Can You Defeat The Giants?

Posted on:

January 1, 2016

HVAC contractors are concerned, and rightly so, about the entry of Amazon and Google into their segment of the home services space. Because details remain sketchy, contractors currently have more questions than answers, with “How much will it cost to participate?” being the top contender. “My concern is somebody is getting between us and our potential customers,” admits Dave Hutchins, owner and president, Bay Area Air Conditioning, Inc., New Port Ritchey and Crystal River, Florida. “Worst-case scenario is our existing customer gets drawn in for whatever reason.”

To prevent that, he anticipates intensifying his exposure to current customers, possibly by increasing the number of company newsletters they receive in the future. “We need to stay in contact so people know we’re still here.” Hutchins points out that Amazon and Google are currently only offering home services in select cities, a scenario that could change at any time depending on traffic to the sites. “I personally see Google as a more powerful force than Amazon,” he says. “I know Amazon sells a ton of stuff, but Google is a bigger player.”

Will he participate in either new venture? “Time will tell,” he says. “We need more details. You have to look at the cost, which we don’t know, compared to paying for more search engine optimization so you come up better.” He explains that his company meets the criteria for inclusion, which includes criminal and business background checks, as well as appropriate licensing and insurance.

According to Hutchins, Google already shook things up in August when it moved from displaying a seven-pack to a three-pack for local search listings. “Whoever is up there, depending on what it costs them, is probably going to have a booming business,” he says. “If Google puts you in the first three, you’re in the driver’s seat, and that’s probably worth some money. But how much money? That’s another question.”

Google’s move into homes services has the potential to become the next Uber, Hutchins predicts. “Look what that’s done to the taxi business,” he says. “If somebody can generate enough leads, we will pay them a percentage to run the call.” For now, he’s trying to stay informed. “If you’re forward thinking, you have to stay on top of it,” he says. “We need to see what the opportunity is once the dust has settled and they put a price tag on it, and they tell us how it works. Right now, there’s a lot of speculation.”

A Middleman? No Thanks

Another contractor who doesn’t relish having two Internet giants acting as middlemen is Robert Nagel, president & CEO, Fox Service Company, Austin, Texas. “We want to have direct contact with customers,” he says, “because we believe we know exactly what they need. We are a customer-service-focused company. We really don’t like middlemen between our customers and our company because we think the message can get lost in translation. We prefer firsthand, direct communication.”

Nagel indicates his company spends considerable time trying to understand the dynamics of search engine optimization in order to get the company name to the top of the search engine page, where visibility is greater. He believes the algorithms are constantly changing, usually to the detriment of companies that don’t pay for advertising. “It’s a moving target, by design,” he says. “Our goal is to make sure our customers, and those we’re looking to do business with, can find us easily. We spend a fair amount of money on advertising in the marketplace to make sure in this digital age that people can find Fox easily and efficiently.”

David Kottke, marketing specialist, estimates that Fox is currently spending 30 to 40 percent of the media budget to generate Internet leads, and the amount continues to grow. Although product details remain fuzzy, Nagel thinks his company may participate in Google’s and Amazon’s programs once they are available in Fox’s market areas. “While we don’t necessarily like a middleman between us, but if Amazon or Google chooses to be a middleman, there’s very little I can do about that. With that said, it’s incumbent upon us to learn it, understand it, and participate well in it. That’s what we intend to do, although currently we don’t know exactly what that will look like. This will be another item we evaluate as we go forward.”

Approach With Caution

While he is open to new marketing strategies, Richard Biava remains cautious about the new Internet platforms offered by Google and Amazon. “While I’m always looking for new, profitable, and more efficient ways to grow our company, I think contractors need to approach these sites with some caution,” advises the vice president, GAC Services, Gaithersburg, Maryland. “Today, Google sends visitors to our website,” he explains. “We invest a lot of money in our website. We’ve created great content, videos, and all sorts of information we believe demonstrates to our prospects and customers that we’re a cut above the other companies out there. With these new platforms Amazon and Google are rolling out, the entire transaction takes place on their sites. This means my company page on Amazon or Google may end up looking more or less like a lot of my competitors, competitors I don’t think do even close to the same quality of job we do.”

With this new service, Google is moving from an advertising business model straight into commerce, Biava says. “Instead of selling brand impressions and clicks, they’re selling deals. That’s interesting to us. These platforms, whether created by Amazon, Google, or Uber, are all about commodifying things, and there’s only one winner in that game, and it sure isn’t the local contractor.”

GAC Services, whose workforce consisted of a dozen people in 2007, today employs a staff of 85. Biava credits at least part of that growth to a change in the marketing mix: In 2007, the company spent 3 percent of revenue on marketing. Today, the company allocates 4 percent to marketing but 20% of the marketing budget goes to digital media. “GAC Services is on the fast-growth track, and we’re not planning on slowing down anytime soon, so we’re always willing to consider new customer acquisition channels if they make financial sense for our company and fit within our existing Internet marketing strategy,” he says. “Change is inevitable and is going to happen. In fact, our business embraces change. Since we took over in 2007, we have reengineered process after process to improve our business. As professional contractors, we must listen to the external environment we operate in and be ready for the change.”