When we buy a product or a service, the first thing we do is check if it’s worth the price. This has become a challenge today, especially with online platforms where product prices are not available for the consumers to analyze. In this episode, HVAC eCommerce experts Justin Riley and Noah Carter from UpFrog talk about this sore spot for contractors. They sit with Tersh Blissett and Josh Crouch to share their insights on the importance of pricing transparency in any industry. Listen in as they provide solutions for contractors to overcome these problems while keeping their business models intact.
HVAC eCommerce Business For Beginners With Justin Riley & Noah Carter
We are here with Justin Riley and Noah Carter from UpFrog. We are going to talk about a subject that can be a sore spot for contractors. That’s whether or not you should have pricing online or on your website. This is something that in different Facebook groups gets heated real fast and people are very rooted in their stance. Justin and Noah have been working on some solutions to help contractors figure that out, but not ruin their business model in the process. Justin, do you want to start and give us an overview?
It’s such a polarizing issue. For some reason, people think that it’s one or the other. It’s either we’re an online pricing company or we’re not.
Even if you did filters or something like that, it’s still very polarizing.
The people that are the most negative towards it haven’t used it. They don’t have the data behind it. They think that people are just buying random systems online, and you show up at their house to install them.
Can you take us through a real snapshot of your background? I know your background is in big data. I want to make sure people know that you’re an expert in this.
I believe that hunches in business are good but data is king. I can have a hunch and you go out and try something. I’m a trier. I try a bunch of stuff. The data ultimately gives you what works or what does not. When we look at the data, the legacy model, the online model of actual online pricing, tech turnovers and replacements or that method, we find that there’s a much larger segment of consumers that are shopping for replacements way before they replace it. If you’re somebody that just does tech calls and tune-up, and pitch your replacements off tech leads, you’re missing at least 50% of the replacement markets.
Here’s something that I found very interesting. There’s a book called They Ask, You Answer. It’s answering the questions that consumers have. He gives some stats on there like how many times somebody goes to their website and the first button they’re looking for is pricing. If they don’t see pricing, they jump to another website. In our industry, they’re going to jump a lot because it’s not there.
There are three questions that come into a consumer’s mind when they hit your website. Can these people help me? Do they offer the services that I need? How much is it going to cost? How fast can it be fixed? Those are the three things. On all of your websites, I suggest you answer those three questions. If you can do that with a contact form or some type of call to action, you’re going to capture a lot more customers than you ever thought possible. Your conversion rates will go much higher. When we go back to the data side, we look at, “How much does it cost to acquire a brand new customer?”
We run some ads. We pay for SEO. We get a tune-up customer. We go to their home. We perform a tune-up and say, “The system looks okay. Maybe a little pound of refrigerant here to rejuvenate a capacitor.” In the next 2 or 3 years, you’re probably going to need a new system. If you take that cost of acquiring that initial lead, plus the time and energy it takes you to maintain that customer for the entire time, which can be a year, sometimes three years. You’re nurturing that customer. You get to the replacement fees. The cost is 2 or 3 times more.
When you look at business growth, there are two types of business owners that I find out there. Guys that are generational where you’re maintaining a business that’s been there since the ‘30s. It has slower growth. They don’t need to. They’ve got a profitable business and that’s great. If you’re a new younger company and you want to take over market share, customer acquisition is the number one thing I look at. How much cheaper can I get a customer and acquire it to bring it into mind? The initial cost plus the cost for acquisition of a lead, it’s generally $2,000 to $2,500 if you map out the entire process. With online pricing, we’re consistently getting new installs between $400 and $600 every day throughout the country. When you look at fuel, growth and taking market share, there is no better system that’s out there. The reason why I believe that it works so well is that consumers want to know.
Otherwise, they are going to sources like HomeAdvisor or Angi Leads. They are getting that information from a third-party source or study. They are taking it from a study back whenever. They don’t have the contractor’s best piece of mind with that information. They are just trying to push whatever they want so they can get the lead into their system and funnel.
I’m not the smartest guy in the world but I have been surrounding myself with incredibly smart people over the years. I’ve been in this industry for many years from startup to this position now. Surrounding yourself with people that think differently or don’t have a bias is so important. That’s why I’m so excited to have Noah as my partner in UpFrog because he doesn’t have this industry bias.
He doesn’t have this, “This is the way we do it because that’s the way it’s always been done.”
