In part three, John Barba and Sean Giberson, residential sales manager for Taco of Canada complete their in-depth look at the innovative and ambitious "Beautiful Heat" campaign to promote hydronic heating as a system solution that delivers comfort and efficiency. One unusual aspect of the campaign is that direct competitors have partnered to develop and fund a multi-year program to benefit the industry as a whole.
John: The 11 members that banded together to get the Beautiful Heat program started are obviously funding the program and it's a funding mechanism in their marketing department. How much money is being budgeted and where specifically is it coming from?
Sean: OK. Yeah that side of things, let me get to that end of things. Where we had originally started when this concept was presented we looked at "how do we do it?" and looking at other industries and how they had positioned this or how they had funded. We're very different from where we ended up today. Essentially what we said...We originally looked at some sort of a levy on hydronics products. It was going to be very cumbersome, very hard to detail, hard to track and we had to step back from that and kind of rethink things. So what we did from there is we said, "OK You know what? It's coming right back to the manufacturing side of things" and in the Canadian marketplace we call this the "2% solution."
Sean: And it's how we as a group have discussed it all along and the magic number when you look at budgeting a campaign like this, your big dollars. So you can do with very limited funds and we've tried that in the past. A number of years ago there was a hydronics marketing group that started in Ontario and certain manufacturers put so much money into it and it was a very small little budget. Well you don't really do much with that and then the pazazz of that or the sizzle quickly dies and everybody goes, " You know what? We tried" and so it didn't go far. But we took what was there and learned from that and we said, "OK, if we're going to do this right..." I'll give you a little lead in. We went to a company. They're called company B and these guys, to my knowledge, are the same ones that created probably one of Canada's most successful marketing campaign ever and as the beer commercials just always do well so Molson created this campaign called " I Am Canadian" and I'm sure that transcended a bit, Molson Canadian Beer and it was huge. So we went to that same company and these guys just got it. The understood what we wanted to do and went through and said "OK if you're going to reach some marketplace here's what you have to do." So here was a number, we come back to the industry or that committee and started crunching the things and said, "Guys, this is what we need." So based on as close as we can get as an estimate to our market size, guess what? It's almost 2% [Laughs].
Sean: So there's where the 2% solution came from and so from that these founding members come into play and basically it was, "OK. With this number of people in here and we can estimate this and the number still works, you guys figure it out." So you can't cross lines as far as discussion of numbers and that side of things among manufacturers. So basically it's stated as, " Alright, you guy's figure it out. You know the number we need from you guys, you figure it out." So did it come out of our marketing budget? Did it come out of maybe pulling some advertising that we did in the trade magazines? Did it come through a price increase on our level? Every one of us did probably something different. We have no idea, but essentially the wholesalers and everybody down the line said. "You know what? We're on board. If you can grow the business like this projected plan, we're on board. 2% if it's in there somewhere...Obviously it all comes in to budgeting and making your dollars worth as a company. But if the 2% is in there, whether it be in pricing, whether it be in whatever, we're on board with you. We'll support it."
So we came and all said and done, basically a 2.7 million investment, annual investment to get to where we need to move forward in this and the net results of a 160 million dollars as that increase five years down the road.
John: Well that would be something. That would definitely be something.
Sean: There are numbers that I look at and it makes my head spin as to really what's going on here and what we've been able to pull together. To finally say, "OK, we've done it." To get to that point where everybody was in the room that day and understanding just what this meant was unbelievable. You take 11 manufacturers to really check everything at the door and say, "OK, let's figure this out." And the respect and that for one another in the room and for this program is really amazing.
John: Looking at the list, Sean, theSe are direct competitors.
John: Guys that go head to head with for the same customer.
Sean: You've got it.
John: Taking that hat off and putting the bigger hat on.
Sean: Right, and that's exactly what I mean. We checked all that stuff at the door and said...the saying kind of became "A rising tide floats all boats." And whenever you look at this, and this is something we learned and the executive brought back from his committee in talking to other organizations. What they brought back home was, "You're never going to get total buy in." So a 100% will never happen.
Sean: Absolutely, you get as many boiler manufacturers as there are in the industry. I can say we've got a huge percentage of circulator manufacturers. We've got some controls people in there. Everything is in there in the hydronics component, ex- tubing manufacturers, it's just all there so we look at it right now to say, "You know what guys? We're the ones in the penalty box. And not that that's derogatory and don't take it in that way, but kind of the thing is that we're in the penalty box. We're the ones at a disadvantage right now because of what we're trying to do with the big picture." I say that 2%'s got to come from somewhere and certainly...so there are companies on there or outside of this that are going to reap the benefits, and like I said before, the rising tide floats all boats. They will see benefits from this program, but it our hopes and it is our determination to go forward and continue to campaign these people and say, "You need into this. You need to be in here." and that is the mandate of the campaign and the executive committee is to continue to drive and build the members and so the founding members have now an unique role in which to grow and facilitate this and make sure that everything continues to happen and it's a neat setup.
John: I'm sure the intention also is to make sure that the contractors know, "Hey, these are the manufacturers who are driving this thing. We're supporting you and I think the expectation would be that you would at least give us the opportunity to earn your business by the virtue of us being in charge of this campaign that will help your business."
Sean: Absolutely. It's again just going back to investment. The first thing...year one, get the contractors aware of the program. Get the contractors signed up so we can begin to populate a database. Through the website will be a searchable database that a, let's say a homeowner, when they stumble across an ad in one of these magazines or they're looking for a heating system and up it comes on the website beautifulheat.com and it will take them to that website and through there not only will they learn about all the benefits of the hydronic heating, but there will be that, "Enter your postal code" or "Enter your zip code" and we'll have that populace of contractors that have been through Beautiful Heat training side of things. This is ok now. I'm aware that when that homeowner calls me I know what to say, I know what the campaign's about. I know all of it. So at that point we'll give them the endorsement that they've been through the training and say, "Alright, you're now up on the website."
