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Investing in Planned Replacement: The Questions to Ask to Get the Answers You Want

The potential planned replacement market for rooftop units is $15 billion strong – based on the number of systems the Air Conditioning and Refrigeration Institute says were shipped in the late 1990s, which are now reaching the end of their projected life span. This is an excellent opportunity for commercial HVAC contractors to increase their profitability. Yet how do you convince a customer to replace a unit that still works? You can start by looking in the right places and asking the right questions.

Contractors need to develop a compelling business case for planned replacement by showing customers the benefits of replacing HVAC equipment. Show them how they can save energy, reduce maintenance costs, enjoy peace of mind and take advantage of the many other benefits new rooftop units can provide.

Question the Five Critical Factors for Replacement

First it’s vital to determine that a project is a good candidate for planned replacement by assessing the condition of the customer’s equipment and building, as well as their business needs. An equipment survey will reveal if the HVAC equipment is in good condition (the unit and its components aren’t expected to fail in the immediate future), fair condition (operational, but either the units or components will need repair or replacement within two to five years) or poor condition (the unit is in need of immediate repair or replacement).

When evaluating the replacement of HVAC equipment, it’s important to know the condition of the components that are the most expensive to repair. Focus your attention on the condition of:

    1. Cabinets: Are any panels missing? Is the paint in poor condition? Are any holes rusted through?

    2. Coil Section: Do the coils have adequate airflow? Have the coils been maintained and cleaned? Do the coils show signs of corrosion or fin damage?

    3. Compressors: Are they leaking oil or refrigerant? Have they ever been replaced? Are they running at correct temperatures?

    4. Heating Section: Are there gas leaks? Are the heat exchangers corroding?

    5. Motors: Do they show wear or corrosion on the housing windings? Are they running hot or making excessive noise?

If any two or more of these critical – and expensive – components need replacement or repair, there is probably a convincing business case to replace the entire unit. Taking photographs of these findings – the condition of the rooftop unit, curbs and ductwork – will help you demonstrate the condition of the equipment and building to the customer, and aid in the offsite design of a solution. Never underestimate the impact of an image of HVAC equipment that is destined to fail, or will cost the owner excess money to repair!

If there is the potential to replace the units, an assessment of any changes to the structure or use of the building will also provide valuable information. If possible, it’s also a good idea to recalculate the building load to be sure the existing equipment isn’t over- or under-sized.

Ask What Your Customer Really Needs

Even if the equipment is in poor condition, your customer may have other business needs that take priority. If their building needs repairs beyond the HVAC system, or the customer is getting ready to retire and doesn’t want to spend the money required, now may not be the time to discuss HVAC replacement; however, an HVAC replacement discussion at a future date may be met with great enthusiasm. (Timing is everything, so remember to follow up later, possibly at the next year’s scheduled maintenance service.) Exploring the customer’s business and HVAC performance needs means asking these questions:

  • How is the current HVAC system meeting humidity and temperature needs, and is dust or noise a problem?
  • Are customers and employees comfortable, or are they complaining about comfort?
  • Is the health of the building’s occupants a pressing concern?
  • Does your client need or want to lower the cost of electric bills, system maintenance and repair?
  • How many years do they anticipate staying in the current building? Are any changes planned to the building or its interior layout?
  • Which days and times are best for maintenance?
  • Is the customer familiar with equipment finance leasing?
  • How does the customer measure a successful investment? Simple payback, return on investment, net present value, internal rate of return?

It’s also important to know the current status of your customer’s business. A simple “How’s business going? Great, average or could be better?” can help tell you if your customer is ready or able to invest.

Developing the Business Case

When you have the answers to these important questions, you will be able to develop the business case for planned replacement by defining the value proposition. This is a clear statement of the tangible benefits the customer will receive if they buy your products and services. A good value proposition will always address the customer’s most important needs and concerns.

Vague or non-targeted value propositions, such as award-winning and patent-pending technologies, don’t show the customer benefits clearly enough. Some examples of good value propositions include:

  • Reducing the customer’s average monthly utility costs by $500
  • Eliminating HVAC-related repair costs for the next five years
  • Limiting downtime with a guaranteed two-hour response time for service calls

Your value proposition will also include information about available utility rebates, project financing and warranties. Talk to your HVAC manufacturer about how they can help you in these areas. Lennox developed its Continuous ComfortSM Planned Replacement Program to help contractors reduce costs, increase customer satisfaction and even out the seasonality of HVAC demands.

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