I had just sat down at a Starbucks last night as I do many evenings and opened my laptop. I cranked up my Spotify app and the phone rang. It was a call from a good friend. A good friend, who is soon to be making the jump from employee to self-employed owner of a home service business; fertilization company and pest control to be exact .
Usually he’s just got bullshit for me, but tonight he had a good question. He asked “what do you think customers care about most when hiring for home services: price, reputation (quality), or convenience?”.
These are the three traditional selling propositions. I really think you could add ‘brand’ to the list as this does apply but really only to highly branded items such as Lamborghini’s or Pepsi. For example Lamborghini has slapped its logo on some radically over priced bicycles… and probably sold a bunch of them. In the home service space, it is really a tiny bit of people that will hire your brand over anything else. Let’s be real, very few customers come out and say “I just need to have XYZ Roofing do the project” the same way that they say “I only use an Iphone no matter what the price”. Of course you can and should strive for Iphone level branding but in home services, with scalability constraints, and relatively low barrier to entry, it’s realistically impossible (yes I said that).
“You can never beat ‘Chuck and a Truck”
Now since the start of my business, I have never sold on price and advise against it. You can never beat ‘Chuck and a Truck’, slinging exterior repaints for $1,000 with no insurance, no payroll, no liability no reputation that they need to uphold. Competing with them will ultimately lead you out of business, or you’ll wither away so much quality and convenience to save costs, that you’ll lose customers. And when you compete on price, you’re only opening yourself up to customers who will find a ‘Chuck an a Truck’ and ask you to match their bid.
Instead I focus on selling based on reputation, and convenience. That said, the majority of customers just want the lowest price. Price is the number one driving factor I see behind most home service purchase behavior.
So my response was “well for the general market I would say it is 60% price and 20% reputation and 20% convenience”. Now among my customers, the ones that actually hire us, I would say it is “0% price, 50% convenience, and 50% reputation”. There are some customers that want convenience, and want to know their project will get done without the baloney of “our truck broke down” and other monkey business commonly associated with low cost service providers. There are some that will want the job done right by a company with a reputation that indicates they will maintain it (their reputation). And those are the customers that will pay a fair amount to get the level of service they expect.
Now if everyone had a bottomless bank account, what would the deciding factor be? Convenience or reputation. On the inside everyone wants convenience and reputation. With economics coming into play, consumers will go with where they feel they can get the highest level of convenience and reputation, for the lowest price.
Here’s the thing, even if their deciding factor is the price, their expectation of service level, will still be compared to whatever the highest level of service they have received as a consumer… not to to the level of service they would expect from ‘Chuck an a Truck’. In other words, even those that chose to pay ‘Chuck an a Truck’ prices are expecting Apple store service.
Most customers don’t spend money on home services regularly. A lot of home services are one off projects. So they have no benchmark. They don’t know what it’s like to work with an unlicensed, uninsured, or otherwise low-budget operation that lowers the price and provides crappy service and quality of work. So the closest thing they can compare your interaction to is what ever “good service” means to them.
Just think about this, a customer hires you based on having the lowest cost. To keep costs low (or because you don’t charge enough to maintain the expected level of services or because you’re too unorganized to do better), you skimp on vehicle maintenance, employee pay, and organizational software. Your truck breaks down on the way to your job. You need to delay the project because your short staffed since you don’t pay enough. You use the builders grade materials which falls apart in months. Throughout the project you lack any type of communication. What is the review going to say?
1 star: I hired them but they totally suck. Delay after delay. It was a headache. Now this thing is falling apart.
What is your response going to be; “they got what they paid for?” Maybe you could do a little better and say “we offer the lowest prices and in order to do that we have to cut corners”. Either way, it really doesn’t matter. You’re not going to get any repeat business, and the next price shopper is just going to take a gamble on someone with less bad reviews or an even lower price than you.
That’s why I don’t compete on price, but rather focus on delivering a level of service customers expect, at the best price we can offer it at.