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Ever wonder Where Did the Money Go?

I just finished having a replacement furnace and central air conditioner installed in my house.  The experience was such an adventure that I thought I'd share it with you.  I will present the process from the consumer's standpoint to reemphasize the need to evaluate your sales processes and training on a regular basis. 

The Estimates
Last month I told about my efforts to get local HVAC companies to respond to my request for quotation for a replacement furnace and central AC.  3 out of the 4 companies that I called dropped the ball on the initial phone contact.  When it came time for the actual estimating process, their performance was also mixed.

We're looking for a high efficiency furnace (94+) and high SEER AC (14). All salesmen arrived promptly and looked professional. Almost all asked questions about the square footage of the house, insulation, etc.  All read the capacities of the existing units. 

The first salesman to arrive was from a local company that came highly recommended.  He quickly gathered his information and was ready to begin writing his quote.  I stopped him and asked about venting the furnace since I have a deck on the closest exterior wall.  He said that there would be no problem and that they had several options as to how to vent.

The written proposal was on a preprinted Estimate/Work Order form.  Everything was spelled out and explained fully. Everything was included in the price including permits.  I had the bottom line number.

The next salesman to arrive was from the company that had originally installed the AC and furnace.   Things went down hill when we got inside and he did not recognize the furnace that his own company had installed and serviced.  After evaluating the situation, he says that I cannot have a high efficiency furnace because it cannot be vented properly due to various impediments. Since I already had a quote in hand for the installation of a high efficiency system, this seemed odd. 

The written proposal was a mix of hand written details on a preprinted multipart estimate form.  The details were clear and he explained each of them in detail.  There were a couple of problems with the quote. First, the warranty included an extension by the installing company. This was good, but was not spelled out anywhere in writing.  Second, they would take care of any required permits.  The cost would be added later and he had no idea of what it would be. The average homeowner would have no idea what these costs could be, so his bottom line was uncertain.

This second quote was about 10% higher than the first one that I had received and the furnace was only 80% efficient.

The third was from the company that installed a third manufacturer's system.  He arrived just at the end of the one hour window he had given me.  He did a quick run through and told me he would email me a quote the next day because he was running late.  He wanted to leave me with some brochures, so we went out to his illegally parked car (Wrong way an the street, blocking a fire hydrant and neighbors driveway).

He did not have the brochure I needed in the pile on the back seat, so he fished one out of the trunk from under his golf clubs.  Yes, he did look like he was dressed for the links.  The email arrived 3 days later.  It looked very professional.  Well typed and complete.  Unfortunately, he quoted the wrong furnace - their standard 80% efficiency model even though the written summary of the job specified a high efficiency model.  The quote included permits and all modifications and was about the same as the quote from the first company.

While I was waiting for the third quote to arrive via email, I was convinced to call a company that NSPG had met with recently.  After the usual run through, he opened his phonebook sized customer references book.  There had to be 10,000 names and addresses in the book including people one street away from my house.  Unfortunately, he sort of riffled through the book as if he did not want me to really contact anyone in it.

Then, he pulled out his flat rate price book for furnaces and AC units.  Finally, someone who knew how to make the purchase easy.  No cryptic hand written scrawl with numbers I can't understand.  He flipped it open and we started with the "Good" systems.  I had to convince him that I wanted high efficiency, so we moved to the "Better" systems. 

That's when things went bad.  He began scribbling numbers on the back of a piece of paper totaling up the AC and furnace costs and deducting the various rebates.  By the time he was done, he had taken a perfectly straightforward flat rate price and made it completely incomprehensible.  And, to top it off, there was no difference in the installed price of the AC unit with or without the furnace install.  Without a Secondary Task price on the combined job, he had priced himself out of the bidding.

His price was 1/3 higher than the closest comparable system price I had in hand. Now I'm willing to grant him a 10% price difference as with the comparable quote I had received for the same equipment, but by not setting up their flat rate books properly, they're pricing themselves out of jobs.

To his credit, this salesman did call back several times to see if I had made a decision.  None of the other three salesman ever contacted me again.  It was like they didn't want to sell me anything.  Were they all so busy that they did not need my business?  More likely, they did not have a sales procedure that required them to make a follow up call. 

So, three out of four estimates were serious flawed.  Two were for equipment I did not want. One was priced too high because they relied on a limited home-made flat rate book that they were not competitive.  One company quoted me what I was looking for and gave me a clear bottom line price. Only one company did a follow up phone call.  And, all sized their proposed units based solely on the size of the existing system. I saw no calculations done to properly size the unit to the house.

What can we learn from this? 

1. Give the customer a quote for the product the customer wants. If it's inappropriate for the application explain why and submit your quote for the agreed upon product. 
2. Give them a clear bottom line price with all that they need to get the job done right.  Most of your customers want to buy a solution to the problem.  They don't want to buy a specific furnace and AC.  They want a good efficient way to heat and cool their house.  They don't want to hear about unknown permit costs and verbal guarantees.
3. Properly constructed and used flat rate price books really make the buying process easier.  The one flat rate offering I saw during this process really was an excellent sales tool.  They had the details of the products spelled out with a clear bottom line price. I was even convinced that the "Best" model was the one to get.  Without trying, he had up-sold me on a more expensive unit because of the Good, Better, Best presentation.  Unfortunately, the poor pricing design and confused sales implementation made his bottom line pricing confusing and uncompetitive.

Tune in Next Month for the exciting saga of The Installation.

The Money Masters™ in Buffalo was another outstanding event.  Several excellent seminars, a visit to Roy's Plumbing, and enjoyable time spent getting to know a large number of successful business owners.

Next month we'll have an article on the impressive operation at Roy's Plumbing including their in-house truck wash and "supply house."  

What a success story!