Cracking the Code Podcast
Author: Thomas Christian | Digital Marketing Coordinator at EGIA & OPTIMUS | June 14th, 2024

HVAC Buying Psychology

High quality and high efficiency come with a high price tag. Homeowners experiencing sticker shock can lose faith in the contractor and often look to the competition for cheaper, lower value options. That is where tiered pricing options come in!

This week on Cracking the Code, New York Times bestselling author Weldon Long discusses alleviating price concerns by empowering customers with multiple options so that they can find a system they can both enjoy and afford.

Audio Transcription

On today’s show, you’re going to learn all about the HVAC buying psychology.

Selling at the kitchen table is one of the most important things we do, but we have to understand the buying psychology that goes hand in hand with our selling psychology on this week’s show. I’m very excited about having this conversation. And the reason I’m excited about having this conversation is because it’s so important to our business today.

And, you know, I’ve been in this contracting world for a, for a long, long time, about 20 years now. And the contracting world, the residential HVAC, plumbing, electrical, Uh, it’s just given me a lot of amazing things in my life. And, you know, at this stage of my life, as they’ve mentioned, I’ve written several books, including, uh, the power of consistency and New York times bestseller.

And so I speak in a lot of different organizations, a lot of different industries. But it’s important to know that I come from this industry, everything I know about making money, everything I know about growing wealth and prosperity, I learned in the residential heating and air conditioning business.

And so I’m, I’m extremely grateful to the industry. It’s a wonderful business, a wonderful industry with a lot of really great people. And I’m very excited to talk to you today about one of the most important things that I have found in growing my companies. I’ve had about six, six or seven, maybe eight HVAC and plumbing companies, Over the course of the last 20 years.

And as Dave mentioned, I started the new one just four years ago, and we’ve had an enormous amount of success, which I’m going to share with you, but it’s because we understand the psychology of compromise choices. We know how to sell. In fact, I tell folks in our companies. We are not a heating and air conditioning company.

We are a sales and marketing company that happens to install air conditioners and furnaces. So because we have that kind of that different mindset, I think it really helps us scale our companies quickly and profitably as we would hope. So when we talk about sales, I took this about an hour ago for my service Titan.

This is my rolling 12 months, 365 days. And you can see there, the number is just over 13 million. This is our fourth year in business and our year to date so far this year, 12. 69. So we’re right there again, by the time we finished, December we’ll be just over 13. And so people ask me like, how do you do it?

How do you grow these companies so quickly? You know, I talked to folks who’ve been in this industry for 20 years and they’re struggling to hit 5 million or 2 million or 7 million or whatever the case is. And the reality is you have to focus on the sales process and elevate the sales process. To the same level of importance as the operations, uh, as an example If you had a really really busy day, you had 100 service calls stacked up You would probably never go to your accounting department and say hey Can you guys run some service calls for me today?

We would never do that, right? But when it comes to selling we find somebody with a pulse and a heartbeat And we’re like, Hey, you’re the sales guy, right? So, you know, we got to elevate the importance of the sales function. That is what I do. And this is why I have the success that I have in this industry.

And a huge part of that is understanding the psychology of buying the compromise choices philosophy. And as you’re going to see a little bit old school, a little bit retro with price cards, right? I know everybody’s going high tech these days. But I’m telling you, I have learned there’s a lot of value in the high touch part of this business as well.

So let’s talk about the power of compromise choices and using price guards to quickly scale your business and to dramatically increase your sales. So I want to talk to you about two little stories to give an example. Kind of what this compromise choices is this is a philosophy I’ve lived for 20 years in the HVAC world and even before that But uh as there’s a couple of great stories here, I think really illustrated So there’s a a chain of high end kitchenware stores in the malls all across the country called william sonoma You’ve probably seen them you may have shopped in them But they sell high end kitchenware and knives and you know Plates and pans and all the kind of stuff that you know a gourmet chef would want right all high end stuff You And a number of years ago, they decided at Williams Sonoma that they wanted to, um, to offer a bread baking oven for their customers, right?

Because I guess people are getting into baking their own bread these days, whatever it is. So they went out and they sourced a line of bread baking ovens that they thought was going to sell like hotcakes. It was very reasonably priced. It was very high quality, great reviews, uh, that type of thing. And so they went out and put them in every store across the country and they could not give them away, right?

