Brand You

Ed the Roofer

This is a 2 part post, with the 2nd part about Private Labeling.

Ed



BRAND YOU

In the August 18, 2008 issue of the “Air Conditioning, Heating & Refrigeration News,” John Hall wrote an article titled, “The Importance of Branding Products.” The lead sentence is, “Many HVACR distributors say that their name is the most important brand they sell.”

I agree.

This must mean it’s the Age of Aquarius. Manufacturers, distributors, and contractors all think their brand is the most important. And all are correct.

Yet, only the contractor actually gets belly-to-belly with the homeowner. Only the contractor gets the call if something goes wrong. Only the contractor performs the installation. Only the contractor stands behind the product AND the installation. That gives the contractor a unique role.


“The Most Important Name On Your Car”

Years ago, before automotive consolidation, a local Nissan dealer used to promote, “Bankston – the most important name on your car.”

Bankston was trying to differentiate its brand. Bankston wanted to give people a reason to buy from Bankston rather than another area Nissan dealer.

The company was making the case that the dealership’s brand mattered more than the car’s brand. After all, you can buy a Nissan from lots of dealers. You could only buy Bankston from Bankston.

But what value does the local car dealer add? Pinstriping? A softer sales approach? It’s still the same car. And even if a consumer bought the car from another dealer, Bankston would still service it.

Unless there’s a personal relationship, the only reason to buy from one car dealer, rather than another, is price and/or ease of doing business.


In Home Installations, The Car Is Not The Same

The service trades differ from the car business. The way a plumbing contractor installs a water heater or reverse osmosis water purification system is a big part of the total installed, turnkey value package, maybe the biggest part. The same is true for heating and air conditioning.


The Most Important Brand

If the actual products, such as faucets and condensing units, are little more than parts in an installed plumbing or air conditioning system, what’s the most important brand in the system?

With air conditioning, the Copeland, Tecumseh, and Bristol marketing departments could make a persuasive case that the most important brand is the one on the compressor. After all, it is the “heart” of an air conditioning system.

The marketing departments of the condensing unit manufacturers would probably disagree. Even though different manufacturers may use the same brand of compressor, the same brand of refrigerant metering device, the same brands of contactors and relays, and use the same brand of machine tool to manufacture the coils, the marketing departments will claim the products differ.

They’re right. The products do differ. The wrappers differ. The refrigeration circuitry differs. The wiring harnesses differ. The footprints differ. The acoustics differ.

And no matter how many parts are similar, the way each manufacturer brings them altogether is different. The parts are merely components. The condensing unit is the finished product.

Frankly, the greatest differences are often beyond the box. The differences lie in the manufacturer sales force, marketing and training support, incentive trips, ease of doing business, and distribution.

These are important differences for contractors. They do not matter to consumers. Consumers care about the quality of the installed system. This is work performed by the contractor. This is the design of the system, the quality of the installation, the reliability of the contractor, and the attitude and level of support from the contractor’s staff.

To the contractor, the condensing unit is a component, part of a system that includes a furnace/air handler, IAQ components, refrigerant lines, a supply air duct system, a return air duct system, grilles, registers, diffusers, and more. The installed system is the true finished product.

The box brand matters most to the contractor. The contractor’s brand matters most to the consumer.


Upside Down

Ironically, many contractors get it backwards. They act like the box brand matters more than the contractor’s brand. They think the brand on the box matters more than the brand on the truck. Some even make the box brand the biggest brand on the truck!

These contractors persuade the consumer that a box brand, a component brand, matters most. When they do this, the contractor subordinates his brand, lessening its value.


“Dealer” Status Lacks “Franchise” Status

When I was in the franchising game, I used to explain the difference between franchising as follows…

• Reselling a condensing unit and coil is like going out on a date.

• Becoming a “factory authorized dealer” is like going steady. Breaking up may be hard to do, but it’s a snap legally. The only ramifications are hard feelings.