Justin and I were discussing, you don’t have twenty years of tainted legacy model in your head. You’re thinking wide open as a consumer more than I am as an HVAC guy.
You’re the next upcoming generation of homeowners. The Millennial age group was the predominant homeownership group that has taken over from the Boomers. We talked about hiring that age group. We have to look at how to market to them too because they have the access. Thaddeus from HVAC Success Secrets sent me that the average person has 8.4 social media accounts, which is insane to think about.
The data collection from there allows more people that whenever they’re in the market for a new system, they don’t necessarily want to buy. They’re more looking for information. When they search that, it allows you to track that and you can use it on their social media platforms, all 8.4 of them.
What is the average cycle that you’ve seen from the data source, from the first time they search to purchasing?
Fifty-four percent of the replacements that we end up doing are 180-day cycles, from when a consumer starts their journey to when they decide that, “I might need a new system.”
This is not the on-demand like they just broke the compressor.
That’s about 10% that we find. Other numbers may differ, but we have a much different view on things from our data side that we watch. I think it’s wise. It’s a multifaceted approach. When I started back in 2015 with online pricing, I launched on February 2nd, 2015. My first ever version of it was simply a test to sell from wholesale equipment. It was never to go down this path. I thought when I woke up the next day, I’d have a Ferrari in my driveway because I was a new eCommerce millionaire. I put all these products on the page and I’m instantly going to have all this success. It took me about 3.5 to 4 months to sell the first system online to figure out how it worked. There were two key components of it that now I understand are the fundamentals.
Number one is the traffic that’s driving through the system. I prefer cold traffic. Cold traffic meaning, not my customers. I’m going to grab somebody else’s customers. The second thing you need is to change the marketing tone in messaging. If you look at every marketing collateral that’s put out, it’s all about doing it today, 24/7, seven days a week. We’re the best company. Do it today.
When somebody is in the awareness or consideration phase of the funnel and you’re looking to grab that consumer, the marketing collateral we put out is, “I appreciate you using our online tool. This can be confusing. We’re here to help.” We open the conversation up with that. I can tell you that customers love it. If you come out and you market directly towards somebody that’s in that phase, they’re going to hit stop. They’re going to go away.
It feels salesy.
I’ve purchased a new truck. While I was at the car dealership, I indirectly knew my salesman, so we were talking more about sales than we were about the vehicle. He said, “The job now of a car salesman is more to get you in the vehicle you’re looking for than it is to sell you a vehicle.” Most people when they get five calls from a dealership get annoyed and they go to another dealer even the same brand. They’re like, “I’m not going to Fred Anderson. I’m going to go to another Toyota dealership and buy there.”
The fact of people being pushy instead of getting information pushes a lot of customers right out the door. That is where they land on our doorstep. That’s how you land them as a new customer. It’s how you steal market share from other guys because they’re being pushy. They’re offering financing deals and coupons. Instead, we’re offering value and we’re providing answers for the consumer. The consumer indirectly wants to buy from you because you answered all their questions.
The quickest way to consumer trust is through transparency. I believe that. This is not a takeover. Every one of our clients run the traditional model, as well as the online pricing model, side-by-side. We grow much faster on the online side, but they still maintain the same business. What we find is I would say 12% to 17% higher average job ticket. It’s even more than that now.
That’s the exact opposite of what we hear.
It was scary the first time putting our prices out. The first time I did it, I created a fake company name to put it out there because we didn’t want to hurt our reputation. I can tell you that it’s been nothing but unbelievable to see. We took a contractor out in Arizona. He’s a great young guy. He’s killing it. He took over a family-owned business. He started with us just a few months ago. His average ticket was $7,800 for an install, train dealer. He’s not making much money. In January, his average ticket is $14,980. It almost doubled his average ticket in 2.5 months.
If you think that with an online pricing tool, leads will come in and sales are going to just come flying in the door, it doesn’t work like that. You have to nurture it. You have to massage those customers. They are going to be texting you. You’re opening up a communication line with them that’s very different. The same things that provide value for the other side of the business also provide value here. The people that I hear are the most negative against it are the most uninformed people about it. I’m an open book. Anybody that wants to see the data, I’m willing to show them. I believe that this is similar.
Many years ago, they said they will never take our thermostats. What happened? Eighty-five percent of all market share of thermostats are not sold by HVAC guys now. It didn’t ruin it all. These are the same people now who are telling us that online pricing is the wrong thing. It’s hard for me to believe them because I watched the Nest and everybody moves in and grabs market share in our industry. I follow the data.