Nobody would buy these bread baking ovens. So after a while they got to thinking, you know, maybe, maybe our customers expect a higher quality, a more expensive bread baking oven, because it was a medium priced, Oven, you know, it wasn’t like one of the super high end ones And so what they did they found another supplier of these ovens a higher quality a more expensive one a fancier one and they started swapping out all of the the inventory in the store and what happened though inadvertently is that Some of the stores kept both of the items on the shelf the the old one and then the new more expensive one What do you suppose happened?

To the less expensive one, the one that couldn’t sell before they started selling them lights out, right? And they learned a very important lesson about compromise choices Because when you give your customers, your homeowners, only one choice, you’re giving them a choice of all or nothing. You’re giving them a choice, but the second choice is to do nothing, right?

When we offer multiple options, we have the choice of the, you know, the, the high end, the mid range or nothing, or maybe even maybe even a basic option. My point is people, as we all know, 10 to kind of align down the middle. We don’t want the cheap guy. We don’t want the high end guy. We want the just right guy.

Now to do that, we have to incorporate some things in our, in our sales process. There are certain ways we can set this up and make sure that we’re capitalizing properly. On this psychology now, this is not just about having three options or five options or whatever There’s a lot more to it than just having a number of options.

You have to To to create your process around this concept. Let me give another example of a manufacturing client. This is a client of mine Uh, the client shall remain nameless, but about 10 years ago this client called me up and they said hey We are looking for someone to develop a sales training program for our 2000 dealerships 2000 dealerships You And I said, I’d be happy to do it.

So we got to talking and, uh, the guy eventually, I, I, I never asked budget. By the way, we’ll talk about more of that later. Why that’s important. One of the biggest mistakes you can make on a sales lead is to qualify your budget on your homeowner. I’ll explain it more later. So I didn’t ask budget, but this guy tells me at some point their budget for the program is half a million dollars 500 gram So they asked me to put a a proposal together and send it to them So I did I spent the entire weekend with my staff We put the proposal together and we sent it off on that next monday morning And my first proposal the first number in the proposal was 10 million.

Now I had no delusions whatsoever. They were going to spend 10 million, but I was pretty sure they could spend a couple of million if I just approached this right with a compromise choices philosophy. So they get the proposal for 10 million. They just about have a heart attack. 10 million. Didn’t you hear a thing we said?

We said our budget was half a million. And I said, well half a million dollars isn’t going to solve your problem You got 2 000 dealers going to cost at least 5 000 dollars per dealer per year, right? 5 000 dollars 2 000 clients. That’s 10 million dollars. Do you want the problem to solve that? They said well you’ve lost your mind And so then they invited me down to their headquarters to have this conversation They wanted me to explain this 10 million dollars and i’m going to say I had so much Extra stuff packed in there like tons of live events and a television show every week for their for their dealers It was just over the top and I knew they were going to spend that kind of money But again, i’m practicing compromised choices.

So I go down there takes two or three meetings I had a whole committee and it said it was a japanese owned company And so my final meeting was actually in front of the japanese decision makers and i’m presenting through Interpreters, which was a whole bizarre experience But I end up closing the deal for two million dollars, right and we go out to dinner the night of uh, After we sign the agreement we go out to dinner and there was this one guy.

His name was john It was what i’ve been dealing with primarily this whole several couple of month period And we’re having dinner and john turns to me i’m sitting next to him and he turns to me and he says, uh, He says mr. Long. He says you know what we were all thinking when uh, when you came down to two million dollars You In his mind, I came down from 10 million.

It didn’t occur to him that he came up from half a million, right? Four times their original budget. And I turned to him and I said, no, John, I said, tell me what you were thinking when you got me down to 2 million. He says, well, we were all thinking, whew, at least it wasn’t 10 million, right? That is the essence of compromise choices.

Hi, I’m Daryl Yeshinsky. Hey, I’m Bob Larkin. Many of our contractors meet with us monthly and you chances are have met with us monthly. We found that members have deeper and greater needs. So we came up with next level coaching. Which is we meet a lot more often and there is accountability to deal with some of the issues of money, growth, finding employees, having an exit strategy to get off this roller coaster.

