Al Zelczer saw the zoning business in the mid-1980s as a largely untapped and underappreciated segment of the HVACR market. A retired electrical contractor, Zelczer concluded that no manufacturer recognized the zoning needs in retrofit or replacement applications, and there was little, if any, standardization in duct design, equipment preferences and workmanship standards. He built a low-pressure air version of the technology of pneumatic dampers, found in skyscrapers for the residential market. What guided his thinking was a system that, above all, would be easy for contractors to use. It required flexibility so that installers could use it in existing duct systems. Contractors needed to be able to interface with zoning at a level well beyond the electromechanical products that were in the market.
He formed Arzel® Zoning Technology Inc. and developed new and more sophisticated control solutions. In the 1990s, Zelczer patented the Ezy-Slide damper, which allowed contractors to easily install a damper without disassembling the duct system by cutting a simple triangle in the existing duct. But changing the mind-set of an industry, particularly those within HVACR, can be difficult, even if you come up with a better way of doing business.
Their early efforts to bring Arzel products through the wholesale distribution channel were disappointing. “The industry was not focused on zoning,” says Dennis Laughlin, president of Arzel. “The only time a better mousetrap is embraced by the market is when it is widely understood there is a rodent problem. Arzel was a different solution, and they were solely focused on zoning, which was not a big market for most distributors at the time. In short, we just were not ready to be at the dance.”
They had won several contractor converts however. One was David Squires, president of Vincent's Heating & Plumbing in Port Huron, MI. Squires belonged to the early Best Practices Contractor Success Group, out of St. Louis. During one of this group's quarterly project presentations, the Arzel secret received exposure. Quickly, the regional status of Arzel had expanded.
Zelczer saw the success of this approach and determined that he needed help in developing a national strategy for the company. Through his legal counsel, he got together with Dennis Laughlin. Laughlin was an investment banker in Cleveland who also had owned manufacturing companies. Laughlin's experience in growing companies and utilizing private-label agreements was the right background to help build Arzel.
They spent the next few years developing infrastructure to handle a national company. The sales effort was one of utilizing additional “best practices” groups along with a telephone-based sales effort to land contractors one at a time. Through the years, Arzel gained momentum and began to also develop new products that focused on the retrofit market.
But how far could it take them? As successful as Arzel had become, the company knew that the contractor-direct channel was not a formula that could keep pace with the pending demand for retrofit comfort technology. “Depending on who you listen to, there are somewhere between 75,000 and 100,000 contractors, and we were still just a drop in the bucket to what we could become,” Laughlin says. “Every one of those contractors has a buying relationship with a distributor. I knew if we could find a way to reach the right distributors and enlist their help in training responsibilities, then this would be the model for us to grow as a manufacturing company.”
When Arzel began, it did not have the infrastructure to take on wholesale distribution — the training, marketing and logistics associated with regionalized distribution are tremendous for a small manufacturer. By 2005, however, Arzel was a different company.
They were established and counted more than 4,000 contractors as customers. The time was right to again try the wholesaler distribution channel. Over the years, a few distributors had been in touch with Arzel. Arzel chose one of those progressive companies to establish its first wholesaler relationship: Empire Gas & Electric Equipment Co. in Denver. Soon they added Behler-Young in Brighton, MI, to the early mix. Laughlin says it was an opportunity for Arzel to learn how to do distribution the right way with these two well-regarded distributors. The success that Arzel and the distributors enjoyed with its partnership encouraged Laughlin and his team to seek out other successful, progressive wholesalers in the industry. “I must also say that those operations set a pretty high bar for the distributors we subsequently brought on board,” Laughlin says. “Arzel owes Buzz Sweat at Empire and Doug Young at Behler-Young a great deal of thanks for helping us learn how to approach the wholesaler community,” Laughlin says.
Another key to securing a foothold with wholesalers has been Arzel's association with HARDI. “Our involvement with HARDI has been a tremendous asset,” Laughlin says. Becoming part of the organization was not easy, he acknowledges, because HARDI identified them as a contractor-direct manufacturer. But Arzel persisted, and they received strong support from former HARDI President Doug Young, president of Grand Rapids, MI-based Behler-Young Co., who praised Arzel and its staff as a manufacturer that would do right by its wholesaler distributors. Since then, Tom Delp, vice president of Sales, has been very active in the association at both the national and regional levels. “Being with HARDI has given us great insight into what we're trying to accomplish as a company,” Laughlin says.