But yeah, absolutely. Through that we have the ability to fly that Beautiful Heat banner on our websites, on our literature, on anything we produce in order to, again, build that awareness campaign out there with the contractors and, "Hey, we're working to grow your business. We're partnering with you. We would like to see you prosper. We want to help you." So that is a huge, huge component of this going forward as those founding members to say, " Hey, we're in it for you. We want to help."
John: And itís a partnership.
John: Alright, I'm a heating contractor and I work in Vancouver. I've just stopped crying over the Stanley Cup.
Sean: [Laughs] I didn't know that would come up again, by the way.
John: [Laughs] I need something to lift my spirits. I want to get involved in Beautiful Heat. What do I do?
Sean: Alright. So what you're going to see is..come to the website, there's really two portals in the website. You've got the front page, we've got a homeowner's webpage, we've got a contractor's webpage. So homeowners are going to get all that information, contractors are going to get in there. He's going to learn about, again, the messaging that we're trying to pitch or trying to convey to the end user and basically it will be a "click here to learn more". It will put them in touch with the Beautiful Heat coordinator and at that point we're going to have online training available, so that's part of what's being developed right now is it will be a questionnaire with, "Run through this video. There will be questions asked. Answers are expected. We have to know that you are identified with one of the industry organizations and once you've been through that process, hey, you're up and we'll then go through the process to get you up on the website." And then from there, like you said, that's a searchable database and it's really going to be year two where that stuff starts to come down the road. As far as inquiries and when that campaign really hits the consumer side of things. But, year one - contractor's education. So there's going to be a lot of communication in year one with that contractor that signs up and wants to get involved with Beautiful Heat.
John: Excellent. Now. last question. I'm a contractor in Boston and I'm still buzzing about the Stanley Cup. It's been a dream come true.
John: And the manner in which we won is making me really happy. I look into this podcast and I say, "Here, hey this is going on in Canada. What about my country?" Do you see this as a model for the rest of the North American hydronic market?
Sean: Absolutely. The process of this has been, as he said, the actual sitting down and working on this to make this plan happen. It has been 41 years. There's been the desire but nose to the grindstone has really been the last seven years and in looking at that you create a template. And a template really becomes just that. It's transferable. It's a model in which things can...we can now transcend borders. We can take something and...as in Canada, the CIPH side of things is here, the Canadian Hydronics Council. You've got the RPA side of things. In the last couple of years there was the Hydronics Industry Alliance which was created to really make sure messaging and more industry communication is conveyed back and forth across border. So the CHC and the RPA and that have been communicating on this front. If we have this model and through HIA (or the Hydronics Industry Alliance) we have taken this model of the Beautiful Heat Campaign and we presented it to the US side of things. So what I think is going on right now, and I'm one step removed from that side of it, but where we are right now is we've made the presentation. I do believe that the RPA has looked at this and said, "You know what? That's something that we can work."
So from a Canadian perspective, we're looking at possibly this program going forward in the US and it might be a different modeling setup. The dollars, the manufacturers, there may very well be a different model in place there, but on the front end think of the strength in this. We have so much influence from the US and you might see a little bit from us into the US, but there's a lot of stuff that's back of forth. When you look at North American manufacturing and distribution, there's a lot of things that go both ways. So if we could have the messaging of Beautiful Heat on both the Canadian and US side of things through magazines and your much bigger market than we are as far as consumers and that go. So the publications and the magazines, the print, the glossy stuff that people are reading. Certainly the Canadian market would win from that because there's a lot of magazines that come into here from the US. But the model, really if we just look at the model, I think it's what works now. The legwork has been done on it.
So if we take that Beautiful Heat Campaign and say, "Here you go," and now we can work that out. There has been a memorandum of understanding that has been created and I don't know if we reached the end of an agreement to say, " Ok, yeah, you have rights to that and can use it." But we're very close. We're certainly in discussions about how both sides went with this. So, again, going back and saying, "We as an industry need to move forward on this and I think we can all win that rising tide side of things" just makes a lot of sense. So hopefully that contractor in Boston doesn't have too long to wait, but at this point I don't see when that happens John, so the discussions are there and I know there's certainly some movement and progression. So we'll see what happens.
John: Well that's terrific. It sounds like...it's something that's a long time in coming and it's not going to take much to get everyone's business to grow to the point where it's going to be a stretch for all of us to get the work done. But that's a good thing. Thank you Sean Giberson. Taco's residential sales manager, Taco of Canada and the a founding member of the board of directors of the Beautiful Heat Campaign and I think if this works we'll call it the "Beautiful Beautiful Heat Campaign." Terrific work. Outstanding work in bringing together a disparate group of manufacturers, many of whom are competitors with another, to work together to grow our pie. It's very commendable work. Congratulations. Outstanding work.
Sean: Thank you, thank you. There's been a lot of hard working members involved with this all along the way and it really is hats off to them. So hopefully we can all win from this and we've move this forward very quickly.
John: And the spirit of cooperation, the 11 members besides Taco or the 10 members besides Taco are?
Sean: So, yeah the 11 founding members of the Beautiful Heat Campaign are as follows: We've got S. A. Armstrong, Bell and Gossett, Grundfos, Lars, Raypak, Taco, Tecmar, Uponor, Weissman, Watts, and Weil-McLain and that's the founding members.
John: And the heavy hitters.
John: Alright, well again best of luck with that Sean. I'm sure we'll be hearing more and more about it as the months go by and the years go by and we look forward to seeing it in the United States as well.
Sean: Fantastic. Well thank you John.
John: Thank you sir and thank you all for listening to the Taco FloPro podcast.