Welcome to the future, technologies and innovations that sculpt our industry.
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Well hello everyone, thank you for joining Did You Know?
The ESCO HVAC Podcast.
So today we're spending time with Andrew Fuselier from SmartAC.
Andrew, thanks for joining us.
So give us a little bit of background behind SmartAC and how it evolved because we're starting
to hear a lot of buzz about the process, the equipment, the opportunity that it provides
to the industry, especially with legacy systems.
And we'd like to learn a little bit more about it today.
Yeah, so it actually started right about six years ago.
There was a company that existed that we had before this and we were primarily focused
on energy efficiency around air conditioning and that was kind of the direction that we've
been heading for a while.
And through that process of trying to go through contractors and understand what brought value
to their business.
Certainly, a consumer loves the idea of paying less for their AC, but we had put in some
ports into our monitoring system that allowed for additional health aspects of it.
And that's really what the contractors started latching onto and said, well, that has value
to me.
To actually know what's going on has value.
So that kind of put us on the journey saying, all right, well, is there anything out there
like that?
Like what exists today?
So relying your mental clock back.
Since he had a product out there that was doing something similar, there's a company
called Alert Labs.
So we tracked down people that had been using it and trying to figure out, okay, well, where's
the value for you in this?
And it was what we expected.
It was like, look, my business relies on me being present in a home, but every truck roll
has a cost.
So we thought, okay, well, if we can reduce the cost, there's something there.
But then another topic came up, which is, well, it takes me a lot of time to retrofit
these systems to have the kind of data that I'm looking for that will drive value.
So we said, all right, well, there's another one we got to check off the box.
There's the unit economics have to work.
But then also it's got to be really simple and fast.
And then some contractors that were, I'd say early adopters of this, they might have
three different portals.
They had a Sensee portal, they had a Train portal, and they had a Linux portal.
And they're like, okay, now I got to navigate how I do this across multiple different portals
on this.
We said, all right, well, it's got to work across every OEM, regardless of thermostat.
And that's really what set us on the journey of how do we bring effective monitoring to
it?
And then where's the real value in that?
And then we started at the homeowner because if the homeowner doesn't let it in the home,
then you have no chance.
Right?
So the center of everything that we started creating was we need to have something that
has just immediate value where the homeowner says, yes, I want it, but that it improves
the overall economics of the contractor across all of the challenges that we uncovered with
membership programs.
And that was everything from the homeowner saying, yes, I want it to many of the traditional
programs that existed were really built on the back of a day one discount.
Right?
So it's like you sign up for this membership, I'll give you 10, 50% off today.
And that was a lot of the motivation for sign up.
So the customer retention rate wasn't great.
Once they had the discount, then they kind of fell off over time relatively quickly.
And then we said, okay, well, what are the economics behind your program?
How much does a truck roll cost?
And as we dug in, what we found is that, yes, on the whole, a lot of these programs actually
do return value to a contractor, but way, way, way less than what is possible if you
enable a system to have communications and you open up those lines of communication to
the homeowner and create just a fantastic customer engagement experience.
And so that's really where we started six years ago is we started with feedback from
the market, from the industry saying this is a hole and this is a problem.
And it wasn't really anybody focused on it purely at that level.
It was always just, yes, memberships are good, maintenance plans are good, I'm going to have
one, but how well are you actually monitoring what that does for you?
What's that returning to your business?
So that really is the entire foundation fundamentals behind why we created the company and everything
we've done.
Yeah, absolutely.
And that's what intrigued me about it.
I've heard about SmartAC for a while, hadn't dove too deep into it, but as we're starting
to work with our educational programs and encouraging our programs to start focusing
on the technologies, right?
The innovations that are happening in our industry, ways that we can become more efficient
as an industry.
You know, we all struggle with finding good help, whether it's an educator, whether it
is a contractor, we're faced with a shortage of prepared and qualified technicians in the
field.
So anything we can do to help become more efficient is absolutely an asset to the industry.
So we'll have a mix in our audience today and we'd love to know in the chat, are you
an educator?
Are you a contractor?
Are you a student?
And particularly if you're a student and have any questions.
And so along the way, if you have any questions, any comments, let us know.
We'll try to address them.
And so I actually, SmartAC sent me a kit that I'll actually play a video here in a minute
of walking through doing an installation monitoring my system because I actually, now I've got
new technology, don't get me wrong, you know, here in the studio, in the shop and in the
garage, I run a multi-port low ambient inverter from Deiken.
But on the house, right, it was a new construction, came with a 14 sear single stage AC and a
single stage 95 gas furnace.
I would love to yank it out, but it's brand new, still under warranty.
Nothing I can do about it, right?
And so it intrigued me for having a new home and still being able to monitor what my system
is doing and utilizing AI for preventative.
