After the Credits, Hope Remains

Following a rough January, window and door companies still see potential after the tax credit hangover
Christina Lewellen
February 13, 2011
FEATURE ARTICLE | Sales & Marketing
After having a festive wrap-up to last year, the window and door industry suffered a bit of a hangover in January. The 2009 and 2010 tax incentives and increased awareness of energy efficiency fueled retrofit sales among otherwise skittish consumers and pulled forward demand as would-be buyers rushed to complete their home improvement projects before the end of the year.
The party ended abruptly, however, as business for many window and door companies ground to a halt in January. Starting this year, consumers are eligible for up to $200 for a window project and $500 for a door project—a far cry from the $1,500 credit cap of the prior two years.
In a mid-January, a WDweekly poll indicated that more than 80 percent of industry respondents experienced a sharp drop-off in business at the start of the year. But while the pull-forward phenomenon of last year’s credits may have been drastic and somewhat shocking, window and door companies are regaining their wits and looking ahead at how to have a successful 2011—regardless of the size of the tax incentives.
“What has happened to us is pretty much what happened to other industries with incentives,” says Rick Jones, president and CEO of Stanek Windows, a direct-to-consumers manufacturer. “There was tremendous pull-forward especially in the fourth quarter of 2010. And then, the phone stopped ringing January 1, 2011.”
“January is always an uphill battle and we know we will have to fight every year to reclaim our momentum,” says Philip Isaacs, CEO of California Energy Consultant Service, a Rancho Cordova, Calif.-based dealer. “But this year, January was very different. The phones were virtually dead for nearly three weeks. I did not anticipate going from a strong December and actually our best year ever to flat-lining for the first three weeks of January.”
With the changes in tax credits, companies like Stanek
Windows are pivoting to new messages, such as new
woodgrains options.
RIDING THE WAVE
In one of the worst economic downturns in history, there’s little doubt that the tax incentives did buoy many window and door manufacturers and dealers from what might have otherwise been. At Stanek Windows, for example, Jones recalls the beating his company took when the Dow Jones plummeted in the fall of 2008. “We saw our business drop off dramatically in the fourth quarter of 2008,” he notes. “When I say ‘dramatically,’ it was probably a third of what it should have been in a fourth quarter of the year.”
Then, Jones says, the government’s stimulus package came along. Comparing the fourth quarter of 2008 to the fourth quarter of 2009, Jones says Stanek’s business increased 48 percent. And in 2010, business jumped another 35 percent from where it was in the same quarter of 2009. As the clock ticked toward the end of 2010 and homeowners rushed to get their projects completed by the end of the year (the products had to be installed by December 31st to count), business spiked even more, he says. “We used sometime in October as a cut-off [for production] and it was the biggest month in the history of the company in terms of bookings,” he says.
Jones also notes that homeowners who didn’t take advantage of the incentives in 2009 came forward in the first half of 2010 as awareness of the credits spread. “We saw in the first half of 2010 an increase of about 30 percent and that all happened around tax time,” he says. “People were filing tax returns and they were thinking about the credits.”
In addition to energizing homeowners, the tax credit also gave industry professionals a boost during the extended economic downturn, notes Isaacs. “It gave the [sales] guys something to be excited about at a time there was not a whole lot to be excited about.”
The tax credit encouraged sales right until the very end of the year, Isaacs says. “We had a very good December,” he says. “Typically when the middle of the month hits, you get the ‘I am going to hold off until after the holidays’ objection. However, our guys were armed with the tax credit and closed deals that would have waited or possibly not bought at all.”
THE TALK FOR 2011
After a rough start to the year, some window and door companies are reporting upticks in business, thanks in large part to the role the tax credits played in increasing awareness of energy-efficient fenestration products. "Whether you voted for him or not, Obama has done a lot for this industry," says Stan Stokes, president of K.C. Co., a Maryland-based Pella dealer. "[These efforts] have done a lot to raise awareness in our industry."
And even though the $200 cap for windows and $500 cap for doors isn’t nearly as impressive as the former cap of $1,500, some window and door companies will continue to use the tax incentives as a selling point. PGT Industries, for example, highlights the credits prominently on its Web site and Jones says Stanek does not shrug off the impact of the lesser credits. “I happen to think that a $200 tax credit is significant,” Jones notes.
"It doesn't matter if it's $10 or $2,000," Stokes agrees. "People want that dime from the government."
Many window and door companies have stopped promoting tax incentives, but others, like PGT Industries, still see opportunities even with the lower credits.
Anticipating the likely end of the $1,500 credit, Jones points out that Stanek’s leadership made sure that enough product enhancements would be available in 2011 so the sales force would have plenty to showcase to potential customers. “Our marketing approach now [that the larger tax credits are over] is that we’re emphasizing features and benefits of our products,” he says. “We’re all vinyl but we’ve added additional woodgrains to our offerings. We’ve added additional hardware and glass offerings so we have some new things to talk about with new customers and maybe some prospects we might have seen last year.”
The $200/$500 credits may also present an opportunity for the dealers that are promoting them, given that many companies in the industry stopped talking about the credits once the larger cap expired. “What I’ve observed [in the early part of this year] is that we’re the only ones advertising the credits,” Jones says. “Since it’s no longer $1,500, most dealers have stopped talking about it. It’s an opportunity for those who do.”
Though some in the industry disagree with the concept of the credits from a longer-term political perspective, few argue that the incentives fostered awareness of high-performing window and door products among a previously less-educated consumer base. And while the current credits are smaller than those of the last two years, Jones and many others in the industry contend that this heightened awareness, coupled with a smaller credit, will have a positive impact on business. “I think [the credits] served the window and door industry on a broad base,” Jones concludes. “We get enamored with big numbers, but anything you can do to help a prospect make a decision—even if it is only $200—does make a difference."

Contact Christina Lewellen, senior editor, at clewellen@glass.org.