Do you know how many phone calls we get now? We don’t install Nest products particularly, but we’re a Nest pro-dealer. We get so many phone calls from people who purchase and they forget to connect the wire. I’m a pretty handy guy. There was this jumper wire. I was like, “There’s no jumper wire on this Nest. I put it on it and it doesn’t turn on. Maybe I shouldn’t ruin the apartment’s HVAC system. Let’s go ahead and call a tech.”
The consumer wanted it. In business, I like to be where the wind is blowing towards me, not away. If we look at the last few years and the market sentiment or the way people want to shop, I promise you that this side of online transparency is growing and the other side is shrinking. It will never go away completely. There is no reason for the legacy model to go away. The average business grows between $1.1 million and $2 million a year when we run their marketing through the online portal. That’s standalone. Nobody believed us.
How long have you been doing this together?
UpFrog was formed back in October of 2021. It’s the same system we have used since March of 2020. The one contractor that we have that’s been with us since then has sold over $4.2 million of online sales. We were doing this before COVID. It wasn’t just the COVID thing that accelerated it. We were doing it beforehand. One of the big benefits that make the system so successful is we advertise in mediums that allow us to get eyeballs all year long.
I don’t want to advertise in a space where I’m hindered by contextual search. You’ve got your Google Maps, your pay-per-click and your LSAs, which are roughly 80% to 85% service prepare leads. That’s what they are. That’s the traffic that comes through them. People say, “What am I supposed to do when the shoulder season?” The good thing about Facebook and their social and different display ads is you don’t need the consumer to be typing in a search for your ad to show up.
Does it need to be remarketing on Facebook?
We don’t do as much as we used to as far as remarketing. If you have a good message that people are receptive to from the beginning, you can capture that lead. There are much more effective ways to market them in affordable ways through SMS, email, different channels or direct mail. We’ve built a mountain of leads. The one contractor we have in Texas has almost 6,500 leads we’ve generated for them. That’s 6,500 prospective customers that are in his funnel.
When you count a lead, that’s somebody who’s replied to you. It’s not just the cold calls going out.
They’ve shown an active interest. They have answered thirteen-some questions through a form. Here’s the secret. The huge benefit to doing an online system is data, privacy laws and all these different things. When we get a lead, it logs information in that consumer’s record. When Joe from Texas sends a sales tech out there, we know what pages they looked at, “They’re interested in the 16 SEER. They visited it seven times. They went to the financing page.” Now you’re showing up at the house.
Instead of a conversation that is like, “Let me check out your system.” It’s like, “What can I measure your home for? What system were you looking at?” They said, “We were looking at the 16 SEER but we had Bob’s Plumbing and HVAC out here and they told us that 18 SEER was better.” “Did Bob’s give you your price upfront?” “No, they came by here.” Why wouldn’t they give you your price upfront? They said that they’ve been in the business since 1970 and they’re the most trusted, but are they?
My questions at every install are the same. How do we give a price online and protect ourselves and protect ourselves, and not come back to that, “By the way, it’s going to be another this and that?”
That’s the fear piece and it’s ingrained. We’re very descriptive in what’s included and what is not included. That’s important. Maybe one of those is online prices. Every single job that’s out there is more because as you know, return airflow, static pressure, venting issues and accessories. Not once do we have consumers complain like, “You’re raising your prices.”They say, “We thought so.”
They’ve already said yes initially because they’ve already gotten to the point where they know what the price is about or what the payment’s going to be about before you ever step foot. They’re more comfortable and trusting of you before you ever get your technician over there. When you do something like this for a client, is it a plug-in that you’re putting into their website or are you building a website for them?
That’s the easy stuff. We’re not trying to convert your already customers to this new system. We don’t need to do that. We scrub lists. We put an audience list through our consumers. We mark it and we exclude all of those. Your everyday customers are not getting served our ads. We don’t want to come in and it’s not a takeover. When people see it going into their website, that is for sure cannibalizing some of that traffic that’s there. We can do anything with tech but I can tell you that it works better as a standalone solution.
How long is the turnaround time from getting something like that set up? How much time does it take from the business owner? Sometimes that time is valuable. At the same time, I want to make sure that the price is right of what we have to charge.
