HVAC Contractors Consider Cutting Out the Middleman
Contractors discuss the role of lead-generating, on-demand HVAC contracting services
Consumers want instant gratification, and they want it now.
As such, the on-demand economy is booming. According to a report from CB Insights, investment activity supporting on-demand services rose 514 percent year over year to hit $4.12 billion in 2014, and $9.4 billion has been invested since 2010. The success of Uber has inspired a wide range of new on-demand services, such as Washio, a laundry and dry cleaning service; Heal, a service that focuses on in-house physician calls; Task Rabbit, which offers errand-running and household chores; and many more.
The HVAC industry is not immune to this growing trend for on-demand services. Last year, on-demand behemoth Amazon launched Amazon Home Services, offering 15 million service listings across more than 900 professional services, including HVAC. Amazon joins Home Advisor, Thumbtack, and others offering these types of middlemen services to connect homeowners with contractors.
And, while such offerings are grabbing headlines nationwide, many HVAC contractors feel the efforts of these on-demand services are detrimental to homeowners and the mechanical service industries.
Scott Merritt, owner of Fire & Ice Heating & Air Conditioning in Columbus, Ohio, is one of many who deems middleman operations more harmful than helpful.
“I’m on Amazon and Thumbtack, and we don’t get a lot of business from them,” he said. “Companies on there are offering tuneups for $29 or $39, and they’re gaining customers based on price alone. I know there’s a line of thinking that if you just get your foot in the door, you can upsell for everything, but then the customer is not getting what they think they are getting. That approach is a bit dishonest.”
During a busy month, Merritt said he receives about eight leads a week from these sites; however, in his experience, Fire & Ice typically only gains these customers’ business when their price is dropped really low.
“When you reduce prices, quality is going to go down. A quality install includes a thousand little things that all come with a cost. If you’re not getting paid very much, your quality is going to drop off over time. There’s no other way around it.
“The industry, as a whole, needs to concentrate on promoting value rather than trying to undercut everyone all the time, which is what happens, and will continue to happen, on these sites,” Merritt continued. “We’re professionals, and we should be paid professional wages.”
MONOPOLIZING WEB TRANSACTIONS
Ben Landers, president and CEO of Blue Corona, an inbound Web marketing, analytics, and optimization company based in Gaithersburg, Maryland, said there has been a proliferation of digital channels popping up across numerous industries and that middlemen websites are a hot trend in the current marketplace.
“While it is possible for very small HVAC companies to exist with a single new customer acquisition channel — typically word-of-mouth or referrals — most companies need multiple customer acquisition channels to survive and thrive [i.e. website, direct mail, email marketing, pay-per-click advertising, and more],” Landers explained. “Viewed through one lens, middlemen sites like Amazon Home Services are nothing more than a potential customer acquisition channel. They do represent a potential growth opportunity, and, for growth-oriented HVAC companies that have achieved sufficient scale with capacity and desire to grow, there’s nothing wrong with testing these sites to see whether new customers can be acquired at an acceptable cost.
These new sites aren’t that much different from some of the customer acquisition channels consumers are already using, added Landers. “If you think about it, Comcast and Verizon are the middlemen for cable TV ads. Google is the middleman for pay-per-click ads on its AdWords platform. The difference between Google pay-per-click ads and something like Amazon Home Services is that with Google pay-per-click ads, prospects are driven to the company website. With Amazon, Thumbtack, and others, the prospect goes through the entire transaction on the middleman’s site. The prospect never leaves the middleman site’s ecosystem. While this might be convenient for consumers, I don’t think it’s beneficial to HVAC contractors.”
Additionally, sites like Amazon force contractors to compete for jobs in a standardized way, Landers noted.
“A profile on Angie’s List must fit the same standard parameters that all of a company’s competitors’ pages do,” he said. “The same is not true about a company’s website. I’m a big advocate that management should invest in a website that the company owns as that differentiates it from its competitors. This can’t be easily done via middlemen sites, where the entire transaction happens on their site. There is an argument that one of the primary goals of middlemen sites is to make things better for customers by creating apples-to-apples comparisons between HVAC contractors. The trouble with this is I don’t think it’s appropriate to make such apples-to-apples comparisons with home services, such as HVAC, plumbing, etc. I’ve used a lot of different HVAC companies over the years, and I can say, with 100 percent certainty, that they are not a commodity. By carefully vetting the available companies, a consumer can find the right balance between price, service, speed, and quality.”
While it’s okay to test out middlemen websites, contractors should be focusing on maximizing their investments in marketing aspects they own or largely control, such as their websites, email newsletters, SEO, video, and social media, said Landers.
“HVAC contractors should build as many profitable customer-acquisition channels as possible,” he said. “To the extent that a company can, it should aim to own or substantially control as many parts of those channels as possible.”
RETURNING INTEGRITY TO HVAC
Joe McDevitt, a refrigeration technician and 25-year industry veteran, created his own version of a middleman site called Home Repair Pal, which allows consumers to research and compare the average cost of repair for both HVAC and plumbing jobs by zip code.
