Harvey Anderson believes in the old one-two punch. His company, Servamatic Systems Inc., has two separate inhome sales operations offering the exact same equipment -- passive solar water heaters -- under two different names, Servamatic and Energy Clinic.
The two operate independently, but their sales offices are paired geographically, and salespeople often cover the same turf. The result is that many customers wind up getting two sales pitches on the identical product from two different salespeople.
It seems to work pretty well for solar heating systems, which have always needed an aggressive and somewhat lengthy sell. And selling is what Servamatic does best.
The company makes no bones about the fact that its product is not exceptional. The system is wonderfully simple: Street water pressure feeds two 25-gallon stainless steel rooftop tanks, where a curved mirror concentrates sunlight that preheats the water before it goes into a hot-water heater. The device is well made, designed to be maintenance-free, and guaranteed for 10 years. But it is marketing, not technology, that has made the company a success, says president and chief executive officer Anderson. That marketing momentum has taken Servamatic from $669,000 in sales in 1979 to $31.2 million in 1983, and to number 18 on last year's INC. 100, a list of the fastest-growing public companies in the United States. Sales topped $73 million for the year ending April 30, 1984.
Anderson developed many of his marketing ideas while running Hydro Magic Inc., a company that sold water softeners in the late 1960s and '70s. Servamatic, in fact, started out as a water softener company.
"We had a problem at Hydro Magic," Anderson explains. "We didn't have any competition." He set up Servamatic as a competitor, "so the salespeople would have somebody to beat. They'd battle it out. One month one company would have 100 installations and the other would have 96. The next month the one company would work that much harder. It provided a lot of excitement and entertainment. The salespeople loved it."
Anderson did, too. Sales roughly doubled wherever he set up a Servamatic office to compete with an existing Hydro Magic operation. But he wanted to put his marketing skill to work in a business with bigger margins than the water-softener industry. In 1979, he tried letting Servamatic sell solar water heating units instead. The results convinced him to go into the solar water heating business full tilt. He moved all his salespeople over to Servamatic and pared Hydro Magic back to a service company to provide repair service for the 25,000 water softeners it had already sold.
Servamatic, meanwhile, continues to use Anderson's sophisticated marketing techniques. Sales prospects, for example, are delivered to the sales staff by an elaborate lead-generating system. Potential customers are identified by mass canvass, then screened by telephone interviews to target the most likely buyers. The result is a "closing rate" of 25%: One out of every four prospects who gets an in-home sales presentation buys the solar water heating system.
The company grew quickly, from 6 sales offices in 1980 to 18 in 1982. That year, the company bought a struggling publicly held competitor called Energy Clinic Corp., a reverse merger that took Servamatic public and provided a second trade name. Anderson kept little of the Energy Clinic staff, but quickly started setting up Energy Clinic offices to compete with Servamatic offices, in much the same way that the old Servamatic offices competed with Hydro Magic for water-softener sales. Energy Clinic offices are set up only in cities where there already is a Servamatic operation. Between the two sales organizations, the company now operates about 70 sales offices.
The strategy works even better with solar water heaters than with water softeners, because solar water heaters require a somewhat complex sell, much of it built around tax benefits. Under the current tax laws, 40% of the cost of a solar water heater (usually between $4,000 and $5,000 installed) can be claimed as an energy tax credit, right off the tax bill. In California, where nearly half of the company's sales offices are located, a state energy tax credit can take another 10% of the cost off the state income tax. Those are strong selling points, because the heater's price is effectively cut in half, says Cliff Jack, manager of the Energy Clinic office in Ventura, Calif. However, the energy tax credits require detailed explanation, since most taxpayers have never used them before. The rest of the price can be recaptured through savings on utility bills in five years or so, another important point that takes a little time to convey.
It is much easier for a salesperson to get those advantages across if a customer has already been softened up by a previous sales pitch. But a salesperson doesn't often get the opportunity to make two pitches to the same customer. If a customer has already heard one in-home presentation from Servamatic, he or she would be unlikely to sit still for a second one, although he or she might be willing to hear a pitch from a company called Energy Clinic. "What this system really does is give us a second chance to get in the home," Anderson says. "And it gives us a chance with a different salesman. You know, maybe the first salesman pushed a little too hard or didn't push hard enough. You're in [the customer's] home. He can't just turn around and walk away like in a car lot. So the personality fit is much more important. If the first fit wasn't right, this gives us a second chance to make the fit."
After all, the product, and even the parent company, are exactly the same and, Anderson says, there is no effort to hide those facts. As part of the sales pitch, Energy Clinic is supposed to be identified as a subsidiary of Servamatic Systems. Sometimes a prospect remembers getting a presentation from the other sales organization, but even that can work to the company's advantage.
"If someone says they already saw a presentation from Servamatic, then we can ask why they didn't buy the system," explains Cliff Jack. "That way we can identify their true objections quickly and zero in on overcoming them."
Whatever the reason, the system seems to work. The closing rate for prospects who are getting their second presentation is 50%.
"I think a lot of it just comes down to personality," says Anderson. "You know, if you take 10 people and let a good salesman sell to them, he's going to sell 2 or 3 of them. And another good salesmand would sell 2 or 3 of them, but I bet it wouldn't be the same ones."