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Contractors Can Gain More Profit Through Energy Efficient Remodeling

Mark Mitchell — Tue, 01 Feb 2011 11:35:42 +0000

What you can’t see, in fact, can hurt you, especially as it relates to home construction.

According to the government census, there are nearly 110 million occupied homes in the United States. Leading building material manufacturers state that up to 70 percent of these homes are not insulated to current energy code requirements, making them less energy efficient than a new home. However, making matters worse, most new homes being built today are constructed in accordance only to the lowest possible legal energy efficiency standards. While it may be legal, it does not address one of the biggest complaints of homeowners…comfort. More than half of these U.S. homeowners report at least some dissatisfaction with their home’s comfort level.*

Making a home more energy efficient not only makes it more comfortable to live in, it also enables homeowners to lower the cost of maintaining their home year-round and for years to come. In fact, 73 percent of homeowners say they are willing to pay more for an energy-efficient home.** And with the government’s energy tax credits, homeowners can save even more money when executing energy efficient projects for their home.

So, how do professional contractors turn that into sales? By becoming an energy efficiency expert, and highlighting it on each of their remodeling projects. When contractors provide a more holistic service offering (versus just a low price), they have the opportunity to add energy efficiency to their customers’ remodeling projects and enhanced profit to their business.

Of the 25 million homeowners involved in remodeling projects***, many could include energy efficiency enhancements if homeowners were just made aware of their options. This profit enhancing opportunity for the contractor is often lost because many contractors focus on reducing project costs, rationalizing that they must compete with other contractors that typically lead with price. Homeowners have high expectations, stating that they want their contractor to be more of a consultant and provide deep expertise to their home’s project. These homeowners are more willing to pay additional dollars for the services and product attributes (including energy efficiency) that these contractor’s enhanced solutions usually provide. Contractors who make energy efficiency a priority and utilize this expertise to differentiate themselves from price-centric contractors can secure more jobs and more profit per job.

For example, roofing contractors head to the attic to check out the backside of the roof deck before they quote the job. While in the attic, they could check the attic insulation level and provide a quote to add attic insulation to optimize the home’s energy efficiency. Most big box retailers make this service easy… as they have a rental program where professionals (and DIYers) can rent a blowing machine along with the blowing wool insulation.

This same approach could be used for windows and HVAC contractors, as their homeowner sales pitch focuses squarely on enhancing energy efficiency of the home. Adding a tag-on insulation project or air sealing solution would help optimize the energy efficiency of the whole house. Attic or crawlspace retrofit insulation applications, along with air sealing are the easiest and usually most cost efficient ways to add on sales to a home retrofit/remodeling project.

So what about other remodeling projects? Kitchen or bath remodels usually focus on beautifying with cabinets, countertops or flooring, but they don’t have to stop there. When opening the drywall, caulk and seal the cavity (to reduce air infiltration) and then re-insulate with the highest R-value available. New, more energy efficient windows or doors add to the look of the room and can make it more comfortable by reducing drafts and adding thermal performance. When re-siding a home, adding new windows to key sides of the home, a new layer of foam board insulation over the existing exterior, and caulking around all openings can make a huge difference to the energy efficiency, comfort and performance of the home.

Focusing on energy efficiency makes everyone a winner. For homeowners, they get a lower cost to maintain their home, added comfort, and research shows that a more energy efficient home can enhance in its resale value. For the contractor, leading with energy efficiency expertise can differentiate them from other contractors, help them close more projects, and ultimately enhance their profits. Oh yeah, and the planet saves more natural resources.

* Decision Analysts (What Your Customers Want By Garry Upton)

**Ecohome, June 2008

*** NARI

From an article I wrote for the Daily Energy Report

Home Depot Improves Cross Selling

Mark Mitchell — Sat, 29 Jan 2011 10:08:19 +0000

Home Depot has recently added a line of Martha Stewart products in an effort to be more appealing to women. This is an effort by Depot to catch up to Lowe’s who has traditionally been more friendly to women. As large ticket sales which signal a major remodeling project have slowed, this effort is designed to spur more small project sales. The really big news from this effort is the introduction of selling across categories, in which women are shown which product from one category goes with which one from another category. Both Home Depot and Lowe’s have done a very poor job of selling across categories. Category managers who are rewarded mainly on the performance of their category have little incentive to grow overall sales or increase customer satisfaction by featuring related products in their aisle. When you buy materials, you won’t find a reminder about the tools you’ll need. When you buy a door, you have to think for yourself that you night want some new hardware. Hopefully this Martha Stewart effort will help both Home Depot and Lowe’s realize all the dollars they are leaving on the table by focusing solely on each category and not the project. You can read more about the new Martha Stewart program in this New York Times article.