• Joining an alliance with a year long or longer contract is like being engaged. You can get out of the relationship, but don’t expect to get the (investment in the) ring returned.

• Becoming a franchisee is marriage. Divorce is painful and expensive.

Even though car dealers have the protection of a franchise agreement, they still try to stand apart from other car dealers. Contractors who lack similar protections, not only fail to stand apart, they often try to blend in by adhering to the box brand’s identification and marketing programs.


Factors Limiting The Attractiveness Of Building A Manufacturer Brand

Lacking the protection of a franchise agreement, building a manufacturer’s brand is fraught with peril for a contractor. Nine factors limit the attractiveness of building a manufacturer’s brand for a contractor.


1. Competitors Invest In The Manufacturer’s Brand Unequally

Some companies might invest a lot in manufacturer brand promotion. Others might not invest anything. Yet, all benefit equally.


2. Strong Local Brands Can Carry National Brands

In some markets, with some contractors, the local contractor brand is stronger than the national manufacturer brand. This shouldn’t be surprising. In a number of industries, local retailer brands are often stronger than the national brands they carry.

In HVAC, more than plumbing, consumer awareness of national industry brands is low. When more than 10 thousand homeowners were asked to name air conditioning brands top-of-the-mind, the brand mentioned most was recalled by a mere 20% of the respondents. By comparison, 29% couldn’t think of ANY brand. “I don’t know” is the best known brand in HVAC.

The industry didn’t fare much better in aided awareness. When homeowners were asked to look over a list of brands and check those known to them, the best known HVAC brands were only recognized by two thirds of homeowners. It sounds like a lot until you realize that even lesser known appliance brands achieve aided awareness levels in excess of 90%.

Air conditioning brands simply aren’t on the consumer radar screen. And why should they be? Consumers replace an air conditioner once or twice in a lifetime. Due to frequency of need alone, consumers are more likely to pay attention to contractor marketing for services and maintenance.

If this seems surprising, it’s probably because you pay attention. Unlike the run-of-the-mill consumer, you are intently tuned into industry marketing. Unlike consumers, you are presented with trade advertising, trade show exhibits, association meeting appearances, dealer meetings, and training meetings. No wonder these brands seem dominant. Yet, the only landscape they dominate is the industry’s. That’s a small sandbox in a big consumer playground.


3. Contractor Marketing Funds Are Limited

Even large contractors with aggressive marketing have limited budgets. Granted, on a per capita basis (i.e., dollars per household in your target market), contractor spending may be more than the manufacturer. However, it’s still limited. Why dilute it more by diverting funds from the contractor’s brand to the manufacturer’s?


4. Co-op Is Reverse Subsidy

In some cases, co-op advertising is a win-win. The manufacturer pays for part of a contractor’s advertising efforts when the contractor mentions the manufacturer’s brand. Both win.

However, in other cases the co-op rules require the contractor to subordinate his brand to the manufacturer’s. Or, the manufacturer strictly controls the marketing message, resulting in manufacturer-centric advertising. This isn’t manufacturer co-op of a contractor. It’s contractor co-op of the manufacturer. It’s a reverse subsidy.


5. Manufacturers Can Add Competitors As Dealers

Contractors can invest years and huge sums to build a box brand, only to wake up one morning and learn that the box brand will be offered to a larger competitor. Don’t blame the manufacturer. He wants market share. Adding a big player is a fast way to get it.

Even though the original contractor continues to sell the brand, the interloper gets to reap the benefits of the original contractor’s brand building efforts with zero investment.


6. It’s Harder To Switch Brands

A contractor’s investment in a brand is a barrier to switching. Switch brands and lose the investment. Thus, if a manufacturer’s policy, pricing, or philosophy starts to make the brand unattractive, the contractor must give up the financial and psychological investment made in the manufacturer’s brand. Usually, the switching costs preclude a change in suppliers until the business practices become so unbearable the contractor willingly pays the switching costs.