Arzel's wholesaler distributor base is building, albeit slowly. That is by design, Laughlin says. Arzel takes a cautious approach to the wholesalers that it will do business with. After all, Arzel has developed close ties with its contractor customers. The manufacturer wants to ensure that the wholesalers who may work with those contractors provide the same level of service to them. The company's goal is to become a manufacturer that goes to market through the wholesaler distribution channel.
“We really want the people that we bring on as distributors to further serve our customer base,” says Laughlin. “It is not easy, however, to fill in all the blanks in the country. An additional obstacle is communications. If we've been working with our customers for the past five to 10 years and now we say, ‘Go buy from this distributor,’ I have to make certain that the distributor is capable and is stocked properly. Ultimately, my reputation as a manufacturer is to provide quality products for contractors. We have an excellent reputation in the industry, and those relationships take time to transfer. “
In much the same way that Arzel has always targeted progressive contractors, the manufacturer now looks for those same qualities in potential wholesaler distributors. “Our best distributors have some kind of structure to support our products,” Delp says. This includes, he says, “a dedicated sales manager and sales team and, preferably, dedicated tech support. That allows us to train them on the aspects of zoning and the zoning market.”
In fact, Laughlin points out, a commitment to training and education by the distributor are among the qualities that Arzel considers key in establishing a relationship. After all, distributors are extensions of the company's customer service. Before a distributor begins to sell, Arzel trains the employees on its products. A distributor is likely to have at least one zoning line already on the shelf and most have more than one. These lines, however, utilize electromechanical dampers and are very similar in their performance and application. Arzel represents a new solution. “We need to introduce distributors to the vast new market that we serve in the retrofit business,” Laughlin says. “Our zoning techniques are a little different because of the varied applications which exist in the field. We have thousands of homes which are success stories that traditional zoning technologies would not have accommodated. For distributors who are replacement- oriented, a zoning line is now available which matches their customer base.”
Arzel employs in its Cleveland headquarters five full-time salespeople who work directly with customers and three full-time tech support staff who provide design and zoning strategy consultation. Arzel also manufactures its products in Cleveland. Indeed, it manufacturers all of its products in the United States.
As Arzel grows its distribution, it now utilizes manufacturer's reps, who receive the same Arzel training as its distributors and contractors. Delp says the reps are enhancing the communication between contractors and distributors and Arzel. “The communication goes both ways,” Laughlin says. Last year, Arzel participated in 21 trade show events around the country. As Arzel receives sales leads, it channels them back through its distributors. “We're bringing back contractor leads to our distributors and reps,” Laughlin says. “Working as a team, we all work to bring them in as customers.”
Laughlin points out that the replacement business is much larger and accounts for more customer relationships than the new construction market. “We are the only zoning line designed with the retrofit market in mind,” he adds. “We have been preaching about retrofit zoning before anyone recognized the term. I think we invented the term.”
As Arzel became more and more popular among contractors, its product line expanded. Today, Laughlin says Arzel offers the most complete line of retrofit zoning products in the industry. For the past three years, Arzel has averaged a new product every 72 days. “Our pipeline is full, and we currently have 11 new projects in our engineering group under development,” he says.
Arzel's EzySlide Damper remains the mainstay of its product line. Laughlin points to several other product lines that are popular among contractors. Its latest is Zonocity, a complete zoning solution for small-duct, high-velocity systems. This line had been in the works for three years, Laughlin says, and it is a complete zoning solution for these installments and applications. Arzel's HeatPumPro, which provides better control strategies for heat pumps, won several industry awards in 2006.
Contractors generate concepts for new products that use Arzel's technology every day, says Mark Votaw, vice president of Zoning Products. Because Arzel handles its own tech support, they know instantly where and when there are problems. “Our guy is the contractor in the field who is trying to make something happen,” Votaw says. Even with the move to distribution, Laughlin and Votaw say this important feedback mechanism with the contractor will continue. “We will continue to have our toll-free 800 tech support number, and most of the distributors we are working with have dedicated tech support,” Laughlin says.
Arzel's engineers are continuously working to make its products easier for contractors to install and more efficient for the homeowners. Laughlin points out that all new Arzel products must meet founder Al Zelczer's test: Is it easy for the contractor to install? That was the basis on which the company built itself, and it's what continues to drive the company today.
