Whilst it is common knowledge that pricing has come to be the single biggest factor in purchasing HVACR equipment and components in the last five years, the extent of the problem faced by well-meaning manufacturers and suppliers makes for stark reading.
The topic is worth discussing, because meeting socio-economic and sustainable development targets, including emission reduction, is not only about infusing technological innovation, and ensuring proper design, installation and O&M but is also about pricing and general trading dynamics, and their impact on companies earnest about focusing on quality.
The market is dotted with manufacturers with decades of presence, which includes R&D, rigorous manufacturing processes and other cost-intensive layers. Today, many of them feel upended by “newbies”, some less than a year old in the market, with a mere 1-2 certifications in their kitty, and yet confidently offering prices 50-60% less than the market standard and, to make matters worse, five-year warranties; in some disconcerting instances, they are even offering 10-year warranties.
With the speed of projects having declined, in addition to fewer big projects, the challenge is even more for long-standing manufacturers, who focus on quality, robustness and strong aftermarket services.
They blame the clients for the situation they find themselves in and question the disappearance of customer loyalty. They look around and find that everything is commoditised and that many clients are happy to compromise on quality for even as few as USD 100 of price difference. This thinking, they say, percolates from the client to the consultant and the contractor. And soon it becomes a transformative eco-system.
Perhaps nothing could be more symptomatic than the increasing use of the word, ‘equivalent’ by consultants while specifying products. And this word side-lines established players from the market with potent force, on the back of their sales engineers helplessly filing ‘lost-order reports’ with frightening frequency.
All is not lost, though, with some manufacturers acknowledging that the price clients are asking is impractical, and putting up a fight to preserve or to capture lost market share. They are launching and sustaining concerted efforts to educate the marketplace, highlighting such issues as the high percentage of deterioration of equipment output in unrealistically low-priced products and, at the same time, showcasing the advantages of equipment, which encompass high-quality motors, shafts, bearings and belts – the sum of all the parts.
The fight they are waging is no longer only over pricing – and in some case no longer over pricing; instead, they are highlighting technical competence and pushing time-tested aftersales service features to the foreground.
They know they are in it for the long haul and are not willing to concede the hard-won space.