7. The Box Brand Might Show Up In A Big Box Or Utility

If a box manufacturer smells an opportunity to boost market share by offering the same brand of box through a big box retailer, utility, or consolidator, most will jump at it. In fact, most have. You hear about the programs that go national, not the pilots that fail.

Again, don’t blame the manufacturer. They should jump at these kinds of opportunities. It helps the company short term and Wall Street has a short term horizon. Given the strength of the retailer or utility, it might help the company longer term. After all, it costs the manufacturer less to service one large account than lots of small ones.

It’s not all bad for the contractor. A big box will help build awareness of a manufacturer brand. The contractor will benefit from some of the retailer or utility promotion efforts.

The risk for the contractor is a retailer’s or utility’s message might drown the contractor’s. The consumer might begin to associate the manufacturer brand exclusively or predominantly with the retailer or utility.


8. The Contractor Risks Guilt By Association

If an unscrupulous competitor gets a hold of the same box brand you sell, he might tarnish you through his deceptive trade practices and your association with the box brand.


9. The Contractor Can Lose The Brand

The contractor might lose the box line altogether over a warranty squabble, a change in local representation, or any other of a number of reasons.


Only Your Brand Is Yours

Why build equity in a brand you don’t own and can’t even lease? It’s like depositing money in someone else’s bank account or paying someone else’s mortgage. It’s like renting a hotel room and paying out of your own pocket for new carpeting. Why?

Lacking the minimal exclusivity and contractual protections that car franchisees enjoy, it doesn’t make sense for contractors to push a brand they don’t own, control, or enjoy long-term rights to sell. More and more contractors realize this and are pushing back.

As one contractor said on the HVAC Roundtable, “Be careful of factory authorized dealer programs. I meet every single requirement of a major manufacturer’s factory authorized dealer program – except that I’m not 100% loyal to the manufacturer and I don’t display their logo on my trucks. To be a factory authorized dealer in my market I must pay the manufacturer $6,000 a year. Do you have any clients paying you for the privilege of doing business with you?

“The label ‘Factory Authorized Dealer’ makes everyone who wears the logo THE SAME!

“I found out the hard way after years of promoting myself as a dealer of someone’s brand that I AM THE BRAND and to differentiate me from others in my market I must market me, not a manufacturer.

© 2008 Matt Michel

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Ed the Roofer

Here is the rest.

Ed



Private Labeling

Carry that sentiment forward to its logical conclusion and the result is private labeling. And a growing body of contractors has done just that. They are changing the marketing rules altogether. They are putting their brand name on the products they sell. They are private labeling.

Private labeling isn’t new, even for plumbing and HVAC. At least one water heater manufacturer has been private labeling for years. When I ran a franchise group well over a decade ago, we private labeled a line of heating and air conditioning equipment. A sister company private labeled disposals. Before I started private labeling, another business alliance had private labeled their own line of HVAC products for years.

Sears has used the Kenmore brand to private label as long as I can remember. A variety of manufacturers provide the products. Sears customers don’t seem to care who makes the box as long as Sears stands behind it.

Indeed, private labeling is not new. What is new is the private label “movement” among contractors. More and more contractors are beginning to private label to take control of their destiny.

Why not? According to the marketing research, consumers look for a contractor twice as often as they look for a product brand.

The late Tom McCart said, “I have sat across the table with buyers for over 30 years and have yet to meet one that knew what he wanted or needed. I have met with several who thought they knew what they wanted, but it was not what they needed.

“Through the years I have been training, I have asked salespeople and technicians, ‘Who selected the equipment?’

“More than 90% responded that they did, or recommended the choice. As far as equipment is concerned, your salesperson will make the decision for the prospect (I rarely recorded the brand on the proposal).


Don’t Ask, Don’t Tell

While Manufacturers prefer to push their brand, they will private label if that’s what it takes to make the sale, to move boxes out the door. That’s smart.

Frankly, private labeling works in a manufacturer’s favor. Yes, the warranty is unchanged. Yes, the field and technical support is the same. The marketing, on the other hand, goes away. Less money. Less administrative costs.

