Matt Michel is CEO and President of the Service Roundtable, the world’s largest private contractor group. He began his career in 1983 and has held engineering, marketing, and senior management positions with such leading organizations as: The Turbo Refrigerating Company, Lennox Industries, Titus, Aire Serv Heating & Air Conditioning.

The Service Roundtable
The nation’s largest private contractor group. Matt is currently CEO & President of the Service Roundtable, a group dedicated to providing contractors with the information they need to improve their sales, profitability, and business performance. Matt founded the Service Roundtable in 2002 with funding by angel investors, including professional angel investors and a number of leading air conditioning industry professionals, such as four past chairman of the industry’s leading trade association, one of three living industry hall of fame members, several past national contractors of the year, and so on. Within six months of its launch, the Service Roundtable became the largest private contractor group in the heating, ventilating, and air conditioning industry. In 2003, the company added plumbing.

This is part two of “The Secret to Surviving a Slowdown.” In part one I stressed the importance of attitude. I can’t stress it enough. Remember, when the economy is going like gangbusters, some companies are sucking wind. Conversely, some companies are booming when the economy is not. Good economy or bad economy, you want to be one of the winners.

It’s important to have faith that a slowdown will be short lived. As a rule, slowdowns are short lived, lasting around eight months. The most notable exception was the Great Depression, which economists now consider to be a series of economic recoveries aborted by government meddling. Economists are smarter today and less likely to follow the misguided notions of the past, even though governments are still prone to meddle with things (hey, it’s what governments do; they meddle). Still, absent colossal blundering, chances are good that any slowdown will be short.

While bad economic times do not last, many companies react like the economy will be in the tank forever. They cut way back in a slowdown, making it an opportune time for the aggressive company. The aggressive manager knows it’s easier to grab market share in a recession, so he takes share from the competition and rides the curve to new heights when things turn.

You may not be enough of a riverboat gambler to bet hard during a slowdown. Even if you were inclined, you might not have the resources squirreled away to weather much of a slowdown. Yet, there are still things you can do besides retrench. You can still grow aggressively by executing smart marketing strategies that are low cost, but effective. One of the best is “affinity marketing.”

Affinity marketing is marketing to groups of people with a common or shared interest. The marketer (i.e., you) supports the common interest when people in the group buy the marketer’s goods and services. Affinity marketing works best with non-profit organizations.

Here are the first five of ten ways to practice affinity marketing:

1. Homeowners Associations

Offer to pay a homeowners association (HOA) $10 for every service call you perform within their neighborhood. Pay $10 for every service agreement purchased.

In return, the homeowners association distributes information about your company to the neighborhood and invites you to speak at the next HOA meeting.

Some HOAs are professionally managed. Some are volunteer organizations. All HOAs are looking for money, especially free money. The professional manager can present the program as proof of his worth. The volunteer, who is usually a harried homeowner, is simply grateful for a beneficial program that’s easy on him.

When I was the president of an HOA, a home security company approached us. They offered the HOA a bounty if homeowners converted from the current security company to theirs. Since a significant share of the neighborhood was under a security contract, I didn’t anticipate many conversions. To my surprise, around 10% of the homes switched to the new company when we announced the program. That meant, nearly everyone who was able to switch, did.

Why did people switch? Because people were more loyal to the HOA than their security company. Because all things being equal, they might as well give their business to a company that helped their HOA.

How do you find the HOAs? In many towns they are registered with the city. Visit the municipal website to see if you can find a listing with the presidents of the HOAs and contact information.

If they HOAs are not listed, start with Google. Most HOAs have some kind of web presence. Search for the neighborhood’s name and your town. Or, try one of the national directories of homeowners associations. You can find these from a web search.

2. Schools & PTAs

When my kids went to Garden Ridge Elementary School, they brought home coupons for a pizza delivery place every day. The coupons didn’t save me any money. When the coupons were redeemed with the pizza delivery company on a specific night, the pizza company made a two dollar donation to the school’s PTA.

The same pizza company regularly mailed me coupons offering far more than a two dollar discount, which meant the donation was less than their standard discount. Moreover, I didn’t really like this particular pizza company’s food. Yet, we ordered pizza on the designated night.

The money didn’t even go direct to the school where it might be used something academic. Instead, it went to the PTA where it would be used on teacher appreciation gifts.

Even worse, the PTA volunteers copied the coupons at the school, took them to the classrooms, where the teachers told the kids to stuff them in the folders the kids showed their parents every night. As a taxpayer, I paid for the pizza company’s marketing of an offer that I didn’t even benefit from. And I still bought!

I bet you have too! People are plain stupid when it comes to their kids, especially when the kids are young. As a marketer, this is irresistible.

