Co-op Allowances Give HVAC Marketing Budgets a Shot in the Arm

runs ‘Product Spotlights’ once or twice a month. The firm has 1,700+ branches and serves customers in all 50 states, Canada, the Caribbean, Puerto Rico, and Mexico. It is headquartered in Newport News, Va. 

Thomasson sees several pluses through co-op allowances. “One great benefit of partnering with others is that it allows you to share the cost of marketing initiatives. Ferguson HVAC’s co-op program will enable us to collaborate with fantastic vendor partners such as Nu-Calgon and MARS to cross-promote our companies, services and products.”

The Ferguson HVAC executive sees other benefits to partnering in co-op programs. “For starters, you can share content and help promote each other’s company, including what you sell and do. This will help you reach more people and grow your audience. You can also collaborate on projects or offer joint discounts on services or products.”

Thomasson says that as social media becomes more ingrained into society, the way businesses use it to communicate with customers is changing. “In 2022-2023, the social media allowance will be a common form of marketing and promotion for HVAC contractors, wholesalers-distributors, and other types of businesses.”

He notes that today, Facebook, LinkedIn and Twitter remain the most popular social media platforms. “However, for our contractor customers, some are exploring newer platforms such as TikTok to reach customers. Some use social media to share news, products, and services. Others use it to build customer relationships by providing customer service through social media channels. Others provide a mix of the two.”

Thomasson believes that all of these platforms can be useful. “A social media allowance will help businesses reach new customers and keep current customers updated on the latest products and services. It is an essential tool for promoting businesses and building relationships with customers.”

Regarding social media, Thomasson notes that some in the HVAC industry are still at the initial stage. “They understand that they need to use some form of social media, but they’re not sure how best to use it to connect with their customers. One option that is often overlooked is forming partnerships with other companies in the industry.”

The Ferguson HVAC executive offers this advice about using social networking platforms: “Before posting, whether paid or organic, make sure you have a plan. It is one thing to know how to respond to customers in real-time. Knowing how to listen and learn from your customers is another thing. Social media is a great place to get to know your customers’ preferences and behaviors and to learn and grow alongside them.”

Co-op and promotional allowances and MDFs can improve an HVAC firm’s visibility to potential customers as well as create a positive image for your brand, says Ryan Collier, the company director of Heat Pump Source. The firm offers heat pump services across the UK, including renewable heating installation, repair, servicing and maintenance.

He says using these kinds of funds can assist firms to reach a wider audience; by advertising in multiple channels, vendors can increase their chances of reaching potential customers. “Additionally, these allowances can help you target specific demographics that may be interested in your products or services. For example, if you advertise in a local newspaper, you can target homeowners in your area who are likely to need HVAC services.”

Collier says another benefit of using allowances and MDFs is that they can help you save money on marketing costs. “In many cases, the manufacturer will reimburse you for a portion of your marketing expenses. This can help offset the cost of advertising and help you stretch your marketing budget.”

One drawback to using co-op allowances and MDFs is that they can sometimes be difficult to obtain. In order to receive an allowance, you typically have to meet certain criteria set by the manufacturer. Collier offers this example: “You may have to purchase a certain amount of product from the manufacturer or commit to a minimum level of advertising spend. Additionally, some manufacturers will only offer these allowances if you agree to use their products exclusively. This can limit your ability to promote other brands or products that your customers may be interested in.”

2023 Minimum System Efficiency Standards

What about the new minimum system efficiency standards for air conditioners and heat pumps that go live January 1, 2023? Will they affect co-op marketing allowances and MDFs? Empire Heating and Air Conditioning in Decatur and Cumming Ga., uses co-op allowances and participates in some special promotions. Empire owner Martin Hoover doesn’t believe the new minimum system efficiency standards will have much of an impact on co-op allowances and MDFs.

“I don't see much of a link to co-op and the new energy mandates,” Hoover explains. “Co-op for the most part is earned as a percentage of purchases, so the new requirements will eliminate the lowest end of air conditioners and heat pumps, so our minimum sale will be higher and thus co-op per system purchased would go up. We don't sell much of the base models these days so it will be minimal.”

Hoover sees other issues with the standards that are coming in 2023. “Having different standards for 14 SEER installs North and South seems silly and has put manufacturers in a bind. North can install 14 SEER after January 1 as long as the manufacture date was before. South must throw/ship away all 14 SEER in stock by January 1 as our standard is by install date instead of manufacture date. Pretty much 14 SEER has gone away down South already as nobody wants to get stuck with it.”

Hoover notes that the new M1 standards may require much larger equipment. He tells CB that manufacturers have yet to provide exact M1 equipment specifications. He urges manufacturers to provide details on coils, fan blades and other components that may be part of the heavier M1 gear.

