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Hot or cold? The U.S. economy is sending the HVAC industry mixed signals. From heated inflation to hints of fiscal cooling, indicators suggest that a nimble business strategy is critical for HVAC providers this year. Whether 2023 turns out to be a year of repair or replacement — or a fluctuation between both — flexibility will remain crucial throughout summer and fall.
There’s no doubt: Customers in 2023 are concerned about the state of their pocketbooks and more influenced by price than they were just a year or two ago. Housing starts are down in some markets, and the pandemic was declared over. That sent many workers back to the office, making them less likely to invest in their homes.
For the HVAC industry, customer orders might be smaller as property owners focus on repairing units instead of replacing them. So now, as the market wavers, it’s wise for distributors to analyze their business for resiliency to ride out this economic storm.
The key? Diversify.
• Customer Base
No matter the industry, businesses that fare best during times of instability are those that maintain a wide variety of income sources. If your customer base is limited to a specialized segment, start attracting customers outside your traditional business structure —residential, commercial, government or other avenues. This gives you another sector to rely on when one slows.
• Product Offerings
This is the time to promote your value brand. For some customers, replacing their unit makes the most sense, but they will quickly save money where they can. Giving them a choice of price is a benefit in a tight economy.
Similarly, customers might not buy large equipment, but they will retain an interest in products such as dehumidifiers or add-on accessories such as air purifiers. If you haven’t, look at your stock and find ways to diversify into products that are still attractive when customers are purse-tightening.
Finally, give your service parts inventory a boost. Make sure you’re carrying a range of OEM and universal parts that will keep customers’ units running until a more financially fruitful time.
The HVAC industry relies on technicians’ sales skills during downswings.
As the frontline to end-users, technicians can upsell, cross-sell or bundle products. This doesn’t mean hustling homeowners, of course. However, a good technician understands the products and how they’ll best benefit their customers.
As distributors, we are well-positioned to offer continuing education, particularly during a slowdown. That training helps technicians think outside the box, helping customers find the right solution.
Distributors should also continue to push the value of maintenance agreements with their technicians, knowing those are a steady income stream regardless of economic turbulence.
Likewise, share some of your inventory management skills with dealers. They’ll need to carry a wider assortment of parts and supplies as they go on repair visits, and it’s a waste of their valuable work time to run to the supply house midday because they don’t have a part on hand. Help technicians identify the best way to stock their truck so it’s ready to go each morning.
• Service Offerings
Now, it’s time to evaluate the competition. Be honest with yourself: Are they easier to do business with?
Pull out all the stops for customers when orders lean out. Your approach during this time is to support your dealers effectively. That might mean being creative with rebalancing or financing offers. Update them on industry trends and keep your products front-of-mind. You also should work to improve delivery time, offer incentives and give them several avenues to order parts from you.
It’s unclear how the second half of 2023 will shake out. Regardless of whether the economy stabilizes or slips toward a recession, diversifying will be the best way to position your business for success. Focus on doing that with your customer base, product catalog and service offerings. This strategy might not lead to hand-over-fist sales growth, but it should maintain business volume at a reasonably steady pace.
As it always does, the economy will bounce back. Until then, communicate with manufacturers and dealers alike to manage your inventory. Focus on supporting dealers by helping them establish a steady workflow, even when orders are slow.
These improvements won’t only boost sales during an economic slowdown but will prime your business for even greater growth once consumer spending returns.
Keith Kramer has a long history in the HVAC industry, most recently serving as President of Marcone HVAC. For more than 30 years, he has worked in HVAC sales and management, including roles as President and Chief Operating Officer of Midwest-based distributor Munch’s Supply.