Private label contractors book their own travel and don’t expect manufacturers to include them in incentive trips. Manufacturers have been searching for years on a way to get out of the travel business. Private labeling can lead the way.

Distributor and manufacturer relationships don’t change with private labeling. Contractors still need good suppliers. The only real change for the channel is the way the product is marketed to the consumer.

While few manufacturers openly push it, almost all offer a private label option if a large enough contractor demands it. Why lose a sale over corporate ego?

Some of the private label lines involve the use of less well-known brands, but they’re still made in the same factory, largely with the same parts due to manufacturing economies of scale.

Sometimes a contractor will private label despite manufacturer objections. No one objects when a contractor adds wood grain contact paper to dress up a furnace installed in a basement. Why should anyone object to placing your logo over the manufacturer’s. It’s the same principle as buying a truck and putting your decals on the truck. If you buy it, you can do what you want. The manufacturer may protest, but not enough to lose the business.

Of course, this is all kept hush, hush. The manufacturers’ policy seems to be, “Don’t Ask, Don’t Tell.” But you can ask and if no one will help, you can tell your supplier what you’re going to do.


Contractor Private Labeling Experience

Contractors have been private labeling for nearly a decade now. What are the results of private labeling? Here’s what a few contractors have to say about their experiences private labeling…


Mark Swepston - Atlas Butler, Columbus, Ohio

“We have had good success with private labeling.

“When we started I thought we would be about 50/50 name brand and private labeling in three years. In eight weeks we were 90% private label and our old supplier dropped us as a residential dealer.

“The interesting thing was that instead of coming in to see how they could earn our business they just said goodbye.

“This year we will sell close to 1,200 replacement systems that are ISO 9000 certified with our name on them.

“We sell the Atlas Butler solution, not equipment.

“In addition, our gross margin is up about 6% and that goes to the bottom line. There are many other advantages too.


Scott Robinson - Apple Heating, Astabula, Ohio

“We sell the ‘Apple Heating’ brand almost 100% for gas furnaces, air conditioning, heat pumps, air handlers and light commercial up to 20 tons. We also label thermostats and occasionally add our label to zone control panels and other items.

“There has not been a downside. Our old distributor has justifiably begun to look for new dealers and is very cool towards us.

“Essentially it follows with the idea that our solutions are for systems, not ‘the box.’ That customer satisfaction is more dependent on the contractor who designs, installs and services a system than who made ‘the box.’ As has
been said, ‘We are the brand.’

“Expect this trend to grow among mature companies that rely less on association with a national brand and more on their own reputation and capabilities to attract customers and get the business.

“If the customer thinks it is about the box, you have failed to differentiate yourself and your brand. We tell them our equipment is manufactured for us in a state-of-the-art, ISO 9000 certified manufacturing plant in Wichita Kansas by UPG. UPG happens to also manufacture some other brands you may have heard of such as York, Luxaire and Coleman. And we always tell them the lab tested SEER ratings.

“But we sell our installation, not the box. When asked about manufacturer brands we say, ‘They are all good. They all use the same components like motors, control boards, igniters, etc. that are identical.’

“In other words we direct the conversation away from the box. We might also tell her that SEER ratings are arrived at, under ideal conditions, in a laboratory. When equipment is installed incorrectly, the customer does not get the rated efficiency. Again, it’s not about the box. It’s about the installation.

“We do measure the performance of our installed systems and give the customer an unconditional 100% money back guarantee if they are not happy. By the way, we do have other firms putting in ‘the same stuff’ in our market. But not for $100 less; try more like $2,000 to $5,000 less.

“The manufacturers have many contractors brainwashed into believing it is their brand of equipment that is the most important component of a successful installation and a happy customer. Most of the customers are not even aware of the manufacturer brands, and 93% are not concerned about which brand.

“‘I’d rather have the least expensive equipment installed right, than the most expensive equipment installed wrong.’