The new minimum system efficiency standards for air conditioners and heat pumps may have an impact on co-op and MDF programs, believes Jack Nagy, President of MTA360. His firm specializes in creating websites and SEO marketing

programs specifically for home improvement firms such as HVAC, plumbing, electrical, roofing, solar and more.  The company works with HVAC dealers of all brands and its digital marketing services are approved for co-op and MDF programs by all manufacturers.

Nagy prefaces his remarks by noting that co-op guidelines are typically based on the dealers’ purchases and co-op dollars are accrued based on this factor. He explains: “However, as we look more deeply, equipment price increases over the past couple of years -- with likely more to come – combined with the release of the new SEER2 product, is likely to have a negative impact on the co-op accrual.”

Other factors are at play, Nagy explains: “Many dealers are selling fewer systems than they have the past couple of years due to the increased cost to the consumer. So, while co-op guidelines may dictate the same the amount of co-op, accruals by a dealer may vary greatly.”

The MTA360 president offers this conclusion: “Net net, as prices increase, consumer demand reduces, thus affecting dealer purchases, which drives co-op dollar accrual.  So, yes, the SEER2 is a factor, but so are inflation and price increases.”

At LG Air Conditioning Technologies (LG ACT) the new minimum system efficiency standards may offer a positive spin to co-op allowances and MDFs. According to Sean Foster, Senior Manager, the 2023 standards mandate could be a plus for his firm’s programs. He says his company’s allowances and offerings are based on market demand.

Foster explains: “The new standards focus on technology, energy savings, and energy efficiency. We expect LG Air Conditioning Technologies' current co-op programs will be positively affected by the new standards, as LG ACT continues its efforts to drive interaction between distributors, contractors, and the homeowner.”

LG Air Conditioning Technologies offers a co-op at 50 percent reimbursement, which is only available to LG's distributors. Eligible applied reps and distributors may be able to accrue a percentage of their invoiced sales – for 2022, it's 1.5 percent.

Foster says his firm’s co-op program is available to LG distributors and applied reps only. “Participating LG distributors receive a credit that they can apply to their contractor customers as the distributor determines, such as for marketing/advertising, contract training, trip/events and/or trade shows.”

LG ACT offers a tool kit on its Marketing Resource Center for distributors and LG Pro Dealers, accessed through registering. The Marketing Resource Center provides customizable marketing template ads and additional assets.

Yes, tools are available that can help HVAC companies track their co-op allowance spend as well as MDF performance. Jack Nagy’s firm, MTA360 (mentioned above), is one example. “Our most popular services include: websites built from scratch, search engine optimization and natural backlink creation.” His firm also offers popular social media marketing and pay-per-click (PPC) programs that are covered under co-op and MDF offerings by all manufacturers.

Nagy believes that co-op marketing allowances can be beneficial to HVAC dealers. He cautions: “However, when you dive deeper into the cost per lead, a key metric of any HVAC firm’s marketing investment, there may be times when passing on a co-op opportunity may actually be the better decision. At first blush, co-op arrangements seem smart -- you are sharing the marketing cost with the manufacturer or the distributor, and being promoted alongside their brand can help drive awareness, but co-ops also can hem you in to a specific agency or media organization.”

Nagy says MTA360 (site is at https://mta360.com/) recommends HVAC dealers do some lead-tracking and analyze the ROI of the spend against two key metrics -- cost-per-lead and conversion, which is all about the quality of the lead. He explains: “If you spent $12,500 and got $25,000 through co-oping, but you are paying above $100 per lead, there may be a better approach for your marketing spend. Online digital programs that drive leads to your website, which tend to be high-value, quickly convert and can be in the $25 cost-per-lead range. They can drive volumes of business for HVAC dealers.” MTA360’s real-time dashboard shows the dealer, distributor and manufacturer the applicable Google analytics data and, in particular, an estimated cost per lead.

Another potential tool for HVAC marketers is SproutLoud (https://sproutloud.com/). It is a distributed marketing platform that offers tools that brands and their dealers, distributors and contractors need for local marketing execution, funds management, and marketing analytics. The platform also offers local marketing guidance.

“With our system, brands can choose to run a traditional claims-based Co-Op Marketing program, or an instant Co-Pay system, or a combination of both,” says SproutLoud Vice President of Sales Michael Torcasso. He says that Distributed Marketing software that can automate, streamline and simplify is replacing the time-consuming old ways of doing Co-Op

Marketing.

One trend we can expect to see as we head towards 2023: increased use of social platforms. “Although social media is included within the overall LG co-op and marketing program, its use is still growing,” says Jeff Holm, Manager, Channel Marketing at LG Air Conditioning Technologies.

Link to part one of the series:

https://www.contractingbusiness.com/contracting-business-success/article/21249814/coop-allowances-boosting-marketing-budgets-across-the-hvacr-channel

Michael Keating writes for a variety of publications, including NATE Magazine and American City & County. Contact: [email protected]