Posted on July 28th, 2008 by Valerie Schlitt, President of VSA, Inc.
by Valerie Schlitt, President of VSA, Inc.
The HVAC industry grew up on personal relationships between wholesalers and contractors. Now, converting these familiar relationships into real business partnerships is a goal of many wholesalers, Why? Because wholesalers want secure revenue stream that result from contractors’ business loyalty. Wholesalers know contractors are increasingly willing to work with those who make business easier and walk from those who don’t.
Today, times are hard for HVAC contractors. New companies are entering the market and taking business from existing players. The labor pool for qualified staff has tightened. As parts and equipment become increasingly sophisticated, purchasing and training have become more complicated. Not least of all, contractor margins are dropping. Contractors know that the wholesalers who help them will be able to give these contractors a competitive advantage.
So how can wholesalers create a business partnership? Ironically, it’s through SERVICE, from telephone etiquette to honoring a delivery commitment. Excellent service translates into trust. Trust leads to an ongoing business partnership and revenues. Service – it’s the new name of the game.
Here are 10 ways wholesaler organizations can use service to become better business partners with contractors. Some are common-sense ideas, while others point to the wave of the future.
#10 Offer an online warranty program Several manufacturers and some wholesalers do this already. Wholesalers, with the right planning and foresight, could adopt expanded programs. Wholesalers would allow contractors (even if availability were limited to the best contractors) to identify and record faulty items online and automatically receive a credit on their wholesaler accounts up to a certain limit. The wholesaler would pass this amount back directly to the manufacturer. The contractor would take responsibility for discarding the items immediately. No questions asked. No need to mail the parts to the manufacturer. This program would save time and money, and create goodwill.
One large commercial and residential contractor, Hutchinson Plumbing, Heating, and Cooling, Inc. of New Jersey, is working directly with a manufacturer on a warrantee program, piling the malfunctioning parts in a high heap before disposal. This contractor would seriously consider sending business to a wholesaler who offered a similar program.
#9 Handle customer phone calls with respect. Phone interactions between a wholesaler and a contractor are critical and are indicative of how the two organizations will work together down the road. Some key guidelines for the wholesaler include: a.) show enthusiasm and interest in the contractor’s concerns – even to the little guy; b.) answer the phone call quickly, within six rings; c.) transfer callers no more than twice, and ask permission before doing so; d.) if you absolutely must put contractors on hold, do so no more than once, again asking permission; e.) return calls within 2 hours. One Philadelphia-area mechanical contractor, Industrial Valley Service, Inc. returns calls immediately upon receipt of the message. This contractor attributes their business success in part to this practice. Wholesalers may want to adopt this approach and evaluate it themselves.
Once a contractor begins the sales process with the wholesaler, try to keep the same representative working with the contractor throughout the estimating and purchasing process. This is not always possible. However, it makes for a stronger relationship that will affect future business. An obvious mistake that some wholesalers make is they don’t live up to their time commitments. If the wholesaler promises to get estimates by 4:30 p.m., he or she must do so.
Contractors like to start the estimating and purchasing process via phone, but they need to have something in writing, so fax is the preferred method of receiving the prices. Wholesalers must send the fax within the promised time frame. One small residential contractor complained that many wholesalers do not deliver estimates as promised. This has promoted him to change companies.
Sometimes a contractor may need a price immediately via phone for an urgent job. If the wholesaler has committed immediate turnaround, it’s incumbent upon him or her to deliver estimates immediately.
Large contractors prefer to be connected directly with the sales staff, from whom they feel they receive better treatment. They don’t mind automatic answering devises; believe their messages are more accurately captured on an answering machine than when transcribed by an assistant. Smaller contractors prefer a direct connection to the counter. They view the counter staff as more knowledgeable about products and prices, and more concerned about them. Smaller contactors vehemently dislike the automatic answering devises and may take their business elsewhere.
#8 Take advantage of the Internet The web is an excellent way to present information on products and prices, as well as on upcoming products and new services.
One contractor called the internet “perfect for replacing those huge catalogs.” It allows for quick updates of new pricing and product lines. Contractors can review the information off-hours. Once the Web site is up and running, it frees wholesaler staff from providing the same information via phone or fax. One caveat: The Internet site must be easy to use, especially for smaller contractor who may not be computer-savvy. Wholesalers who are installing a Web site for the first time should ask some of their customers to try it our first. Jerry McGinnis, the owner of Southampton, NJ based McGinnis HVAC, said if a wholesaler’s Web site was confusing, he wouldn’t use it and would consider leaving the wholesaler if he was forced to go there for pricing and product information.
Hutchinson sees other benefits in addition to product and pricing information in Web sites. This contractor has downloaded engineering guidelines, technical guides, and has used the Web site for troubleshooting. Another contractor downloaded a complete service manual from a Web site, after registering the model and serial number of the equipment he was researching.
A serious consideration before launching a Web site, however, is how frequently the wholesaler will maintain it. You minimize the benefits of the site if the information is outdated. Industrial Valley Service uses Web sites to learn ballpark prices but always confirms with a phone call. They have seen situations where no one bothered to update prices.
Great as Web sites might be, some less computer-savvy contractors may still need help. Wholesaler staff should be knowledgeable about their manufacturers’ and their own sites to direct contractors who call them via phone to the right Web site location.
#7 Introduce new products and product upgrades. A great way for the wholesaler to gain more business is to introduce the contractor to new products and product upgrades that serve his market. Contractors want to know about new developments and welcome this kind of input from wholesalers.
However, this requires the wholesaler to know something about the contractors they service to ensure genuine and relevant advice. This kind of communications is truly a win-win. Wholesalers may gain more business and longer business relationships. Contractors are aware of products they previously had not known of.
