Putting Your Name On The Box: Do Private Label Products Make Sense?

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January 1, 2014

Several years ago, Steve Bowman decided to move his company “out of the herd,” by branding his company’s residential equipment with a private label.

“The money we were spending on advertising was bringing customers to the plate who would compare the dealers selling that same product and then take the lowest price,” explains Bowman, who is president of Bowman Mechanical Services, Inc., Garner, NC. “Private label gets you out of that ‘Well, this guy told me he could sell me an XL1300 for this price. Why is yours more?’

“We’re not a low bid company,” he continues. “We do high quality work. We decided we were going to distinguish ourselves and take the equipment name out of it. We do inform customers and tell them the product is manufactured by Johnson Controls, a major multinational corporation. It could be under the brand name of York if it had the original labeling on it, but we put our name and brand on it and change the stickers. If they want to scrutinize and look at the manufacturer’s data plate, customers can see where it was made.”

Bowman estimates his company sells about 600 private-label units annually, all with an extended labor warranty. “When our customers buy a Bowman Mechanical Services system, they have a minimum 10-year parts, 10-year compressor, 10-year labor warranty, and in most cases a limited lifetime heat-exchanger warranty,” he says. “They have the security of knowing they are working with a company that has been in the market for 27 years, that made the decision to select this product based on its quality, and that we are going to back it up for 10 years with a comprehensive warranty. That gives us a little bit of a bully pulpit. We’re not just competing box against box.”

The Private Label Advantage

Tim Welch, sales manager, Peaden Air Conditioning, Plumbing, and Electric, Panama City, FL, decided to try private label almost five years ago to establish a unique position in the market. “It gives customers confidence that we are willing to put our name on our product and helps us in competitive situations because we’re not just another face in the crowd,” he says.

The company, which replaces somewhere between 800 and 900 systems annually, continues to offer multiple equipment options. “Our customers still have the ultimate say in the products they select,” he emphasizes. “We offer two private label models—Peaden Signature series, a premium package with a higher end cabinet with extended warranty, and Peaden Pro, a standard grade brand—plus all the major brands.”

He indicates 65 percent of the company’s replacement business is a private label product, although he admits he does encounter customers who are absolutely brand conscious. “You know, there are some guys who are only Ford guys,” he says. “You’ve always got customers like that. That’s why we offer the different options and choices. We fully realize that not everybody will say, ‘Ok. You’re Peaden. Your equipment is Peaden. We’re good with that.’”

Atlas Butler Heating & Cooling, Columbus, OH, went private label more than a decade ago to “differentiate us from the next contractor,” says Mark Swepston, president. “The relationship has worked well because of the services provided.”

Swepston, whose company employs 120 people and replaces 1,500 systems annually, is particularly fond of the just-in-time inventory as well as his distributor’s staging area for installers that is available 24/7. “Our installers pick up the entire package and go straight to the job,” he says. “If we need to install a system at 3 am on Sunday, they make somebody available.”

Things To Consider When Thinking About Private Label Products

While private labeling can seem like the ultimate solution to distinguishing yourself from the competition, it’s not always the solution that makes sense. The decision can be lucrative for contractors, but it’s not something you can rush into. Wise contractors spend an extensive amount of time researching the pros and cons of offering private label products, because it requires a huge investment in time and financial resources. If you can’t, or are not willing to, make this type of investment, then private label products are likely not the best option for your company.

Manufacturer Selection

Selecting a manufacturer to work with is one of the most critical components to deciding whether or not to offer private label products, because ultimately you are going to be putting your name on the product and if it fails to live up to the standards of your company, then you look bad. Bowman advises you to do your research, because you don’t want your company to be associated with a problem product. “It could do some damage if you picked a cheap piece of equipment and tried to put your name on it.”

Welch agrees, which is why he invested both the time and money into researching which manufactures his company would work with. His process was long and included:

Step 1: Narrowing down the list to four manufacturers and having his staff review the equipment looking for the best quality, warranty, and price. They needed a product with the best overall package.

Step 2: Narrowing down the list to the top two manufacturers and travelling to their facilities for tours of their factory.

Step 3: Sitting down and talking with the manufacturers’ staff , which included salespeople, marketing team, engineers, manufacturing team, and even people who worked on the assembly lines.

After going through the process, Welch decided to begin offering private label products. He would not have gone about it any other way because, “If we’re going to put our name on something, it’s not going to be just any old box,” he says.

Customer Challenges

No matter how well your marketing strategy is executed, you are always going to have customers who are brand loyal or have done some research and want something specific. These customers can, and will, be lost if you are not offering a major brand that they are looking to purchase. Welch says he does encounter customers who are absolutely brand conscious. “We’ll get the customers what they want. It allows anybody, whatever their budget is, to be able to look at an investment that’s comfortable for them.”

Bowman Mechanical Services, Inc. also sells American Standard products to meet the needs of every job. Bowman adds, “Many of the jobs in the area specify either Trane or American Standard equipment. So, we sell those products, because we wanted to have something to bid on to get the jobs.

Make Sure You Are Doing It For The Right Reasons

If you are looking into private label products, make sure you are doing it for the right reasons, because, at the end of the day it is your company’s name and brand that are going to be effected by the decision.

“If you don’t want to grow and make it a long-term passage for your company—and I’m talking about a 10- or 20-year commitment—then I wouldn’t bother with it,” Swepston says. “Some people do private label just so the competition can’t quote exactly the same piece of equipment. They are a Carrier dealer fighting against the next Carrier dealer. You don’t want to do it just because of that.