Originally published in the News on May 22, 2017
There’s nothing consumers love more than a deal. Find a way for them to save money, or even get more for their money, and they’re putty in your hands. This is why rebate programs can be such useful tools for home-performance contractors. Over the past few years, however, contractors have observed that rebate programs are diminishing or disappearing altogether.
In fact, Will Doyle, president of Cherry Hill, New Jersey-based Allied Energy Efficiency Experts — the U.S. Department of Energy’s (DOE’s) and U.S. Environmental Protection Agency’s (EPA’s) 2016 Energy Star Contractor of the Year — named diminishing rebates the biggest hurdle for his business.
“They changed the Home Performance with Energy Star (HPwES) program to offer less rebates and different borrowing terms,” Doyle said. “It made homeowners less inclined to invest in programs like this. We’ve had to find ways to offer better quality within the same price range in order to convince homeowners to be part of the program. Previously, we only focused on the energy efficiency. Now, we have two main focuses for the homeowner. We conduct an interview to find the right solutions for the home’s IAQ and come up with a custom solution. Also, we began including a 10-year labor warranty with every project we do, so the customer has 10 years of peace of mind where they don’t have to worry about anything.”
“The [rebate] programs are great, but they may not be here forever,” added John Kane, senior vice president of sales and marketing at Allied. “We want to build something without subsidies and without government push that stands alone as a product and a value worth having.”
Lakeside Service Co., located in Brighton, Michigan, has rebates integrated into its sales software. The company uses this method to position Energy Star equipment at a better net price point, according to John Boylan, general manager, of the company.
“I think rebates are important in driving consumer awareness,” Boylan said. “Rebates alone don’t sell home performance. Home-performance professionals still need to demonstrate that home-performance solutions will solve homeowners’ problems. These rebates can give clients a reason to make a decision instead of waiting.”
Boylan said he doesn’t think the rebate programs are diminishing per se, just changing.
“I believe program administrators are constantly trying new ways to engage different homeowners with the Home Performance with Energy Star program,” he said. “One of those strategies has been to decrease a rebate on one product while increasing it on another. A good example in Michigan is a reduction in the rebate amount on a gas furnace but a 100 percent increase in high-efficiency boilers. A high rebate amount helps, but I really believe rebates are the frosting, not the cake.”
With or without rebates, Lakeside Service Co. sells home performance the same way, Boylan noted.
“In our current model, we never start with the rebates,” he said. “We always start with the testing to build value and credibility. If you perform that part as a professional, the rebates are only there to help close a deal on the spot. When a client asks about a rebate, we always inform the client that when we complete the testing and discover the right solution, we will find the most incentives available.”
A WORLD WITHOUT REBATES
Rob Minnick, president and CEO of Minnick’s Inc. in Laurel, Maryland, said he doesn’t use any rebate programs to incentivize his customers into closing a sale.
“I don’t think rebates are important,” Minnick said. “They’re low hanging fruit and tend to guide customers to get only the items they need to receive the most money back on the rebate program. It takes away from the true reason for a home-performance sale, which to us is health, comfort, and safety. Efficiency is the cherry on top. Get the first two items done and the second two will happen. They will also reduce doctor visits, emergency room visits, and days off from work or school. The list can go on.
“Rebates are not looking at the whole,” continued Minnick. “Plus, human behavior is a large issue. For example, some customers think that since they have efficient lighting, they can keep all of their lights on all day, every day.”
Jennifer Kieda, COO of Standard Insulating Co., in Marcy, New York, and a member of Building Performance Institute Inc.’s (BPI’s) board of directors, said her company took significant advantage of rebate programs when they were available.
“There was a program available in my area through NYSERDA [New York State Energy Research and Development Authority] that offered homeowners a 10 percent rebate on qualifying energy-efficiency upgrades up to $10,000,” Kieda said. “It’s not available anymore, and we have not seen any change in our revenue stream since that program went away. We also knew it was coming and anticipated it happening, so we didn’t heavily rely on it for sales.
“We found that customers didn’t really identify with that rebate,” she continued. “In most cases, we found they just thought the rebate was coming from us directly and that we could have just easily reduced our price for them. We didn’t really find that it was a closer on our sales.”