Industrial Valley Service says they often receive sample parts, perhaps costing the wholesaler $50. Because the wholesaler knows Industrial Valley Service business, he knows which parts fit Industrial Valley Service’s business needs. In fact, the contractor has responded to such free distributing by buying multiple new products.
There are many ways wholesalers can introduce new services and upgrades to their contractors: communication on the phone, free samples, coupons for redemption, etc.
Those wholesalers that don’t try to upgrade their contractors will be missing out on potential business.
# 6 Offer appropriate credit lines and recognize contractors who pay on time. Contractors spread their purchasing power among several (sometimes many) wholesalers, even if they favor one or two, in order to establish and maintain the credit lines, ensure the best prices, and retain purchasing power.
Of course, wholesalers provide credit lines. Certain contractors are fastidious about paying off their depts. McGinnis said he saw a direct correlation in the service and attention he received, and the regularity with which he paid his outstanding balance. He then sold a large piece of business and needed a much larger credit limit. He talked directly to the accounts receivable folks at his wholesaler, who within 20 minutes offered him a credit limit three times his own limit for this specific new job. He therefore had two credit lines with the wholesaler. The contractor was delighted at his new purchasing power. Likewise, the wholesaler had established a critical link between the contractor and himself by offering the credit line. Once again, it was a win-win situation.
# 5 Avoid hidden costs, such as freight and shipping- especially for small contractors. If respect and trust are keys to keeping long-term customers, make it a point to tell contractors upfront about costs they will incur but are not necessarily the cost of the product. One contractor made a special order without knowing there was a $75 dollar special order charge. The wholesaler failed to quote this charge when he estimated total expenses. Therefore he did not include it in the price to the customer. In the end, this contractor had to pay the $75 and absorb it from his own profit margin.
# 4 Provide training. Contractors say a wholesaler who provides training world be difficult not to do business with. Most say with the increasing sophistication of HVAC products, training on the electronic parts is an essential ingredient of staying in business.
Hutchinson Plumbing, Heating, and Cooling in fact said today’s workforce expect to be trained especially given the equipment sophistication and growth in electronic parts. Hutchinson invites manufacturers to its site for workforce training. But they’d send staff to wholesaler-sponsored training in an instant. Providing training demonstrates a wholesaler’s willingness to be a business partner and shows expertise in the industry.
One hint: Manufacturers would like a printed training calendar in advance. Wholesalers might want to schedule training during nonpeak periods when contractors are least reluctant to let staff attend the session.
# 3 Don’t commit to what you can’t deliver. If a wholesaler doesn’t carry a part, doesn’t have one in stock, or can’t get one overnight, the wholesaler should not commit to delivering the order. Industrial Valley Service says one of its most loyal wholesalers will occasionally suggest another wholesaler who stocks an item when it isn’t able to deliver. For Industrial Valley Service, that means getting the part on time, without the hassle of trying to find another distributor themselves. Instead of losing Industrial Valley Service as a customer, the loyal wholesaler has earned Industrial Valley Service’s respect. Being confident in the materials he does carry and in the service he offers, the loyal wholesaler is happy to help his contractors find other sources on the occasions he cannot help them.
# 2 Deliver accurately and on time. Without exception, this is the single biggest reason a contractor will stay with a wholesaler. Contractors count on receiving a delivery as ordered. They coordinate the people, machinery, temporaries, etc. to do a job at a designated time. Since labor is the biggest variable in a job, if the parts aren’t there, the contractor’s money is wasted.
And partial shipments aren’t enough. Contractors expect to receive the full shipment on time. Wholesalers who know there will not be a full shipment should call the contractor, even late the night before, to advise them of the problem. Most contractors would rather receive this late-night phone notice than find out the next morning.
For incomplete deliveries, wholesalers should provide corrective action. One contractor said that his wholesaler purchased parts at higher prices from other wholesalers or distributors to make the delivery complete. Hutchinson’s residential division uses a distributor whose motto is “we’ll never cause a missed real estate closing” because of parts not being there. This wholesaler will deliver upgraded materials before causing the cancellation of a new home closing.
Hutchinson, who is a bigger than some of the distributors and wholesalers they use, has a warehouse that for certain parts serves as the delivery point. A staff member checks the deliveries received and assembles the parts for the next several days’ jobs. This way, there is less likelihood of a shortage of parts.
One contractor said when the wholesaler doesn’t deliver; it’s the contractor who wears the black eye, the one staying up until midnight trying to rectify the situation. The same contractor said accurate, on-time delivery is more important now. In the past, contractors could get replacement parts and temporarily override the unavailable parts. Now, with the self-testing and self diagnosing aspects of HVAC equipment, this is not longer possible. Having the right parts is crucial.
Hutchinson says that to partially circumvent these situations, they ask for the relevant numbers of the responsible parties they deal with at wholesalers: cell phone, backup, after hours, and home phone numbers.
# 1 Know your contractor. To implement a truly effective service approach, the wholesaler needs to know his contractors. This means keeping notes on the contractor’s size, business focus, geography, and payment history, among other things. It might also mean keeping notes about hobbies. It’s not relevant whether you keep these notes on the computer, on note cards, or in a look-leaf binder. Just having knowledge of the contractor is critical to building that trust and business partnership that will keep the contractor returning. A tip: Use the notes carefully without ever letting the contractor, or any other customer, know your method of remembering details about your contractors’ business.
What about price? So does all this talk about service mean that contractors don’t care about pricing anymore? On the contrary, they do. Underlying this discussion about service is the assumption that one wholesaler’s price is as competitive as another’s. Contractors will drive half a mile down the street to get the best price if they have to. Service is now the differentiator, all other things being equal, and is the key to building and maintaining business by business-savvy wholesaler.
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