn't a regulated “phaseout” of the buggy whip as there is with R-22, there was certainly a period when buggy whip distributors had to decide how to replace the lost sales and phase out their buggy whip inventory. Maybe the distributors decided to sell auto replacement parts, which required a greater level of understanding of technology.

In the next few years, distributors and manufacturers will have choices to make regarding phasing out of the current inventory and production of R-22 dependent products. They can decide to participate in the transition in the refrigerant market, or they can decide to change their business strategy and get out of the refrigerant product business. For those who stay in the business, there will need to be an adjustment in business strategy over the next few months and years in order to deal with product specifications that involve equipment using R-22 versus the newer replacement refrigerants.

A distributor with a proactive marketing program can help influence specifications by providing education to specifying engineers, contractors and facility owners and managers about the facts of the R-22 phaseout.

The Phaseout Facts

Jan. 1, 2010: There will be a ban on production and import of HCFC-22 and HCFC-142b except for ongoing servicing needs in equipment manufactured before Jan. 1, 2010. After 2010, chemical manufacturers may still produce R-22 to service existing equipment but not for use in new equipment. As a result, heating, ventilation and air-conditioning equipment manufacturers will only be able to use pre-existing supplies of R-22 to produce new air conditioners and heat pumps. These existing supplies would include R-22 recovered from existing equipment and recycled.

Jan. 1, 2015: Ban on introduction into interstate commerce or use of HCFCs except where the HCFCs are used as a refrigerant in appliances manufactured before Jan. 1, 2020.

Ban on production or import of HCFCs except where the HCFCs are used as a refrigerant in appliances manufactured prior to Jan. 1, 2020.

Jan. 1, 2020: Ban on remaining production and import of HCFC-22 and HCFC-142b. Use of existing refrigerant, including refrigerant that has been recovered and recycled, will be allowed beyond 2020 to service existing systems, but chemical manufacturers will no longer be able to produce R-22 to service existing air conditioners and heat pumps.

Jan. 1, 2030: Ban on remaining production and import of all other HCFCs.

Product Life Expectancy — Do the Math

One decision that a customer of refrigerant-using products needs to consider is the typical life expectancy of a product and the total cost of owning that equipment during that time period when experts predict the cost of R-22 will rise significantly as the supply diminishes. It may make more sense to buy products that use the newer, yet less-efficient, refrigerant, which may be higher in initial cost yet have a lower total cost of ownership. Below are some industry-standard life expectancy estimates of refrigerant-using products:

  • Freezers, compact: 12 Years (2009 + 12 = 2021 replacement year)
  • Freezers, standard: 16 Years (2009 + 16 = 2025 replacement year)
  • Refrigerators, compact: 14 Years (2009 + 14 = 2023 replacement year)
  • Refrigerators, standard: 17 Years (2009 + 17 = 2026 replacement year)
  • Central air-conditioning unit: 15 Years (2009 + 15 = 2024 replacement year)
  • Window air-conditioning unit: 10 Years (2009 + 10 = 2019 replacement year)
  • Air conditioner compressor: 15 Years (2009 + 15 = 2024 replacement year)
  • Rooftop air conditioners: 15 years (2009 + 15 = 2024 replacement year)

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Theoretically, a product purchased in 2009 will fall within a life expectancy to have R-22 refrigerant available for service for the life of the product. However, the simple supply-and- demand economics will come into play, and the probability is high that the cost of R-22 will continue to rise. Exact costs are unknown, so there is an added risk of dealing with this added expense in the maintenance budget each year. This is the life-cycle cost decision risk that you need to make.

The Cost of Ownership

Doing a full life-cycle cost on a piece of equipment involves a lot of assumptions, starting with the quality of the product, the initial cost of the product and the commitment of the owner to provide the appropriate maintenance throughout the life of the product. “Good” service is the key to extending the life of any product. If you do not maintain a product properly, it will not provide the life expectancy that consumers (and distributors) expect.

One EPA website addresses the cost of R-22 over the phaseout period, noting: “While consumers should be aware that prices of R-22 may increase as supplies dwindle over the next 20 or 30 years, EPA believes that consumers are not likely to be subjected to major price increases within a short time period. Although there is no guarantee that service costs of R-22 will not increase, the lengthy phaseout period for R-22 means that market conditions should not be greatly affected by the volatility.” Whether or not this prediction is true will depend on ultimate supply-and-demand economics and possibly on the greed factor of opportunity pricing by suppliers of R-22 when the pricing works its way down to the customer price point.

Marketing and Selling Considerations

A good litmus test of how you may want to approach your marketing and selling strategy during the next few months is to simply be honest with yourself and ask what you would do if you were making the purchasing decision if you were in your customer's shoes. In other words, consider the “Golden Rule” ethic of reciprocity, which this statement summarizes: “And as ye would that men should do to you, do ye also to them likewise.” This might be a good customer service motto. This is also a humble marketing and sales approach that builds customer trust and customer loyalty, which is the sustainable foundation of every successful organization.

Doing the Right Thing for Your Customer

What is the responsible marketing message to customers on which products to purchase over the next few months? Customers need to consider several factors such as energy efficiency, performance, reliability, cost and the ozone-friendly options that are available. After 2020, the servicing of R-22-using products will rely on recycled or stockpiled refrigerants. For the next 10 to 15 years, R-22 should continue to be available for all systems that require it for servicing. Thus if a life expectancy of a product is within 10 to 15 years, then the choice to purchase a new R-22 product in 2009 may still be a good choice, if the system can be maintained and not require a lot of replacement refrigerant.

“The Customer Is Always Right” is a cliché suggesting that to sell something, you simply need to give the customer what they want and not worry about the consequences they may face. In today's world of a stressed economy, this easy-selling approach is tempting. It takes work to educate a customer, and it adds the risk of losing the sale if the customer realizes that what they thought they wanted is really not the most appropriate decision.

“Value added” selling is what you need in the marketing and selling of products that use refrigeration during the next few months. An educated customer can be your best customer, once they realize the risk of taking the lowest initial cost approach in purchasing products over the next few months that use refrigerants.

Conclusion

Distributors have a choice to make. Do you continue to proactively market R-22 products and take the risk of being perceived as a supplier who is promoting outdated technologies like a buggy whip, or do you proactively promote the newer refrigerant-using products to develop the image of being a supplier who is in touch with the changing times? Distributors also have the choice of informing building owners about the R-22 issues when they see engineers who have specified R-22 products and may not have developed specifications in a manner that gives the contractor and facility owner the choice to evaluate the life-cycle cost of equipment ownership through the bidding process.


Steven G. Liescheidt, PE, CCS, CCPR, is the owner of SPPECSS Consulting, LLC, St. Louis, Mo. His career spans more than 30 years in the HVACR industry. Contact him at 314/706-2615 or [email protected]. Read more about his business and bio at www.sppecss.com.

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