Want To Sell More Houses – Read This

Mark Mitchell — Fri, 31 Dec 2010 09:27:27 +0000

Read this brief article from the New York Times about Yves Behar and his firm Fuseproject and you’ll be inspired to rethink the design of houses and the products that go into them.

How to Brainstorm

Mark Mitchell — Tue, 21 Dec 2010 02:22:45 +0000

Most of us have forgotten how to brainstorm for ideas, if we ever learned the correct way in the first place. The problem solving firm, Jump Associates, shows how it’s done. They show how to avoid the dreaded “Tennis Practice” style of brainstorm where one self appointed senior person thinks their job is to smash every new idea lobbed at them. The result is that one group of people stops suggesting ideas and another simply suggests ideas they think will be liked but not what they really think will work. You can learn more about effective brainstorming and why most companies think they are being creative when they are not. Read more in this new York Times Sunday Magazine Article.

Traditional Media Advertising is Dead

Mark Mitchell — Mon, 20 Dec 2010 01:50:59 +0000

The majority of today’s shoppers first look online and then in store. Combining these two provides a more powerful and cost effective way to make a sale than expensive and ineffective paid media advertising. Building material manufacturers who sell to big box retailers like Home depot and Lowes should get on board with this trend. Their current advertising agency or internet agency may not be able to embrace this new method of growing sales. You can read more about it in this New York Times article.

How to Promote DIY Home Improvement

Mark Mitchell — Thu, 16 Dec 2010 12:20:10 +0000

Many building material manufacturers forget that the best way to sell their product is by selling a project. This article in the New York Times is an excellent example of how to get more people buying paint and the related items needed for a paint project. There are several reasons why this example is so great. First, it’s in the New York Times which gives it credibility and maybe even a little status. More importantly it is reaching people outside of the store which will drive more traffic at stores like Lowes and Home Depot. Another reason is that it’s written from the perspcteive of several different experts who are giving you confidence to do the project by telling you how. They do this without blatantly promoting their brand. A final very effective touch is that they have an excellent photo of the products with captions so you know what to look for in the store.

Expanding Your Sphere of Influence

Mark Mitchell — Mon, 06 Dec 2010 04:17:08 +0000

Great article in Construction Today from our CEO, Bill Rossiter on the benefits of expanding your sphere of influence with advice on how to do it.

Builders Shouldn’t Rush to the Bottom on Pricing.

Mark Mitchell — Sat, 04 Dec 2010 11:46:23 +0000

The recent home price indexes from S&P/Case-Shiller show that the lowest price housing segment is suffering the greatest decline in pricing. Builder’s who cut features and quality in an attempt to have lower prices are focusing on the wrong end of the market.

Is Remodeling Becoming Like a Purchase of Artwork?

Mark Mitchell — Mon, 15 Nov 2010 10:21:52 +0000

As this recent post in Yahoo shows, it’s questionable whether a remodeling project is a good investment. It looks more and more like homeowners should take the advice of people who buy art and always say don’t buy art as an investment, buy it because you love it. As these articles on percent return from a remodeling project seem to be getting more frequent and widespread, the industry needs to stay focused on the improved quality of life versus the return on investment. Unless a consumer is an experienced home flipper they should proceed based on how much more they will enjoy their home.

Housing is Still a Good Investment

Mark Mitchell — Sat, 04 Sep 2010 07:23:23 +0000

Karl E. Case’s recent OP-ED piece in the New York Times offers a contrarian view from today’s headlines about the value of home ownership. He makes several good points about why home ownership still makes sense. A good read for builders and manufacturer’s of building materials.