“To become self branded you must change your story with the customer. It has to be about your installation and what makes you and your company special. Stress NATE certified techs, a 100% guarantee, certified start ups, sealed ductwork, full size insulated return air drops with radius elbows… that sort of stuff.

“The other requirement is you have to have a reputation for doing great work and having very satisfied customers. That is actually the hard part.


Steve Miles, Jerry Kelly – St Louis, Missouri

“We have positioned it as our ‘premium’ offering (taking the ‘We'll only put our name on it if we think it's the best’ attitude).

“About 25% of our equipment sales have been our private label brand.

“The most obvious benefit is the elimination of commodity type ‘brand shopping’ for the lowest price of perceived equal equipment.

“Off the top of my mind I can think of no negatives to date.

“The only limitations would be self inflicted by a lack of imagination. Once you start producing labels and literature for one item, doing it for other products, like humidifiers, EAC's, UV's, etc. becomes that much easier.

“There are additional costs, mostly associated with producing our own equipment literature and advertising. Also there is no co-op available.

“Customers that use our company because ‘it's our company’ love the ‘branded’ equipment. They say things like, ‘Oh no, I want the Jerry Kelly equipment.’ And, ‘If you are willing to put your name on it, that's good enough for me.’

“I am a big proponent of selling ‘my brand.’


Robert Wilkos, Peaden – Panama City, Florida

“Let there be no doubt that we believe that private-labeling is a future trend. We just happened to get an early start on this unique way to market your company and it just so happened to be a very successful venture.

“In baseball terms, we'd be called a switch hitter because we promote both national and privately-labeled brands. For decades, Peaden Air Conditioning was primarily a single-brand dealer prior to adding several additional brands over the years.

“In 1999, we unveiled our first privately-labeled brand with a healthy amount of internal skepticism. Our only intent at that time was to promote ourselves more to take better advantage of our solid reputation in this market. We added a second private-labeled brand in 2000. We usually promote four brands at any given time: two national brands and two Peaden brands.

“Our privately-labeled brands account for approximately 75% of all system/equipment sales. There are a lot of pros and very few cons when one chooses to enter the private labeling arena.

“We believe a contractor is most influential in the consumer decision-making process, and we developed a strategy to benefit from this. Although others might think us somewhat different, we're involved in the same loop as everyone else with regard to our relationships with distributors and manufacturers. They've been, and will continue to be, crucial to our success. However, I believe not all contractors, distributors, and manufacturers are created alike.

“Due to our newfound success, we see no reason to primarily promote anyone other than ourselves. Truth be known, we have no future intention of becoming a single-brand dealer or anything other than a good contractor.

“We don't know how other private labeling contractors promote products that bear their name, and what manufacturers think their brand market share might be isn't our concern. What we do know now, more than ever, is that we will continue to go to market our way.


Matt Prazenka, Chicago, Illinois

“For my old company it worked well. It was these pioneers - Mark Swepston, Robert Wilkos, Scott Robinson (and I am sure there are others unknown to me) - who said I’ll try it and see if it works. They blazed a trail for others to follow.

“Study show that 80% of the value from a home comfort system is out of the hands of the box makers or welders (as some who refer to them). Sizing, application, and installation are the keys to system’s success. And still, over 65% of home owners have comfort issues.

“You do not have to private label to be the brand. Guard your independence as the box manufacturers are trying to build their own direct customer base. Ever sell filter media? Whose 800 number is on the side of it? Will that sale come back to you? It is the same with the manufacturer’s extended warranties and to a larger extent the big box programs.

“The customer does not know what he needs to make an informed decision. He reverts back to those lowest common denominators of price and brand. If a person has a specific desire for a brand, I will give him the brand as part of the offering.

“If you are small and need a little lift from the box maker, use it. But only use it to the extent that it provides the momentum to get your business rolling. Once you reach that point, do the difficult thing and change! There is fear involved and you are removing support, but after you do it for awhile and build your confidence, your customers will accept whatever you recommend to them.

“What is going to happen one, two, five, or ten years from now? I am thinking long-term and trying to keep it in line with short term goals.

