Challenges in the sale of technical building equipment
The TGA market is anything but uniform. This is due, among other things, to the large number of subsectors that come together under the umbrella of TGA. These include the following industries (without claiming to be exhaustive):
- Air handling units for ventilation and smoke extraction systems
- Refrigeration plants for air conditioning
- Building heating and domestic hot water
- District heating and waste heat utilization systems
- Water and wastewater supply systems
- Information technology, signalling and communication systems
- Fire extinguishing systems
- Power supply
Original equipment versus maintenance
The characteristics of the different subsectors also influence the (necessary) business relationships in the market. This also raises the question of what proportion of the total market is accounted for by maintenance compared with original equipment. Technical components are always subject to natural wear and tear.
In building technology, this is particularly relevant for subsectors that are characterized by a high proportion of mechanical components such as fans and compressors. Since different decision-makers are involved in some cases in original equipment and maintenance, a corresponding focus is required in sales.
In the spotlight: building technology dealers
In traditional TGA sales, TGA dealers play a central role. Even though a lot of business could basically be handled directly, most manufacturers are rather cautious here so as not to jeopardize the business relationships that have developed.
However, installers and architects are increasingly becoming the focus of manufacturers in many areas. Their influence on the customer’s purchasing decision cannot be ignored, and they are increasingly being considered in sales strategies. There are also numerous potential key accounts which, as owners of hotel chains or office locations, represent a thoroughly attractive target group in the direct approach. The implementation in terms of sales structures and processes is regularly the subject of our projects.
Conflict from direct sales and lived trading business
Quite a few manufacturers have a product portfolio and the application expertise to be able to supply their products to plant engineering and process technology in addition to pure building technology. At this point, at the latest, the conflict between necessary direct sales and historically practiced trading business becomes clearly apparent.
In addition, it is not uncommon to encounter internal wrangling over competencies with regard to the management of industrial dealers as distinct from the TGA trade. This is particularly true when direct sales for industrial customers (verticals) are pushed and existing sales structures have to be realigned.
Pricing in building services engineering
Another classic field of action is the design of pricing in a multichannel context. The aim is to find a balance between the various channels and to maintain this balance in the long term. New pure online players are increasingly gaining relevant market share and, for many end customers, are becoming at least a relevant price reference in negotiations with their dealer or installer.
Complex kick-back systems and partner programs are designed to strengthen installer loyalty to the manufacturer’s brand, but by their very nature they introduce additional complexity into the price waterfall. Maintaining an overview here and actively controlling dealers via performance-oriented conditions is a major challenge for price management. Internationally active market players are also pushing the requirements for international price harmonization.
Solution approaches in the sale of technical building equipment
The first approach in TGA sales is to develop a clear (multi-)channel strategy. As a manufacturer, there should be clarity about the relevance of the various channels and market participants in the medium and long term. Only if market development is coordinated can the various approaches complement each other without hindering each other. It is also important to consciously include new trading partners in online retailing.
From our perspective, pull activities are also becoming increasingly important. This means involving architects, planners, installers and other market players who influence the purchasing decision but do not buy from the manufacturer themselves, or only indirectly. Here, it is necessary to develop appropriate marketing and partner programs for installers and to support architects and planners with specialized consultants. The end customer is usually only of decisive importance in the development of the sales organization in the context of professional buying centers of hotel chains or other key accounts.
In the case of an industry-related portfolio, the introduction of an independent sales organization for industrial sales, often referred to as Vertical Sales, is an option. Here, it is important to exploit synergies with the often much larger TGA sales organization, but at the same time to take account of the special features of industrial sales. This includes the selection of industrial distributors and their support as well as strategic discussions on the direct supply of key accounts.
In all activities, the conditions policy provides a fundamental framework for controlling the necessary investments in the channels. Here, the net-net prices of the various sales channels must be coordinated and the channel-specific price waterfalls must be designed in terms of optimum performance incentives. New payment streams, for example for kick-back programs with installers, must also be integrated into the system.
International pricing, taking Amazon and the like into account, is also a focus of the terms and conditions policy. Due to the very international orientation of central players such as Amazon, it is advisable to manage the online channel and Amazon as an independent country in order to model and control the effects of international arbitrage transactions.
Prof. Roll & Pastuch – Management Consultants has extensive experience with a wide variety of often highly integrated projects in the context of pricing and distribution in the building services market. Our focus is historically on the manufacturer side with reference projects in all sub-sectors:
- Multichannel strategy (pricing and distribution)
- Vertical Sales / Introduction Industrial Sales
- Distribution via architect and planner consultants
- Development of new and differentiated condition systems
- Negotiation training and pricing tools
- Playbooks Sales Personnel
- International Pricing
- Value pricing for products
Learn more about the earnings potential in building technology
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Kai Pastuch is Managing Director of Prof. Roll & Pastuch – Management Consultants. Before joining as Managing Partner, he was Director at a leading international strategy and marketing consultancy. As a graduate in business informatics, he also manages our software company nueprice, which specializes in the pricing of spare parts with the product of the same name. Mr. Pastuch has extensive project management experience from numerous projects for large international companies and German medium-sized businesses in the areas of price management, marketing, sales and strategy. In addition to numerous publications in renowned journals and the publication of the reference books Praxishandbuch Preismanagement and Big Deal Management, he is a sought-after moderator and speaker on all aspects of sales and pricing. As a practice-oriented manager, he likes to get personally involved in our projects and contributes his broad experience in workshops and steerings.