These are the issues that contractors want answers to, and we can provide those answers in next level coaching. When you join Next Level Coaching, you’re going to find solutions that are easy to implement and logical. Most importantly, we hold you accountable to specifics. We’re going to meet twice a month and have specific to dos.

And with those specific to dos, we’re going to discuss and dive into your financials in a very granular way. You’re going to have a clear budget. We’ll be able to establish pricing. We’re going to help you create leadership programs that build your people. We’re going to help you find people. You may think of differing ways to engage employees that will keep them more involved by joining Next Level Coaching.

So if you’re interested in making more money, growing your company, finding good employees, And developing an exit strategy. Give Dell an hour call. We’ll be happy to talk to you about next level coaching, and we’re going to see you on the next level. That is the essence and a prime example of compromise choices.

Right people want to settle in the middle, but you got to hit them high You got to hit them high with the shock value, right? And so I want to talk to you about how this affects us in our business In the residential hvac plumbing electrical world. So let’s say for example that you have solutions for your homeowner I just made these numbers up Anywhere from 5, 000 to 15, 000 up to 25, 000.

And you’ve got this range of solutions for your homeowner. Basic systems, maybe a furnace only, up to more complex systems, higher efficiency, and so on. Well, obviously, let’s say you set your target for your average ticket of 15, 000, which is what it happens to be in my company. Our target is a 15, 000 on average ticket on, on a replacement opportunity, right?

Well, if I’m going to hope to get my homeowner at 15, 000, I got to have them comparing that to 25, 000, not to 5, 000 for obvious reasons, right? Because when they see 15, 000, you know what you want them saying? Whew, at least it wasn’t 25, 000, right? Now the question is, how do we get there? And this illustration kind of helps us understand that.

So, let’s say my target is 15, 000, which it is. And those two blue circles are giant boulders and they’re on a hill and I got a choice. I got to get that boulder to 15, 000. Got a choice. I can start at the bottom and using brute strength and trying to fight the forces of gravity and try to muscle that 5, 000 boulder up to 15, 000.

It’s going to be exhausting. It’s going to be very hard to do. But then I have an option of having a helicopter come into the top of the mountain and put the big boulder up there and I can use gravity and leverage in my favor and lower it down to 15, 000. Obviously, that’s going to be easier. So this is the strategy that we have to use, right?

Again, when this manufacturer came to me, they had a budget of 500, 000. I wanted to get them somewhere around a couple of million. So I had to hit him at 10 million. Right. It’s all relationship. It’s all a relational rather. It’s all contrast, right? So the key is I got to get my homeowner looking at that 25 seriously, not just showing it to them and saying, oh, now nobody ever buys this one, Mr.

Homeowner. That is the lamest thing I’ve ever seen somebody do. I’ve seen sales guys do that. I’ve been doing this for 20 years. I’ve done thousands of ride alongs. And guys will pull out the price cards, uh, whatever they’re looking at and they’ll say, well, nobody really buys this one, right? And they completely undermine their own ability to leverage compromised choices because basically they eliminate that one.

Like it didn’t exist. Now they’re looking at 15 Guess where they end up around 10, 000. It’s common sense. Ain’t rocket science. So this is the strategy I have to pursue. The question then becomes, how do I get my homeowner? to even consider a 25, 000 system. This is the critical thing because the 25, 000 offer on my case, that 10 million offer has to be legitimate.

It can’t be some throwaway offer. It has to be seriously considered as a possible option. And this is where people really screw things up. Right. You have to know how to position this to make the 25, 000 actually work. So there’s three key steps that you have to take to do this. I mentioned the first one already.

Do not qualify total budget, qualify monthly budget. In fact, when I’m on a call, I’ll say Mr. And Mrs. Homeowner without taking any syrup off the pancakes. What can you guys afford to invest in a monthly basis in this new system? I want a monthly budget because they’ll tell you 200 bucks, 150, 200 bucks plus their energy savings.

They can qualify for any system we have. Right with the 200 250 a month budget, but don’t qualify total budget. Why? Well, number one There’s about a 99 chance out of 100. They’re going to lowball you they’re going to give you a ridiculous number They may be thinking 12 But what are they going to say?

They’re going to say oh my neighbor got one for 8 000 and now you’ve boxed yourself in a corner How in the heck are you going to offer a 25 000 system? And remember we have to be able to offer that not because they’re going to buy it But because it puts the 15 000 in perspective You But I got to be able to offer that 25, 000.