Even as Arzel moves to the wholesale distribution channel, it remains actively involved in contractor education by presenting at regional and national industry meetings, such as ACCA, RSES and AHR. In 2005, Arzel established its own Comfort College program to educate contractors and distributors on the basics of zoning and the opportunities to sell zoning. Arzel holds the two-day program at its Cleveland headquarters and its West Coast distribution center in Pasadena, CA. It requires distributors to send its key territory managers to Comfort College, according to Laughlin.
Arzel is spreading its zoning message. It recently started a joint training effort with R.W. Beckett, offering zoning training as part of its curriculum on burners. In 2005, the manufacturer conducted several trainings with Unico so that distributors could then take the message of small-duct, high-velocity systems to its customers. Laughlin says several other training partnerships are in development. “It makes sense to train on multiple topics with partners,” he says. “Making connections for customers is a proven strategy.”
Arzel is even extending these connections to future HVACR technicians. The company works with several technical schools and colleges, providing instructors with zoning curriculum and equipment. With a shortage of qualified technicians in the field, Arzel wants to educate students about zoning early in the learning process. Laughlin says the old guard within the HVACR industry continues to push dual systems and all of the extra ductwork and equipment that go with it. “Frankly, that's 1960s technology,” Laughlin says. “The biggest problem we have in the zoning business isn't getting people to see its value, it's getting contractors to recognize its existence and to stop fearing the change to new technology.”
As the industry continues to catch on to zoning, Laughlin says, Arzel continues to learn and expand its distribution business. Last August, the company opened its distribution center in Pasadena to serve the needs of its West Coast distributors so they would not have to wait five days for parts and equipment. “It's caught on nicely, and it's certainly an advantage for those distributors,” Laughlin says.
While Arzel is still a young company, it has certainly come of age in recent years. Laughlin points to 2,300 percent growth over the past five years. But Laughlin is taking steps to ensure that growth doesn't interfere with performance. “I do not want to outstrip our capability to support our new distribution partners,” he says. “Our goal is to be in distribution totally, but no deadline is set. When this occurs is driven by our mission to deliver only the best in product and service to contractors and consumers.”
Michael Maynard is a business writer based in Providence, RI. He writes frequently on HVACR, construction and architecture issues. Contact him at [email protected].
|President||Dennis D. Laughlin|
|Executives||Mark Votaw, vice president, Zoning Products |
Thomas Delp, vice president, Sales
Leonard Roth, vice president, Operations
Joseph Ramunni, vice president, Technical Services
|Headquarters||4801 Commerce Parkway |
Cleveland, OH 44128
|Operations||West Coast Distribution & Training Center |
1260 Lincoln Ave.
Pasadena, CA 91103
|Major Product Lines||AirBoss® Zone Control Panels |
HeatPumPro™ Control Panels
MPS™ Control Panels
Zonocity™ Small-Duct High-Velocity Zoning
AloneZone™ Zone Panels
ZVI™ Hydronic Zone Valve Interface Controls
EzySlide® Insertable Dampers
RegiDamper® Boot-Mounted Dampers
ModuPass® Modulating Bypass
Definition & Example: Arzel formed a cross-discipline Product Evaluation Action Team (PEAT) in 2005. The team members come from sales, engineering production and tech support. They meet monthly to evaluate field comments on products and new comfort challenges and evaluate new solutions. This group has developed and refined many of our damper solutions.
Significance: We are in contact with contractors in the field and distributor support people all the time. We needed a clearinghouse to evaluate ideas. By pulling from all disciplines, we take an holistic approach to new products versus a strict engineering initiative.
Benefits: Our products continue to reflect our customers' needs. We have effectively shortened the development time frame for most of our new items. There is also a great sense of team accomplishment. Our most recent patent application reflected nine inventors, all from our PEAT committee and representative of all levels of our operation. This has brought a total commitment to quality solutions which respond to real HVACR challenges.
Procedure: The group meets and acts in a formal meeting setting. We have an internal website where all members post updates and note progress on our projects. Currently we have 17 items on our PEAT agenda.
People Involved: Selected interdiscipline representatives from every department in the company.
Timing: We hold regular monthly meetings which can vary in length depending upon agenda length and discussion. It is a commitment of time to maintain this initiative.
Cost: There is a cost to the meeting time, but overall the savings we have achieved by shortening the product development cycle are significant.
Contact: Dennis Laughlin at 216/831-6068 or [email protected].