“I originally created a flat-rate repair app for the industry that allowed contractors to use their smartphones and other devices to offer flat-rate pricing,” McDevitt said. “But, getting the industry to change is a difficult task, at times. The app still sells well, but it didn’t do what I thought it should. So, I decided to change directions and work on the consumer side of the industry instead of the contractor side.”
By making this information available, McDevitt said he’s aiming to bolster the industry’s integrity.
“The HVAC industry is often perceived to be dishonest and lacking integrity,” he continued. “The site empowers the consumer to have additional information as to what the normal cost should be for that particular repair, which grants them security from getting ripped off or taken advantage of.”
The website also contains a lead-generation and advertising option for contractors. “Contractors who agree to follow the pricing guidelines are entered into the website,” McDevitt said. “Consumers searching the website can find an authorized contractor guaranteed to follow specific pricing guidelines. If one of our contractors charges more than the guidelines call for, they don’t have to pay it; we will return the cost of up to $70 for that service call. This is yet another benefit for the consumer.”
The website is free for contractors to become members; however, they will be charged when they are sent leads, which are sent on an exclusive basis. “Other sites charge per lead and then give the lead to three different contractors, making them compete right away. We’re not doing that.”
McDevitt also explained the website is still a work in progress, having only been in operation for about a year. “We’re aiming to build up our user base. We have two apps — one for Apple and another for Android devices — with about 1,000 users. We just exceeded 14,000 hits on the website, so we’re building traction in the market. It’s a novel and new idea in the industry — some people love it and some people hate it. But, one thing is for sure, it’s going to be available, because we’re not going away.”
BETTER LEAD GENERATION
Everything is online today, and because of that, it’s imperative that contractors manage their online reputations. However, no amount of technology makes up for one-on-one contact, Merritt noted.
“Referrals are the only thing better than reviews,” he said. “Your current customer is No. 1, referrals are a close second, and then reviews are next in line — especially for people who don’t know about you.”
Rob Minnick, CEO and president of Minnick’s Inc. in Laurel, Maryland, said he doesn’t use middlemen websites for lead generation; instead, he prefers more traditional methods.
“It’s a challenge,” he said. “As contractors, we’re always trying to figure out how we can get users to give us a call and allow us the opportunity to serve them.
“Are these sites serving contractors well? That’s the big question mark,” he continued. “Their concern is to get you in the door. Contractors are paying fees to be part of these lead programs, and a majority of the leads don’t pan out. They’re either competing against other contractors for the same leads, or a customer could just be looking for information and doesn’t need or want service. So, the contractor is charged for the lead, even though it wasn’t really a lead.”
Minnick prefers to target prospective consumers with what he calls laser focus.
“You have to know who your clients are and focus on those who fit your company model,” he said. “I don’t use the shotgun approach. We’re located in Maryland, and I don’t say, ‘OK, send out a bunch of direct mail and trucks all over the state.’ I prefer to focus on certain areas and certain clientele that match our model. Not every customer is a fit.”
No matter how contractors feel about the topic, these types of on-demand services are likely here to stay.
“People want instant satisfaction,” Merritt said. “When using these sites, you have to have someone monitoring the leads that come in. Otherwise, it’s truly a waste of time and money. If you can respond to them quickly, you have a much better chance of gaining their business. That doesn’t mean everything’s going to work out, but at least it gets you the discussion. You have to have an online strategy, and it has to include much more than just a company website.”
Rich Morgan, president of Magic Touch Mechanical Inc. in Mesa, Arizona, said middlemen websites will only continue to multiply and grow.
“Sites like these exist because most contractors are overwhelmed when it comes to running successful marketing and advertising plans,” Morgan said. “Knowing where and when to apply the company’s marketing dollars, understanding customer demographics, and reviewing analytics are cumbersome tasks and not something any contractor should gamble on without knowing what they’re doing or hiring someone who does. For that reason, contractors that are overwhelmed often turn to these services as a turnkey, easy solution.”
Morgan is also not a fan of sites that present average costs as they encourage consumers to choose contractors based on the lowest available price.
“These sites make statements like, ‘Contractors are carefully vetted and approved by us,’ which, to the consumer, means, ‘Well, they’re all the same, and they’ve been vetted, so they must be good.’ So, if everyone’s the same, it all boils down to who’s the cheapest. Congratulations, you’ve just become a commodity.
“Contractors all want plenty of leads,” continued Morgan. “We want to grow our companies and have packed service schedules year-round, but if we commit to these sites and find there’s more work than we originally thought, we’re faced with doing the work at the agreed price and taking a loss or earning poor reviews by coming off as the bait-and-switch company that charged more than the fix called for online.
“These sites tell contractors they can sell upgrades and additional services, not unlike what home warranty companies say. Unfortunately, most consumers don’t see things the same way and expect the contractor to do whatever needs to be done for the price agreed upon in the first place. Either way, the contractor pulls the short straw and the middlemen profit. I suggest HVAC contractors hire a professional marketing company and learn how to generate leads on their own without the middleman.”
Publication date: 4/25/2016