If they tell me their budget is 10, 000. How in the heck am I going to recommend a 25, 000 option? They’re going to think I’m crazy. 25, 000. We told you 10, 000. So I don’t qualify budget. I think it’s one of the biggest mistakes that we make in our industry because you limit yourself, you box yourself in a corner and.

You box yourself in the corner of a lower number because they’re going to lowball you. Even if they’ll spend 14, they’re going to tell you 8 or 10, right? So that’s a big part of this. When you’re doing your survey, however you go about your process, you do not want to say, so Mr. Homeowner, how much are you looking to spend today?

Right? It ain’t going to work. You’re going to low ball yourself into a corner and you’re never going to be able to offer high end systems. And if you can never high end offer, high end systems, you’re not going to sell the nice 000 mid tier systems. That’s just the reality. I’ve been doing this a long time.

So, uh, you know, I’m speaking from experience. I know what I know. All right. So that’s number one. Number two, you got a price condition. You want to create the expectation throughout the course of your entire process that, Hey, you’re not going to be the cheapest company, right? Let me tell you something.

When you get to the end of a sales call now, just before or just after your homeowner sees your prices, you know what their first thought is? Their first thought is how much can I get them down? How much can I, how much, how much can I get them down off that price? That’s what people are always thinking when they’re dealing with contractors.

How do I get them down? If you follow a value based sales process like I’ve developed and we’ve developed here at EGIA, uh, you’re going to have your homeowner asking a whole different question. The question you want them asking at the end is, And I hope I can afford these guys. I hope I can afford these guys.

If you build that kind of value through your process, where they expect you to be more expensive and they’re hoping they can afford you, you have dramatically increased your probability of selling a higher end system. It’s just that simple. And one of the ways we do that, there’s a lot of different ways we do that.

Uh, EGIA, we have our entire sales training, uh, courses are hours long. I can’t go through every, every concept in this little brief webinar, but the, the overall strategy is to increase value and create the impression. You’re going to be expensive and have them think of themselves. I hope I can afford this guy, but I do want to give you one very powerful way to do it, and that is what the product demonstration, a product demonstration is where in my company and my clients companies.

We take the actual components of an HVAC system. I’ll use a gas flex, a filter dryer, a hard start kit, uh, maybe a piece of heavy gauge sheet metal, um, uh, a float switch, anything I can. I’ll take two pieces of line set. This is my favorite. Take two pieces of line set. and have one about six inches long, just a beautiful piece of copper, pure as a driven snow.

I take a second one and lay the brazing torch to it, right? And you know when it has that oxidization, all that black carbon forms when the, the brazing gases interact with the carbon and the oxygen, right? And so it turns the whole thing black and you put that brazing torch up inside that. That line set where you get all that black carbon and let it cool off and drop it in a sandwich bag, right?

And then flake all that stuff off. It looks like black sand, right? So I explained to my homeowner, this is what happens when nine out of 10 companies don’t do a nitrogen purge. Here’s what it should look like. And I talked to him about putting, putting a sand in their motor oil. They would never do it, but that’s what they’re doing.

And I talked about a lot of companies skip the step on the, on the, on the nitrogen perch, right? Because it adds a couple hours of work and people don’t want to mess with it. They just braze the hell out of it. Don’t worry about it. Right? So we show them these things. But the key is every time I show one of the components to one of my homeowners, I will tell them, Hey, does this increase the cost of the installation?

Absolutely. And if I was trying to be the cheap guy, I could probably eliminate this step. But I don’t want to be the cheap guy. I want to protect your investment and protect your family, right? So the whole time to this product demonstration, six or seven or eight different products, every time I show them one, they’re thinking, Oh, this guy’s going to be more expensive.

But you know what? They’re also thinking, they’re thinking, man, this is the company I want. I hope I can afford these guys, right? You see, you got to think about these things strategically. People ask all the time, what are you doing? People come up with a price objection. Hell, I was dealing with the price objection an hour before it came up.

Right. You can’t wait till the problem comes up. You have to head the problem off. We do this two or three times a day. They do it two or three times in a lifetime. We ought to be better at it than our homeowners. So you’ve got to condition them for price and you’ve got to get them to the point where they expect you to be more expensive and they see why you can’t just say we’re more expensive.

