Steady Revenues with the Housing Market The residential heating and air conditioning market is projected to increase another 5% during 2017, after an 11% increase during 2016. The commercial HVAC market has declined from previous levels to a steady 4% increase for 2016 and 2017. The economic recovery, high consumer confidence as well as low unemployment and natural gas prices have boosted the residential HVAC market, which historically indicate high HVAC replacement rates. According to FMI Research, both residential and non- residential construction will continue to increase steadily through 2021. The 2017 forecast for single- family and multifamily housing is +6%; lodging, +10%; and office construction, +12%.

Innovative Technologies and Trends Buyers are opting for more 14 SEER (Seasonal Energy Efficiency Ratio) units than during the past, when it was mostly 13 SEER units. The higher-efficiency 14 SEER units sell for an average of 10% more. California mandates 14 SEER as a minimum requirement. Ductless systems are individual room air conditioning/heating units that are more efficient, but cost more to install than to replace a ducted system. Ductless systems are forecast to be approximately 9% of residential and 6% of commercial installations. Inverter technology is another trend, mostly in high-end systems, but may become more common in mass- market products. This technology regulates the on/off cycle of the unit for a steadier temperature and more efficiency

Shipments Stoking the Sales Funnel Shipments of gas warm air furnaces for August 2017 increased 4%, to 283,960 units, compared to August 2016. Shipments increased 8.1%, to 1,938,542 for January through August 2017, compared to the same period during 2016. Shipments of air source heat pumps increased 3.3% for August and 9.1% for January through August, compared to the same periods during 2016. Oil warm air furnace shipments during August 2017 increased 16.9% YOY to 3,149 units and increased 1% for the period of January through August YOY to 18,156 units.

The Ebb and Flow of the Market The HVAC industry is confronted with the retirement of Baby Boomer employees who are being replaced by Millennials at only a 50% rate. Attracting people to the profession is more difficult since high schools no longer steer students towards the vocation. According to the 2017-2018 Old Farmer’s Almanac, this winter will be colder than last year, but still above normal with more than average amounts of snow. Geothermal heating suffered a blow, especially in the residential market, when federal tax credits expired on January 1, 2017. The public sector, however, is still strong and many large corporations are choosing this technology to project a “green” image.

Homeowners Look for Energy Savings According to the 2017 Lennox Home Energy Report Card Survey, homeowners said that if money were no object, they would be willing to invest to increase energy efficiency in solar panels/appliances, 39%; windows, 19%; and a high-efficiency AC or furnace, 19%. Almost a quarter of homeowners said they have turned off their heating system completely on cold days to conserve energy. This actually hurts energy efficiency; the recommendation is to raise the temperature on the thermostat. The US Department of Energy does not recommend programmable thermostats for heat pumps because it causes the unit to operate inefficiently, cancelling the savings gained by setting it at a lower temperature.

Advertising Strategies Consumers’ biggest motivation when it comes to buying a heating system is saving money. Promote how high-efficiency systems will save them more money than the premium they pay for it upfront. Appeal to commercial customers by telling them how using a high-efficiency system, such as geothermal, can be part of their green marketing and sustainability program. Stress the reliability of the systems you sell and offer an annual or seasonal maintenance package.

New Media Strategies Review and update your company’s information on local search engines quarterly and engage in local search engine advertising. Make it easy for new customers to click and call and schedule appointments from a mobile- friendly company Website. Communicate with customers regularly with text or email alerts when it is time to change the filter or have their unit serviced and check on them by text after cold snaps and blizzards.