When we first get introduced to a new company, and you know, whether they're small or they're
large, we say, are these metrics that you can quickly pull up related to your membership
program?
Like how readily available are these?
We know what the industry standards are.
We've done a ton of research to know that.
Well, what about you as an individual contractor?
And I'm shocked at the data exists, but how far down we've got to dig to pull out these
numbers.
And it's not their fault, right?
There hasn't been really a way to change it.
But when you dig into the metrics and you realize your conversion rate, it is what it
is, right?
And so you think, okay, well, more training for my CSRs, better selling techniques and
more on the techs, like we'll get a higher conversion rate, a higher churn or my retention
could be higher.
You know, like they all know that some of these things, but the big one to me is on
the no fee truck rolls or low fee truck rolls, right?
We say run every ticket at $150 or less that you receive from a membership standard visit.
And it's unbelievable how many are out there.
And so this is where we start.
We say, well, look, this is what we're going to attack.
This is what we are here to do is to take every one of these metrics and improve it.
And there's a variety of different things that go behind this.
On the conversion side, we spend a ton of time in the customer psychology aspect.
What we say is why are they signing up and why are they leaving, right?
It's primarily tied to the motivation of the day one discount.
And that's okay because you want that conversion.
But then what's the real value you're delivering past that?
What's the homeowner perspective on this?
So we've surveyed over a thousand homeowners on everything related to HVAC and these experiences.
And this is what they felt.
They felt, well, I got that.
And then they showed up six months later and immediately they were trying to sell me something
else.
And then they showed up in six months and they're selling me something else again.
And not only that, we talked to the technicians and we say, how do you feel about those visits?
And almost across the board, they aren't thrilled, you know, especially if most of the technicians
out there, they love doing a good job and solving problems, not drumming up ways to
sell more stuff, especially to a homeowner.
But they know the system is maybe it's not perfectly optimized, but it's still performing.
And if the focus goes to the sales pressure, very quickly, the homeowner perspective says,
you know what, this is not for me anymore.
And they end up moving on.
And so when we dig in and we really ask them, challenge them to look at the numbers, about
15% of the visits were driving 99% of profit of the overall program.
And a lot of people said, yeah, we know that, right?
Contractors like, yeah, we know that.
That's why we have to go to every home because we don't know where it's going to come from.
And we're like, well, let's look at it differently.
What if you did know?
What if you knew where there was revenue opportunity and where there wasn't likely revenue opportunity?
How valuable would that be?
And so that's what we spend a lot of time looking at is we surface to contractors where
there is opportunity, but it's opportunity based in need.
And this is a different perspective because it's not need today, right?
It's not a demand call, but it's a call to Ms. Jones to say, look, we know that you're
probably comfortable right now.
And in fact, we can see it's still 74 in your home and everything looks good.
But what you don't see is that your system has been running much harder to maintain that
comfort.
So you will have a loss of comfort that will necessitate a demand call.
We'd rather get ahead of it.
Now homeowners don't, they're not used to this.
It's a relatively new thing.
And so a lot of times they'll go, you know what?
No thanks.
I'm fine.
I'll see you later.
And that's okay too, because all the system is designed to do, and I say system platform,
we're designed to bring transparency and awareness to both sides.
So the homeowner is now aware that the contractor is aware there's a problem.
So when that thing breaks in two weeks or two months, they've gotten that phone call
and we did our job.
The system did its job, the contractor did its job.
And that in the trust level goes up tremendously.
And so we've developed now a sense of peace of mind for a homeowner that this is not about
something that you're going to just use to come sell me stuff.
This is truly something you're looking after for the comfort for my home.
Yeah, that's exactly how I see that.
I mean, I think about that from a homeowner.
If I get that call, we all get those kinds of calls.
Are you interested in this?
Even if I'm part of a service, I'm going to be like, no, I'm happy right where I'm at.
I may not even hear exactly what's being said, right?
Until my equipment actually does break down and I go, wait a minute.
I missed that.
I had the opportunity.
I was contacted about this and I've never experienced that before.
You're right.
It's a different mentality to think about.
And that's why I think it's important for us to understand these types of technologies
because this is going to change not just our perspective, but a lot of consumers' perspectives
on a high value HVAC contractor.
I mean, that's our goal.
Our goal is to have programs that are teaching the students the things that they need to
be prepared for the industry.
And technology is one of those things that we are responsible for at least keeping them
aware of and preparing them for.
And these are the kind of things that I do believe will change our industry going forward,
is that predictive diagnostics.
Yeah.
We, you know, it's a change.
It's a change in the way that you interact with the customer.
So there's some discomfort there, right?
They're used to responding.
They're used to being firefighters.
And so the analogy we like to give, well, is imagine, you know, imagine driving a car
100 years ago, it was running or not running, right?