Standard Insulating Co. is currently working with NYSERDA on subsidy programs, Kieda noted.
“These are different than rebates,” she said. “When you’re getting involved with subsidies, which pay for 50 percent of the work, then that’s a make or break, obviously. When you have a $5,000 retrofit, and the subsidy pays $2,500 of it, that can have a very big impact. But I don’t necessarily consider that a rebate program because the subsidy helps low-income people make energy-efficiency improvements. A true rebate program is a small amount given back if a customer goes forward with a project.
“I don’t believe rebates are important because I think the perception of customers is that they’re working with contractors,” she continued. “Rebates are something people associate with just a mark-up and then a mark-down. Even when we were working with the state and the rebate came directly from the state, our customers’ perceptions were that the rebates were coming directly from us. So, often times, we would be asked, ‘Can we just eliminate the rebate and reduce our pricing,’ which, of course, because of the way the rebate program was established, we couldn’t do. Because of that reason, we found it didn’t have a huge impact on people.”
There are several ways for contractors to successfully sell home-performance principles.
“Market the concept of home performance and its value to your staff first,” Boylan advised. “It’s always easier if you have a team behind you. Create simple collateral that makes it easy for your staff to communicate what it can do for your clients and share every success story with your entire staff. It’s also beneficial to have a building science professional that is experienced and has integrity. Be consistent, and, above all, you need to believe it is the right thing for the client and your business for it to succeed.”
According to Boylan, the top motivator for customers is the company’s money back guarantee.
“We guarantee we will solve customers’ issues, or we give them their money back,” he said. “Usually, we are solving a problem that no one else can figure out because we were the first one to perform complete testing. Take away the fear of wasting money, and the decision becomes much easier. We also offer lots of options for financing.”
Minnick said the best way to sell home-performance upgrades is to educate homeowners and offer a money-back guarantee.
“We’ve found that our 100 percent money back guarantee is the top sales closer,” he said. “When a homeowner tells us the other guy did not mention any of the home-performance items we discussed and the system he quoted along with the other Band-Aids [what we call IAQ components] will solve those issues, we ask them, ‘What if it doesn’t solve those issues, then what?’ This turns into a nice in-depth conversation with the customers who care.”
Kieda said her company’s best practice is not to pressure the customer into closing the sale.
“When we go out on a call, we first identify whether or not there is a need,” she explained. “In some cases, people may think they have a need for our services because they have a pain. So, we find out what their needs are and learn more about their problems. Then, we give them a ballpark budget on what it may cost them to fix it. At that point, if they really bulk at it, we give them some tips to take care of some things on their own. We don’t pressure them. Often times, we won’t even provide them with a complete audit or a whole-house evaluation because we don’t like to put them into that pressure mode.
“If we pass that part of the presentation, and we feel they’re comfortable with having the budget to be able to fix things, that’s when we go through and identify the issues with them,” she continued. “We don’t push on them what we believe is their worst issue; we let them tell us what their issues are. It’s their house, and we want to fix what they want to get fixed. We essentially focus on what the customers want more than what we believe they should have. That makes all the difference in the world. A lot of home-performance contractors know better than anybody what a house needs, and they kind of try to cram it down homeowners’ throats instead of listening to what their actual desires are. Once that happens, you establish trust, which is something that is generally lacking in the construction industry. Once trust is established, it’s much easier to pick up further improvements later on down the road.”
Kieda noted her company doesn’t necessarily do the whole house evaluation in the initial hit, which differentiates it from many other contractors.
“We help break it down for people and make it comfortable for them to make the improvements at their pace instead of hitting them with a $15,000 whole-house work scope,” she said. “We help them identify what their priorities are, and, in some cases, we can spread that over a year, two years, or three years to meet the goals that they’re looking to do without any pressure.
“Our experience with home-performance is directly related to people wanting to save money,” she added. “Often times, they’ll feel discomfort, but that’s not typically something that causes them to pull the trigger. If you can help them identify that they’re going to save money, you may gain references to those in their neighborhoods, friends, or families who have experienced it directly, and that seems to be the biggest reason people move toward home performance.”
Publication date: 5/22/2017