In just four short years, Nest Labs has redefined the expectations of the home thermostat. Once considered merely utilitarian, Nest has created something that goes well beyond a device to regulate indoor temperature. Sleek and stylish, the Nest Learning Thermostat can be the captain of the home, working in concert with the HVAC system and home appliances and reacting to the preferences of the homeowners to make it comfortable and energy efficient.
Nest has taken the same approach to the smoke and carbon monoxide alarm. With the Nest Protect, the homeowner has a simple yet elegant device that relays information about what and where the problem is and delivers the information through a voice and a message to the homeowner's smart phone.
These two products represent Nest's mission to move away from the "smart home," where homeowners can turn a device on and off through their phones, to the "thoughtful home," where the devices actually understand the home, the people in the home and automatically make adjustments based on their preferences. The company is also partnering with consumer brands to connect Nest with household appliances, fitness bands and even automobiles through its Works with Nest program.
"It's taking something that was stagnant and creating something amazing that people were really drawn to.
— Gene LaNois
If this doesn’t sound like an HVAC company, then you would be correct. "We're a technology company that makes a great thermostat," says Gene LaNois, who heads the professional channel for Nest.
Founded in 2011 by Tony Fadell and Matt Rogers, both of whom came from Apple, Nest set out to reinvent the category of thermostats. "It's taking something that was stagnant and creating something amazing that people were really drawn to and then combining that with a creative P.R. and marketing group and getting the word out about this reinvented product," LaNois says.
A veteran of the HVAC industry, LaNois compares joining Nest to sitting on the cone of a rocket ship. With its sleek design, sophisticated technology, ease of installation and energy savings, the Nest Thermostat has captured the imagination of consumers like no other product in its category. Nest Thermostats are being connected and used in 180 countries, even though the company is only selling in seven countries. LaNois notes that its ratings among consumers for reliability and referrals are incredibly high.
We're a technology company that makes a great thermostat.
While Nest products are sold at retail outlets, LaNois notes that Nest launched its products into professional trade wholesale distribution first. Its first distributors were through Watsco entities Carrier Enterprise and Gemaire. Its retail presence in a few Best Buy stores at the same time had not even been felt yet. Even though Nest created an unconventional product, the sales team knew they needed the support of wholesale distributors who represented an important link to professional installers and contractors.
The wholesale distribution network has grown over the past four years with more than 1,000 outlets in North America, LaNois says. Nest works primarily through four trades: HVAC, home automation, security and electrical distribution. Nest chooses its distributors through a selective process, making sure they are aligned with the right partners that share its vision for growth.
"It's gone very well," he says of the wholesale distribution partnerships that have been established. "I still feel like we're in the infancy stage. It's very rapid growth, but we're still at the beginning."
Like the products themselves, Nest looks for distributors who think outside the box. "One of the biggest qualities we're looking for in wholesale distributors is someone who wants to expand their portfolio, who see a bigger opportunity beyond HVAC. They want to expand outside those current paradigms that have defined the business for years," LaNois says. In short, they want distributors who share a similar philosophy around the interconnected, thoughtful home and who can relate that to their customers and current technology expectations.
Nest also seeks distributors who will serve as extensions of their sales teams. Because of the close relationships that distributors have with their customers, Nest recognizes there are some contractors and installers they can only reach through distributors. Contractors and installers may be reluctant to try out a new product like Nest, but if their distributor shows them the feature sets and how those feature sets actually work, they are more likely to recommend it to the homeowner. "Wholesalers have that close, day to day relationship. They have that level of trust with the contractors," LaNois says.
Nest encourages contractors and installers to work with them though its Nest Pro program. Nest offers professional pricing exclusive training and tools as well as customer referrals to help them grow their Nest business. "We get thousands of homeowners who are looking for installers in their marketplace," says LaNois, noting that Nest can be installed by a homeowner, but many prefer having a professional contractor take care of the installation.
We know that someone who is trained on the product installations for all of our products can do a great job for the homeowner and grow their business beyond what it might be today.