And then the dashboard came out and now you had initial indications of something that
might be wrong.
Well, now imagine partnering that dashboard with OnStar that's actively monitoring it.
And you're getting a call while you're driving that says, hey, your tire's going to go flat
in two miles, but there's a service shop in one mile.
If you pull off the road, you can avoid it, right?
It's wildly different.
And so that's what we, we do a lot of training with CSRs on what we call the nurture cycle.
Your job is no longer to just say, look, we need to be out there right now because we
got to fix this.
And that there's not a problem that's developed necessarily that's there.
But your job is now to nurture.
Your job is to bring transparency to what will become an issue.
So it is a different mindset altogether.
So the whole aspect of what we've done here is we call smart maintenance and that's just
a new and better way to run your membership program.
When we meet, we say, look, here are the goals, right?
Here's what we're trying to help you fix.
We want to increase your science, decrease turn, optimize your resources and margin,
deliver more repeat services, but that's trusted services and improve that overall customer
experience where they say, I am so thrilled.
I have this.
I'm so thrilled that you as a contractor brought me this.
I'm never leaving.
And that's, that's evident.
We have through our platform across all of our contractors over a 97% retention rate
in these memberships.
So we've just completely changed the way people think about the contractors relationship from
not just being a firefighter that shows up when the problem exists.
It's someone who's watching to help prevent the future fires.
And that's, that has been awesome for us and I'd say a big, big reason why we've grown
as quickly as we have.
As we start having these new generations of technicians that are very tech savvy, you
know, they're going to be utilizing these tools going forward.
I just now finished up with a webinar for us from some industry professionals discussing
the changes and transitions in our industry as a contractor perspective.
And I was very intrigued because I was curious to see what the business side was actually
showing.
And I hear from the distributors is very similar that equipment replacement is down, but service
parts are up.
And especially as we're going through these technological transitions and refrigerant
transitions, I do believe we're going to see a lot more of a repair based service for a
period of time over the next few years, as we're going through these transitions.
And so to be able to adequately predict some of these potential failures is going to be
extremely important going forward.
Yeah, 100%.
Yeah, I mean, that's, that's, I think that you bring up a good point in that the, the
generation, I think that heard recently, the average age is 55 and the 50, 55 and the technician
landscape.
Yeah.
We, we have to, we have to spend some time with the technician group for sure.
It's a, it's a bit of a change.
What we say is like, look, this is better for your customer, right?
They will respect the options and the interactions you have with them in the future more when
you bring this transparency in and it's better for you.
You don't want to be running truck rolls that you know are going to end up.
And what is a high pressure sale situation where there's not a lot of revenue?
So how do we, how do we maximize your time on site and increase your overall effectiveness
and hopefully, you know, overall income.
So many of the contractors that we have utilize our system on new installations and there's
a couple of reasons.
Number one is that if there's a home with a single air conditioning home, right?
Single sensor air system and you've just pulled a lot of the margin out of that relationship.
You don't really want to go back that much because the big ticket's been had, but you
want to service that customer and create, you know, customer lifetime value.
How do you do that?
If you put monitoring on to know when you need to go back and actually go back, then
you can delay those visits to when there's something needed or at the request of the
customer specifically, right?
So there's some avoidance there that makes sense operationally.
But the second benefit that we didn't actually envision this as being a strong use case,
but has become is it's validation for the commissioner's job.
And what's happened is usually we've characterized the system fully within 48 to 72 hours.
We look at all the conditions associated with it.
We're looking at outside air, we're looking at system operation, building environment
conditions, homeowner behavior, and we can see what's going on.
Well, imagine at 48 to 72 hours, the contractor knows that something's wrong before the homeowner
does, right?
So we've uncovered, you know, improper manufacturing fan settings.
And I'll say improper, I'm not placing blame on anybody, but it just, it wasn't set up
correctly, you know?
So what we're seeing is, yeah, the customer is comfortable, but this thing's dehumidifying
like crap.
And when the conditions come up, the customer is going to know they're going to feel sticky
and humid.
So the contractor now knows and he's calling the customer and saying, hey, we hope you're
enjoying your new system.
We love to do a quality, happy visit where we just come back and recheck everything.
What he's really there to do is to cover up what will be a callback.
But that callback might happen in June, July or August when you don't want it.
And so there's some really cool stuff that's come out of it.
And it's all powered by the data.
And I will qualify saying, yeah, I'm a mechanical engineer out of school.
And early on, I was definitely a part of the concept and building it in the engineering.
But we turned it over to experts.
And so you guys are much more qualified to ask deep engineering questions than the answer
and than I am.
So I'll go as deep as we can.
But what the system is doing, smart maintenance involves data collection, data visualization,
customer engagement.
The collection starts with how do we actually get the data.
And this is where people tend to be a little bit blown away and they say, how do you do
that with three sensors?