“If selling a brand gets you a sale today, what connects the customer to you tomorrow? It could be a short term gain, but a long term loss.

“If selling the label is what you need to do to get it done, continue on, but after a year look back and account for the costs and see if it was worth what you paid in higher product costs and canned advertising (that features your competitors also) versus using those resources to promote yourself. Co-op is where the manufacturer gets you to pay for promoting his product, not the other way around.


Greg McAfee – McAfee Heating & A/C, Kettering, OH

“We have been self branding (private labeling) for close to five years now. Read my lips to all of you non-believers, ‘We have had great success!’

“For more than twelve years, we carried and sold a great ‘name brand.’ Since the switch to our own brand, we have increased in sales every year. We have never looked back.

“Yeah, we lost some co-op money, but we have gained 100% of our own name recognition. What is that worth? By the way, ‘We are our own brand!’

“Do what works for you, but don't ever think you need a manufacturer’s brand to be successful!


The Retail Contractor Coalition

Private labeling was a challenge in the past with more questions than answers for most contractors:

• Where do you start?

• How do you do it?

• What do you do for literature?

• What about website references?

• How do you persuade your sales staff to sell a company brand when they’ve been brandwashed by a manufacturer?

• Who can you call for help?

• What do you do about advertising?

It took a diligent contractor to put everything together and launch a private label program. Not all who tried succeeded. Usually the contractors who failed were 1) too busy to put together the necessary support material, or 2) unable to bring the team on board and rally around the company brand.

Today, things have changed. A group of innovative contractors has gotten together to form the “Retail Contractor Coalition” in an effort to support contractor private labeling. The fees for participation are modest (about half the price some manufacturers charge to be in their authorized dealer programs) and paid back in multiples through product rebates.

The RCC shows contractors how to private label, provides custom logos for products, custom contractor oriented sales literature, logoed product cut sheets, custom product and model photography with the contractor’s logo, audio training programs with top industry sales trainers, videos for persuading staff on the benefits, a planned national conference on private labeling, and more. The RCC website is www.ContractorCoalition.com. You can contact them by email at info@ContractorCoalition.com or by phone at 214.679.6578.

The RCC is currently established for HVAC only. Plumbing will be added soon.


Ride The Wave

Private labeling is becoming more than a movement. It’s starting to look like a tsunami rolling across the industry. If you’re a contractor, maybe you should check it out. If you’re a supplier, maybe you should figure out how to make your products available for private label.

This is the most exciting thing to hit the industry since consolidation!

© 2008 Matt Michel

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Carport King

This is a great article Ed and I agree with it. We have private label or branding our windows we sell. In our area PGT was the choice for windows by hundreds of contractors or builders.

They spent a ton of money on advertising there brand. So now think about this everybody that walked into the clients door carried in a PGT window sample.

So it was always a job to get the sale and because of this the contractors would lower there price and they not only killed the market but they have almost put PGT out of business.

So my BIG IDEA was to find not only a better product but also one that would private label for me. Now I walk in with a different window and a better window and better sales pitch and a warranty that is backed by our company for over 20 years.

Our name is on the window! Our brand and our written warranty. We brought a better value to our client and we did not lower the price.

In our area we sale more windows then anybody.

Here is another case in point. We build sunrooms or glass rooms in our area. There are 4 composite roof companies in Florida that manufactures the panel.

Everyone else sales it by square foot and again they whore the cost down where you can not make money.

We designed our rooms as a lifestyle room and we gave them names such as the Boca Royale room or the or the Keywester room etc and we gave them a 4 diffferent room choices with 4 different upgrades and 4 different price points.

This is how we market our sunrooms and you can only buy this private label room from us. Yes you guessed it who sells more sunrooms than anyone in our area. Bingo we do.

So all this comes down to is to listen to your sales staff and build a better mouse trap. If you are not self branding your products then you have missed out on some profit and sales.

Thanks Ed for the wake up call. All you need now is to take ACTION.

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