Just when we thought the industry absorbed the last government-stimulated price increase, along come tariffs. Without judging their merits, tariffs are raising prices. Manufacturers appear to be taking no chances and are boosting prices in advance of the impact of tariffs. Contractors must as well. Here are eight ways you can play the price game in 2025.
1. Recognize That Everyone is Affected
Weak salespeople might try to use rising prices as an excuse for failing to close sales. Remind them that the price changes are industry-wide. They affect everyone. Consumers may not like the prices, but they are not going to get relief from a competitor. Their prices are going up too.
Despite higher prices, people are still going to need air conditioning in the summer and heat in the winter. Even if they can’t afford a replacement now, they will figure out a way to come up with the money eventually. The only question is who will perform the replacement.
2. Price in Real Time
This year especially, you must, must stay on top of your pricing. Fortunately, pricing systems are largely digital today, which enables you to make adjustments on the fly. Do it. Whenever a manufacturer or supplier changes a price, adjust your pricing. If you fail to make the adjustments, your margins can quickly fall, and you will end up subsidizing your customers. Do they need your subsidy?
If you hold your margins and perform the same amount of work as last year, your total revenue will increase. Your gross profit will increase. Control your overhead, and your net profit and net profit margins will both increase.
3. Train Your Team On Explanations
Consumers are rightly shocked at the price of HVAC systems today. Frankly, the prices are shocking to most contractors. Your team needs to be able to explain why prices escalated like they did. Make sure to explain that the impact is across the board. Every contractor has been forced to raise prices, so there’s no point in shopping around. Script your explanation and practice it in sales meetings.
4. Offer Financing On Every Replacement
If there was ever a time to stop leading with the total price of a replacement and to start quoting payments, this is it. If people don’t want to finance, they’ll say so. If they won’t qualify, it’s not a sale you were going to make anyway.
Structure your financing for the lowest monthly payment. That means interest payments take a back seat to the term for installment financing. Lead with 10-year installment financing to reduce the monthly payment as low as you possibly can. If you can get longer than 10 years, use it.
5. Join a Buying Group
Almost every major contractor alliance offers a buying group. If you patronize the manufacturers in the buying group, you can save some serious money through rebates. The rebates are not limited to equipment. They apply to a variety of products and services and typically exceed the cost of alliance membership many times over. Reach out to one today.
6. Build a Budget Offering
Shop brands in your market and find one with the lowest price. Use it to build a bare-bones budget offering. Take a lower, though profitable margin. Use this in two ways. First, use it for homeowners who cannot afford anything else.
Second, use the budget offering as a straw man offering to highlight how your standard is superior. Not only does this help people feel better about the pricier option, but consumers will also associate the straw man offer with those presented by low-price competitors.
7. System Rebuilds
Some contractors have begun offering system rebuilds for consumers who simply cannot afford to replace their air conditioners. While rebuilds are more labor-intensive, they are profitable if priced correctly. Moreover, you sell the rebuild today, and in a few years, when the homeowner's and/or industry’s financial situation changes, you can sell the full replacement.
8. Create Processes to Ensure You Follow Up
Homeowners who are making planned replacements and encounter sticker shock may punt. They will replace it, but they might need to save money or adjust mentally to the new price of the equipment. Stay in touch. Use software to set a follow-up schedule. Keep reaching out until the homeowner tells you to stop, buys from a competitor, or moves. Create scripts for follow-up calls, ranging from touching base to informing the homeowner about industry changes that might affect him (e.g., upcoming price increases).