How Do I Combat the Amazon Effect?
Today, there is a growing number of consumers that are spending their time and money online with retailers such as Amazon and eBay. Founded in 1994, Amazon is said to be on pace to become the largest company in the United States, and around the world. In 2018, it is estimated that Amazon accounted for more than 49% of all e-commerce transactions conducted in the United States. Unfortunately, the growth of Amazon has impacted many businesses, therefore creating the term “The Amazon Effect.”
According to Investopedia, The Amazon Effect, “refers to the impact created by the online, eCommerce, or digital marketplace on the traditional brick and mortar business model that is the result of the change in shopping patterns, customer expectations, and the industry’s competitive landscape.” While this may be the formal definition, ACHR News describes The Amazon Effect as a “direct threat to your business.”
Fortunately, there are many ways to combat The Amazon Effect if you come prepared and do your research within your target consumer base. In this article, several ACCA contractor members share their strategies to fight the Amazon Effect and ensure that your company stays competitive and thrives despite having competitors such as Amazon.
Be Transparent with Pricing
As a contractor, it is your responsibility to be transparent with your customers. While it may seem daunting to provide customers with access to information that may sway them to other HVACR contractors or to other companies such as Amazon, transparency is key to helping your customers understand your business flow and pricing.
“The Amazon Effect has created a big shift in customer expectations,” said Charley Boyce, President of Paschal, located in Springdale, AZ. “It is a good thing that our customers expect transparency especially now that they expect convenience and a cleaner, quicker, and friction-less experience.”
It comes as no surprise that Amazon is known for their affordable yet quick services. Through Amazon’s Prime Now service, customers are able to purchase thousands of daily essentials, such as groceries, and have them delivered in as little as an hour at no extra cost. These services have proved to be a challenge for many contractors as customers expect HVACR businesses to provide the same efficiency at a low price.
“The Amazon Effect has made it super easy for customers to find out what items cost, and it does make the conversation about pricing more difficult when they know the raw cost, and they feel that they should only pay for that price in addition to a little labor,” said Tyler Kime, President of Standard Heating and Air Conditioning, located in Birmingham, AL.
While it may be frustrating, transparency regarding the costs of your services and products builds knowledge and reduces uncertainty. When customers understand the reasoning of your prices, they will be more confident in your services and products.
“You must be able to properly communicate the cost of doing business without getting defensive or giving too much information,” said Kime. “We provide a service, not just a product, and I feel that many customers will understand that.”
In addition, transparency is important because it emphasizes the value of your service, not the price. When your prices are clearer to your customers, it provides you with the opportunity to define and quantify what makes your prices and your business attractive, trusted, and valuable.
“We haven’t changed how our pricing is, and we must provide value continually during the process for our pricing to be fair in the customer’s eyes,” said Kime. “If you can’t differentiate, then Amazon will beat you. We provide what Amazon can’t or won’t do.”
Lastly, price transparency allows you to avoid disloyal customers who are price sensitive.
“Amazon is cheap and convenient,” said Boyce. “We want to be the opposite of that, and our customers want technicians who are skilled, who come to their home and diagnose their equipment, and who they know they can trust.”
Define your Customer
Did you know that defining your customer is key for any business endeavor? In the world of business, defining your customer is very important because it is a major factor in deciding whom to build strong relationships with. It is not a good investment to spend a lot of time and energy with a customer who knows that your price range is not compatible with their preferred price points.
“As a contractor, you need to define your core customer,” said Boyce. “If a customer is looking for a low-cost product and service, that is not who your core customer is.”
When defining your core customer, try to ask yourself these questions:
- Who are they?
- What are their needs and wants?
- What are their desires?
- What do they do for a living?
- What do they buy?
- What makes them happy?
- What do they expect from you?
- What do they think about your competition?
- What are their price points?
- How much do you know about your customers?
- What information will be important to your business?
These types of questions allow you to get an idea of what kind of customer to look out for. When against competitors such as Amazon, it is crucial that you define who you want to spend your time and energy with, as not all customers will be the right fit for your business.
“There is nothing wrong with maximizing value,” said Boyce. “It’s all about education and explaining to these customers why it’s better to purchase from us rather than Amazon. They need to remember that our prices include the experience and the services that we provide.”
Lastly, do not be afraid to part ways with customers that do not align with your customer values. While it may seem like an immediate loss, it is better to cut ties with the customer ahead of time, rather than risking providing a service for them that they cannot afford.
“If there is a customer that is looking for low-cost products and services, they know that they are more than welcome to choose another company that will do that for them,” said Kime.
Elevate the Customer Experience
A company is always down to its customers. While you can always provide products and special services, hire employees, and build a company, it is your customers that decide when and how your company will flourish.
“It all goes back to the customer experience and service level you provide,” said Kime. “Amazon provides great pricing, and that’s about it.”
Today, providing subpar customer service is not enough. When there are competitors that provide a steep discount, it is time to elevate your customer service to attract current and new customers.
In order to elevate your customer service skills, be responsive in your methods of communication and stay engaged with your customers. As we previously mentioned, an advantage that many contractors have against Amazon is the ability to connect and build relationships with customers. By being responsive, your customers will feel important as they are always heard, cared about, and listened to.
If you want to turn it up a notch, consider utilizing call centers with phone agents who are available for service calls 24 hours a day. If you consider this option, data suggests that this will place you at an advantage compared to other contractors who have limited or no live phone support.
“Problem solving is what we do best,” said Kime. “Online retailers don’t have that ability which is what our competitive advantage is.”
As we are transitioning to an ever-changing consumer market, it is your responsibility to adapt to these changes and provide an even-better experience for your customers. While Amazon can be cheaper and faster, you will always have an advantage and that is the relationship that you build with your customers.
Posted In: ACCA Now
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