Nest is expanding this program with Nest Pro Elite for contractors who are interested in selling and installing the growing family of products, apps and services that work with Nest. "A Nest Pro installer may not be interested in installing Dropcam high-definition cameras, but an Elite dealer is interested in selling all Nest products in a geographical area," LaNois says. "We know that someone who is trained on the product installations for all of our products can do a great job for the homeowner and grow their business beyond what it might be today."
Distributors play an important role in the Nest Pro and Nest Pro Elite programs, too. Because contractors often prefer to access their products through their wholesale distributors, it gives them an extra measure of comfort when their distributor carries Nest. "Distributors key in on who are the best performing installers in certain categories," LaNois says.
Nest also partners with distributors to bring its products to professional contractors and installers through its Nest Pro Tour. These represent opportunities for Nest to introduce itself to a variety of trades, showcasing the feature sets, technical information that this audience wants to know about. While at the same time providing insight on what the IOT (Internet of things) and the “thoughtful home” opportunity is all about.
The Nest Pro Tour events have proven so popular that the sales teams have had to go back to some of the same locations on different dates to accommodate interested contractors and installers. "We're always happy to schedule another event and reach out to folks who couldn't make the first one," LaNois says.
One of the concerns that LaNois and his team occasionally hear from potential customers center around privacy. Nest was purchased by Google in January 2014, but operates as a separate company with a completely different business model.
Being invited inside someone's home is very personal and it's a privilege we take very seriously.
"Being invited inside someone's home is very personal and it's a privilege we take very seriously," LaNois says. "For Nest, it's about selling a great product to make people's lives easier and more energy efficient for their biggest asset. It's not about advertising."
Nest has been able to go beyond fad status with its Nest Learning Thermostat because it is a product that constantly updates itself. "We're able to constantly give Nest owners the latest and greatest products even if they bought it two years ago," LaNois says. "That's one way we always keep it fresh."
The algorithms within the product mean it's always learning how a home's HVAC system is operating and the habits of the occupants, making adjustments to keep people comfortable. While other products may wear down, LaNois points out the Nest gets better over time because of its interactivity. "It works better on day 200 and day 400 and day 600 than it does on day one because it has learned about how your systems operates, your habits. It becomes quite personalized," he says.
As Nest grows in popularity, more manufacturers are partnering with the company so their products can work in the home with Nest. Nest calls it the Works with Nest program and it now includes consumer brands such as Whirlpool, Jawbone, LIFX, Dropcam, Control4, Creston, Remote Technologies Incorporated and URC to increase the energy efficiency of products when a homeowner leaves the home — whether for an hour, a day or a week.
"These are all manufacturers that make great products that communicate with Nest," LaNois says. "As we add to that line of Works with Nest manufacturers and products, we'll continually keep the product new and have new features in it all the time."
What Nest is doing is part of a growing expectation among consumers around products that not only fit their lifestyles, but know their preferences and adapt to them. Today's cars, for example, are equipped with GPS and have seats and mirrors that automatically adjust to the driver so the driver can focus on the road.
"There's a level of expectation that if this can happen in your car, it should be able to happen in your home," LaNois says. "Combine that with this whole generation that is connected all the time through their phones. There are expectations around being connected and things happening automatically and we agree that these things should be happening automatically rather than having to manually do things."
Homeowners grow attached to their Nest products. After all, LaNois, says, anytime you have something that personalizes itself to your habits, a person is likely to form an emotional bond. Bonding with a thermostat may seem a bit far-fetched, but Nest receives letters from homeowners who report they've sold their homes, but taken their Nest with them. LaNois adds a homeowner's Nest will adapt to its new home as well.
LaNois notes another curiosity about Nest products that he had never seen in his 25 years of being in the HVAC business: Nest products are popular holiday gifts. "One of the best performing months for Nest is the holiday season. Having worked for a former thermostat company, I can tell you nobody is interested in getting a thermostat. But they want a Nest."
Michael Maynard is a contributing editor based in Providence, Rhode Island. He writes frequently on HVACR, construction and architecture issues. Contact him at [email protected]