Contact an elementary school/PTA. Explain that you have an idea for a fundraiser that doesn’t require any parents or kids to sell anything (people get awfully tired of fundraisers where you have to sell stuff). Create cards, flyers, or magnets for the kids to take home. If the parents present the flyer to your company for a service call, the school/PTA gets $10. If the parent buys a service agreement, the school/PTA gets $10.

Don’t stop with elementary schools. Approach the high school band director. The bands are always looking for money for band trips. Talk with the teacher in charge of theater arts. Talk with the heads of every club and athletic team.

3. Sports Shade Tent/Instant Bench

Talk with your local soccer and football associations about providing free pop-up shade tents or instant benches to sports teams. Offer to provide the tent or bench if three or more parents purchase service agreements (or some other product) from your company.

Before you deliver the tent, have your logo, phone number, and website permanently imprinted or sewn onto the tent. Near the logo, add, “Call YOUR NUMBER to find out how your team can get a free tent.”

You can order imprinted tents for as little as $184 from Promotion Peddler at…

http://www.promopeddler.com/cat/Tents/

Personally, I would recommend the better quality tent that costs $217.

Instant benches lack a visible edge you can imprint so you need to find someone who can sew a canvas or nylon flap to the seat that flips down when the bench is set up.

If you want to add to the incentive, give each parent a pop-up travel chair with your logo, unique selling proposition, and contact information imprinted on the back. I’ve found imprinted chairs from an advertising specialty company on sale for $15 per piece with a minimum order of 24 (regular price is less than $18).

The beauty of the tents and benches is the coach is pushing parents to buy from you and will then be marketing for you afterwards.

4. Team Sponsorships

You are probably approached about team sponsorships from time to time. Team sponsorships can be expensive. As a result, many small business owners only sponsor teams their kids play on or that their employees coach.

When people approach Peaden Air Conditioning in Panama City about sponsorships, Robert Wilkos has them submit the names of at least three team families who do business with Peaden. These are checked against the company’s customer database.

Word quickly got around that the way to get support from Peaden was to give them business. Robert Wilkos managed to create peer pressure to support Peaden.

5. Churches

There’s a misconception that churches will not support a business’ affinity marketing efforts. That may be true for a given church from time to time, but certainly not all of them. Churches are like other not-for-profit organizations. They always need money.

I’ve heard ministers make a pitch, just before benediction and dismissal, for everyone to go to a particular ice cream parlor because the ice cream parlor was donating a percentage of the day’s take to the church. I’ve seen inserts in the church bulletin promoting lunch at a certain restaurant because the restaurant was donating 15% of the meal to the church youth when you turned in the insert at the time of payment.

The best church affinity marketing program was created by the late Tom McCart. Tom was working with an air conditioning contractor who was trying to build his service agreement program. Tom came up with the idea of approaching a large church, offering to take care of the church’s heating and air conditioning equipment at cost, and offering a “Sanctuary Agreement” through the church.

The Sanctuary Agreement was the contractor’s standard service agreement, renamed for the church. For every Sanctuary Agreement sold, the air conditioning company would donate $10 to the church’s building fund in the name of the individual who invested in the agreement.

The company provided the church with the Sanctuary Agreements, but otherwise made no sales efforts. It was up to the leadership to present them to the congregation. It was up to the members of the church to complete the customer information, write a check, and mail it to the contractor.

The pastor of the church saw the Sanctuary Agreement as a win-win (and it is). He stood before the congregation and told everyone they needed to get their air conditioners serviced before the summer so they might as well get a Sanctuary Agreement and help the church out.

The number of agreements purchased through the program has grown with the telling. Whatever the number, it was significant (hundreds, if not more than a thousand). The air conditioning company had to add to its service staff just to be able to take care of everyone.

Churches will support affinity marketing. However, it may not be best to start with your own church. That’s similar to being a prophet in your own town.

© 2008 Matt Michel


Note from Tom. Join…Now!
http://www.serviceroundtable.com/SignUp/Default.asp?pid=TP200708

Brand You  October 2008

by Matt Michel, CEO of Service Roundtable

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.

Next Month: Why Most Contractors Have Branding Upside Down.

Brand You - Part Two  November 2008

by Matt Michel, CEO of Service Roundtable

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.


Next Month: Only Your Brand is Yours

Brand You - Part Three  December 2008

by Matt Michel, CEO of Service Roundtable

Part Three - 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.


Next Month: Private Labeling

Brand You   January 2009

by Matt Michel, CEO of Service Roundtable

Part Three - Private Labeling

Last month we ended with an understanding that the only effective branding for your company is as your company. 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 the equipment is concerned, in most situations the salesperson will make the decision for the prospect.

Brand You   February 2009

by Matt Michel, CEO of Service Roundtable

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.