You’ve got to show them why the product demonstration is a very effective way of showing them exactly how a system should go together and how many companies will cut corners to lower the price. Right. And then also you have to kind of position yourself again. We want to have the ability to offer a high end system when we get to the end, not necessarily because, you know, we’re going to sell the 25 or 30, 000 system, but you will sometimes, which is great, but mostly I’m offering it to put my 15 to 17 to 18, 000 systems in perspective, right?

Here’s another tool. You can do it. All of you at some point in your process should be doing a home comfort survey. It’s just where you go through and ask about hot spots and cold spots, indoor air, probably airflow problems. You know, you’re trying to get a handle on the mechanical situation in the homeowner’s house, right?

So anytime you find a problem, let’s say for example, you say does anybody in the home have allergies, right? Oh, yeah, little Susan’s got allergies and i’ll ask about what the symptoms are and then i’ll say at some point Mr. Homeowner, is that something I should keep in mind when I design your system today?

And 100 times out of 100, they say, Oh, yeah, keep in mind, they’re not agreeing to buy it. They’re just saying, keep it in mind. Then I’ll go to airflow, hot and cold spots. Yeah, the master bedroom is really uncomfortable. Well, is that something I should keep in mind when I design your system today? Sure.

Right. Well, I can solve that with variable speed, maybe a ductless system, maybe some some ductwork modifications. My point is, there’s lots of ways I can solve the problem. What I’m trying to get is permission from my homeowner to keep those things in mind. And guess what? At the end of the process, I’m going to keep it in mind and I’m gonna design a system that addresses Susie’s allergies, the hot and cold spots, their concern for efficiency.

Because one of the questions you must always ask your homeowner, always, always, always ask your homeowner, Mr and Mrs Homeowner on a scale of one to 10. How important is it for you and your family to minimize your carbon footprint for future generations? You gotta ask that question. I guarantee it.

They’ll say 89 to 10. Right. Everybody. I don’t care if it’s like a, uh, the executive at a Texas oil company. He’s going to say nine or 10 because everybody’s concerned about the environment. Right? So once they say eight, nine or 10, it’s important. I’m going to say, well, is that something I should keep in mind when I design your system?

Yeah, I guess so. Well, they just told me to keep in mind, high efficiency, variable speed, indoor air quality, just by virtue of keeping all those problems in mind. When I designed the solution, it’s going to be a 25, old solution. just the solutions. Those problems are expensive. Now that doesn’t mean they’re gonna buy it.

That just means I want to hit them with the shock value and then we’ll bring them down to a number they’re comfortable with. Right? We got to get them to the top of the mountain first and then ease them down into a number they are comfortable with. But here’s what I’ve learned. If you go back to this drawing right here, I’ve been doing this for 20 years.

I can’t even tell you how many thousands of leaves I run. But I guarantee you, if I start at 5, 000 and start pushing that, that, that boulder up versus at 25, 000, letting it come down, it will always stop at a higher number when I start high versus starting low and trying to upsell, which is just lame to begin with, right?

So you got to make sure that you are not qualifying total budget. Leave that door open. Even if they throw you a number, just kind of ignore it, right? Just like my guy at the manufacturing company, he threw out the half a million dollar number. I just ignored it. I didn’t say, Oh, you can’t do it for that.

Just like, okay, you know, wait till we get the end. They don’t know what they don’t know. Right. You got a price condition, right? You got to create the expectation. You’re going to be expensive Everything you do in the house should communicate high value product demonstration super important, right? And then i’m going to go through my survey and i’m going to find three or four of the problems in the house that the Homeowner has including efficiency indoor air quality airflow, whatever it is And i’m going to say is that something I should keep in mind when I design your solutions and they’re going to say yes Well, guess what I’m going to do.

I’m going to keep it in mind and design a solution for their whole set of problems. And just by virtue of being so comprehensive and addressing so many problems, it’s going to be expensive, right? It just is. So that’s how I set all this up. Awesome content right there as always. Now, if you like this content, please share it with your friends on Facebook.

And if you’re not a member, go ahead and click the button below to get a free 30 day trial of our entire contractor university platform. We’ll see you next week until then, my friends. Bye bye for now.

Subscribe to the “Cracking the Code” Podcast