The average turnaround time from the minute you sign a contract, say you’re interested in a product and getting your first lead, should be 7 to 10 days. It’s a pretty quick turnaround. Here, it will be even faster but we’re looking for a different system, but for now 7 to 10 days. From the contractor, we know small guys are normally busy. Especially smaller guys with 2 or 3, they don’t have any time. We’re willing to take meetings at 7:00 PM Eastern. We’ll do stuff like that and work around the guy’s schedule. If he’s got a service I can book, that’s perfect. I’ll pull that price, some contents, some installs, pictures, basic stuff like that, nothing really taxing.
Most of them have it. Connecting your social, we have an app for that. All that stuff is pretty easy. One thing I wanted to go back to was about customers. When you get to their house, it’s all about the way that we offered value in the beginning. Remember, we were never pushy. We offered all the transparency. When they get there, they don’t think they are getting upsold. They think they’re getting more value.
Most of the time, we hear from our contractors that they were happy with a duct cleaning or they didn’t want to have dirty ducts anyway. They didn’t like the airflow. In this room, you go in and it’s blocked off. All these people have problems. If you’re not pushy, you’re there to solve their problems. All of a sudden you find that they were interested in a box. You get there 89% of the time.
If you’re asking the questions that you truly care about solving the problem that they have, then it’s going to bleed through there.
That’s what makes it special. The barriers are gone. The time you get there, we’re an ally for them. We’re empowering them. They can ask questions because it’s like, “All of our prices are here. Let’s talk about which one will work best for your home.”
What happens now is you go in and you spend two hours with a customer on a consultation. You’re like, “$15,000.” Now you’ve got objection, objection this, objection that. This breaks down the barrier from the front end. That way you don’t have to waste your time on somebody who’s going to buy or they are going to buy the cheapest. That’s the way they are. They don’t value it the same way. You get rid of that entry barrier.
I built my ServiceTitan books back in 2015. We were contractor 45 or so when we onboarded with them. There were no Pricebook Pro or tools like that. We had to build our own. Going into this, there are a couple of big hurdles. Anytime you do online pricing, it’s Pricebook. How do you manage your Pricebook to keep it in sync?
What happens when equipment increases?
We have a solution on the backend. We simply reupload the raw price of the equipment and it updates everything online. We understand that that was our biggest hurdle in onboarding. In order for us to help more contractors, we needed to make our system more efficient. What we went ahead and did is we built Pricebook for every single brand that’s out there. You simply go in and select, and then instantly it gets uploaded into the system fast and easy. I’m shocked by the number of contractors that don’t have a Pricebook.
They are variable pricing. That’s a big no-no to us. We like to work off. People tell us all the time, “Where should we price our equipment?” They get into the conversation, “This Facebook group says we’ve got to price this way, this and this.” I said, “How about we look at your business and we figure out what your static overhead is? How many guys have you got? What’s your efficiency rate? How many installs can you do?” The most important factor that we always go to first is profit first, “Tell me how much money you want to make this month, then I’ll tell you what you need to charge.” You can’t take gross profit to the bank.
I love the fact that you do profit first. The whole thought process of the vanity numbers in general versus the bottom-line number, then we take it to the bank.
What I like as a consumer is my buddy didn’t get a different price than me. That would throw me off of this industry. Remember, it’s brand new and green. I’m looking at this like, “Why is this the one place where things cost different prices?” That’s a little funny to me. I’m here to fix that.
The funny thing is that the people that say that they don’t want to put pricing on their website if they stepped outside of that little bubble and looked at how they buy things now, I guarantee you that most of them are shopping on Amazon or buying groceries online. They like the transparency and the convenience. They can see reviews of the products before they ever commit to something. It’s easy.
CarGurus have a very transparent price. They’ve got an above below market. When I shop for a car, I didn’t go anywhere but there. If I find that that was a trusted source and they offer transparent pricing and I can see the price of a car with an HVAC system, that’s where I was like, “There’s a gap here.”
Where can people reach out and find out more about you?
You can find us at UpFrog.io. We have a Facebook group, HVAC Digital Ally. Our mission is to help as many people, whether they are a client of ours or not. You can find us there.
Justin says he’s an open book. He really is. We talk almost every day. My wife jokes. She’s like, “I don’t know what you got going on with him but maybe I have to watch out.” He’s got such good information. If you guys have questions, reach out.
Here we are, we are so blessed to be involved in an organization and industry where homeowners have fallen in love with their homes again. The amount of investments that have been put into homes is a ladder.
Thank you for spending some time with us.