Connecting With Customers
Word of mouse isn't exactly as powerful as word of mouth for attracting customers and keeping them happy -- at least not yet anyway. Despite the wakeup call that many dot-com companies have received over the past 12 months, contractors are still considering ways to keep customers just a click away from service.
Butch McGonegal is putting the finishing touches on about $200,000 worth of Web site development and other computerized integration that will help keep tabs on about 22,000 residential customers that do business with United Air Temp, based in Falls Church, Va.
"Customers will be able to access our service department on the Web, see what the posted schedule is and arrange their own appointments at their convenience," McGonegal says.
McGonegal is best known for running Shreve/McGonegal, a plumbing business also based in Falls Church. He sold his interest in the company in 1996, did some consulting and got hooked up with United Air Temp in 1998. As the name suggests, much of the work the company currently does is HVAC. But one reason McGonegal joined the business was to add his expertise in plumbing to the business mix. Ultimately, the company plans to also add electrical work to its menu and become a one-stop source for residential work. The company operates 12 branches in the D.C. area, and plans to have 35 branches in five years. One hundred percent of its business is in residential.
McGonegal admits that the company's Internet-related goals and objectives "haven't changed any, but have certainly been pushed back" after experiencing the assorted horror stories most face with technology. While the kinks were being worked out on the Web, the company took other steps to lay additional groundwork. All the company trucks, for example, have GPS -- a big piece of the puzzle to help the dispatch staff efficiently organize service calls. A database of email addresses as well as the requisite street addresses has been organized.
United has every reason to make life as easy as possible for its customers. Currently, the company already has about 14,000 full service agreement customers and about 8,000 other customers who have various equipment warranties. One of the selling points of the service agreements is the promise that customers will get service that same day.
"Using the Internet is one way to keep track of our customers' needs," McGonegal adds. "Theoretically, customers can use the Web for emergency work, but we also need to see these people on a regular basis for semi-annual checks to make sure everything is working properly."
To that end, the company plans on notifying its customers via email that it's time for techs to inspect and clean equipment. As such, the company's Web scheme is a two-way street. Obviously, customers will be online to receive the email notice so they can schedule service on the Web while it's fresh in everyone's minds.
Good Reasons: So far, the Web comprises a fraction of what the U.S. Census Bureau says is a $157 billion annual market for various home repairs and improvements. Forrester Research Inc., Cambridge, Mass., marketing researcher predicts that in 2005, just 3.5 percent of home-services industry revenue will come from transactions completed online. But this projection might underestimate the impact of the Internet, because it doesn't count transactions matched through the Web when money changes hands offline.
Although plenty of dot-coms have fallen by the wayside, many failed because they forgot that the "com" in ".com" stands for "commercial." Any commercial business needs to make a profit -- period. Hundreds of millions worth of venture capital wasn't enough for most dot-coms. Many burnt through capital searching for an effective business model that could prove itself even as costs rose and revenue failed to materialize on command.
Meanwhile, the framework many hung their hopes on, the Internet itself, isn't closing up shop anytime soon. Forrester Research also considers that by 2005 -- essentially the first digital decade -- people will take the Internet for granted in the much the same way we currently take tv, radio and telephones for granted
"Email will jump from being a 'nice to have' to 'must have' for most people," the marketing consultant company writes in a report aptly titled, "The Ubiquitous Internet." Right now, the 570 million email accounts are up sixfold since 1995. By 2005, Forrester predicts that 55 percent of North American consumers will shop online, amounting to $269 billion or 11 percent of retail sales.
Established contractors like McGonegal at least have a leg-up on any of the various dot-com upstarts that serve as matchmakers to homeowners and contractors. United at least already has customers -- customers received through old-fashioned salesmanship.
Internet matchmakers not only have to find customers, but they have to find contractors. Last year, the Wall Street Journal reported on ImproveNet, Redwood City, Calif., which went public in March 2000. At the time of the coverage, the company had burned through $9.8 million on marketing in just its third quarter -- nearly five times its revenue for the period.
It's also easy to see what the company is up against when you analyze the number of visits vs. the numbers of jobs. In the third quarter, ImproveNet had 4 million visits to its site, but only 41,000 homeowners actively submitted job details. Of those requests, the company matched contractors for 31,000. And when everything was said and done, more appears to have been said than done. The number of matches that resulted in business was just 3,200. ImproveNet notifies customers by e-mail of contractors interested in the job. The contractors then bid after visiting the homes. ImproveNet, which has some 40,000 contractors in its database, charges contractors 2-10 percent of the estimated cost of the job, with a cap of $995.
ImproveNet continues to struggle. Last October, it restructured its operations and cut employment by 30 percent in the hopes of cutting operating expenses by 35 percent. In the third quarter of 2001, the company posted a $4.5 million loss, and in September, the company stock hit a 52-week low of .11 cents a share.
Extra ConvenienceMaybe the "old economy" -- and no one doubts that plumbers fit that bill -- may point out one clear lesson emerging from the shake-up of the dot-com world: Only the businesses, whether big or small, that serve its customers right will be left standing. As the novelty of online shopping wears off, online customers will place more focus on the quality of service received.
Marlin Mechanical Co., Phoenix, upgraded its Web site more than two years ago to give its customers a chance to fill out a service form online. You can count on one hand, the number of requests the company get each month (and you'd have a couple of fingers left over, too). While that pales in comparison to requests received by fax and phone, nobody doubts the worth of investment made on the Web.
"I don't think we're ever going to be amazon.com," says President Mark Giebelhaus. "We're doing this as an extra convenience to customers that do want to do it that way. But at this point, most of our customers are still used to picking up the phone to 'order' our service."
While we doubt that any plumbing contractors will become the next amazon.com, we certainly don't doubt that plenty of contractors will eventually rely on the Web for additional marketing firepower. More than 64 percent of Americans have a home computer, and nearly all these computers have Internet access. While computer sales have slowed with the rest of the economy lately, other technology has already leapfrogged over the computer to provide Web access by other means.
To sidestep the excesses of past dot-coms, we found some sage, almost old-fashioned advice posted on the Web by Jim Sterne, an Internet marketing consultant from California:
Help WantedPercentage of surveyed consumers who say they have researched contracting services online and would schedule appointments online.
Dot-Coms Only Need Apply
(Trade) --- Researched online --- Would schedule online
Plumber --- 1.6% --- 5.2%
Electrician --- 1.4% --- 4.7%
Appliance repair --- 6.2% --- 7.5%
Source: Forrester Research Inc.