And it really is just three sensors that create this experience.
We have what we call the comfort sensor.
It sits on the outside of the supply vent.
And we're monitoring temperature and humidity in this case.
So we're getting the output, but the output delivered to the actual environment where
the comfort needs to be delivered.
And the filter sensor, and this is on the return air input.
This one is doing temperature and humidity, but it's also doing pressure, right?
Downstream of the air filter.
So we're looking at airflow.
So we've got vent to vent delta T across those with temperature.
But then we also have the static pressure that builds up as particulates build up on
the filter.
So we can see where levels shouldn't be that are high limit.
And we can look at static.
And this does several things, obviously.
Like it's not only is the system running at a healthy level, like is there a problem needs
to be addressed with airflow as a whole, but on a clean filter, as it builds up, the homeowner
needs to be notified at some point.
Tell me a homeowner that knows exactly when air filter needs to be changed.
Like it doesn't exist.
In our polling, 20% of homeowners have never, ever changed the air filter, ever.
They didn't even know it existed.
I mean, in our beta testing, I had people tell me, oh, my system doesn't need a filter.
I'm like, oh, really?
That's incredible.
Show me what kind of system you have.
And so that really gives us a great view of the actual delivered performance of the system.
And then we also, during our research, looked at so much of the calls related to the dehumidification,
right?
And water, right?
Should it be present and where should it be present?
If it's in the drain pan, you've already got an issue.
And so bringing that up and highlighting it, homeowners get this information, contractors
get this information.
And it's a way, you know, this is a big one, right?
This is what people, because people know water leads to damage.
And so this is a huge motivator, right?
So you start stacking up the motivations on why people sign up for this.
And it's not just because of a discount.
There's all these other things like, oh, this will save me from water.
Like that's a, that's a good thing.
So the contractor, we simplify it, right?
Data is not useful to anyone, right?
So we've got a principle here that all data has to result in a recommended action because
if it's not recommended action, then nobody gets any value out of it.
So yes, we've got rich data, but from a contractor's side, we just want to let them know whether
there's revenue opportunity and that the homeowners actually being cared for, but that's all done
through our side.
We'll let you know when there's an issue.
We want you to be the hero to place that call to the homeowners.
Say, hey, we're concerned.
But behind the scene, there is immense amounts of data.
We're collecting data every 30 seconds and we can see everything.
We can see on off cycles of the pressure.
We can see the temperature drop.
We can see the space time to time, time between cycles.
And then also the effectiveness of each cycle.
That's measured against all sorts of things.
Obviously outside of your humidity play a big difference or a role in that.
And so we're constantly characterizing the system, not only what it's doing today, but
the nameplate said it was capable of in a lab setting and also what it's doing against
itself.
So much of these failures in comfort, when we call a breakdown as a failure in comfort,
not even necessarily a failure in equipment, so much of these failures in comfort result
from things that get worse over time.
And these trends are observable.
And I don't want to say it's simple and it's easy.
It's not.
We worked on all of this for years, years before we ever brought it out into the public
because we knew the hardest grades on this stuff are the guys like you that understand
exactly how these systems operate.
And if we came out saying stuff that wasn't true or we didn't fully understand what was
going on, we get lambasted.
So yeah, so we have data scientists.
We've got people that literally have their masters in the design and implementation of
HVAC systems.
There's a lot of smart people that look behind the scenes and craft all of this data and
turn it into actions.
And that's on both sides, the homeowner and the contractor.
Andrew, thank you so much for joining us.
This was a good conversation.
I'm glad that we got to discuss this.
Look forward to diving deeper down the road.
I don't need to get too far into the analytics.
I got enough to nerd out on my side so far, but I'll definitely keep in touch.
And if anyone wants to learn more, Andrew, how can they find out more about SmartAC?
Well, it's in the name, SmartAC.com.
If you go there and you're a contractor, you're looking to connect.
There's a partner data collection area.
We want basic information about you.
We can reach out and have a further conversation.
If you want to just connect with me directly, you can go to my LinkedIn.
Andrew Fusilet, type that in.
There's not a lot of us out there.
I think there's one.
And then ping me and happy to connect that way.
Or my email is andrew.fusiletatsmartac.com.
Yeah, there's a number of different ways, but yeah, love to connect with anybody that
has an interest in it.
And honestly, just figure out how to help your business.
We've seen a lot of change in the last year or two with PE roll-ups and the cost of advertising
increasing.
So our whole goal is how do you take people out of the advertising pool?
How do you reallocate to some of that budget to have revenue that's going to come back
to you without competing for it?
All right.
Well, Andrew, thanks so much.
We encourage everyone to reach out to smartac.com and we will see you all again next week on
Did You Know?
The Esco H-Back Show.
Bye everybody.
Awesome.
Thank you guys.