by John Saucier
In a marketplace that has been maturing for more than 50 years, the concept of brand loyalty has taken on new meaning for HVACR contractors. In fact, the factors that drive your concept of brand loyalty will vary depending on your niche in the industry.
Small residential contractors tend to be loyal to distributors. By default, the contractor’s brand loyalty will be to whatever brand is carried by his favorite distributor. That loyalty grows toward the distributor who provides the support, knowledge, and assistance necessary for the small contractor to operate profitably.
These relationships are frequently personal and long-term. However, there is usually an imbalance of power in these relationships, as the contractor needs the distributor more than the distributor needs the contractor.
Larger residential contractors — perhaps those who have developed a solid understanding of marketing and business operations — want essentially the same rewards from their relationship with a distributor, but the balance of power has shifted in his favor. Larger contractors may get better prices from a distributor, and control a larger part of the distributor’s market share.
By controlling that market share, the contractor ensures that while his sales may be low margin to the distributor, the contractor stays in control because he is a high volume, “low-maintenance” customer to the distributor.
As contractors grow their businesses, brand loyalty means less and less. It will be driven by price, consistent availability of equipment, and, to some degree, features and quality of components.
In other words, as contractors grow larger, the closer manufactured units come to commodity status.
At ACCA’s 2003 Conference, during a roundtable discussion between manufacturer CEOs, one senior manufacturing executive pointed out that not long ago there were 11 manufacturers producing about 20 brands. Today, there are around 7 producing more than 40 brands.
The question is: How could 40 brands be so unique that they inspire brand loyalty?
They probably aren’t. If manufacturers want to promote brand loyalty, they should focus on building quality products and promoting loyalty among their contractors to their distributors, not their products.
There are plenty of products out there. Contractors, large and small, will for the most part do business with, and be fairly loyal to, the distributors that treat them fairly and with respect, and that offer a total value package of services.
Commercial contractors are a different animal. I know, because I am one. On the commercial side, brand loyalty is both short-term and fluid. People and policies change very frequently within the manufacturing community, and the contractors’ loyalties shift with those policies.
On this side of the business, manufacturers often compete directly with contractors for both service and installation work.
And no matter what any sales rep might tell you, large chillers are viewed as commodities by commercial customers. These are bid jobs and contractors’ loyalties remain to the customer. We may offer our “favorite” brand at first, even if it’s a higher price — but, in the end, money talks.
In most cases, word of these bid jobs hit the street so fast that the customer is bombarded with calls from both manufacturers and contractors, each presenting their own units in the most favorable way. It’s no wonder customers don’t see any difference between the different brand offerings.
The bottom line is that most commercial contractors change their brand preferences on a reactive, and sometimes frequent, basis. If manufacturers want to improve their brand loyalty among these contractors, they need to play both sides of the street fairly. Compete with us if you must (We have no problem with fair competition), but also provide the support and service contractors need to serve our customers.
The “C” Word
I’ve already used the “C” word once in this article — commodity. For some reason many contractors and manufacturers are afraid to use the word. Are HVACR units commodities?
We all know that consumers pay little attention to unit brand name or brand loyalty when deciding what to purchase. They listen to, and usually accept, the contractor’s recommendation.
To the extent that technological advances are similar among HVACR manufacturers, and brand makes little difference to end users overall, then perhaps our products have already become a commodity.
For contractors, that may not have such a large impact. Our job is to provide value-added comfort services to our customers. Those contractors who embrace a view of themselves as solution providers, and not just installers or technicians, are the ones who will continue to see double-digit profit margins in the days to come. Those are the contractors that manufacturers will want to work with.
So, at the end of the day, to whose brand should a contractor be most loyal?
John Saucier founded Temperature, Inc., Memphis, TN in 1969. Today the company specializes in commercial service and building automation systems. He is the 2003-2004 Chairman of the Air Conditioning Contractors of America (ACCA). He can be reached at 901/388-4706.