• From: Remodeling magazine 2013
• Posted on: March 19, 2013

Follow the Money

Today Angie’s List has more than a million members in more than 170 local markets. Members post an average of 40,000 reviews each month. Angie is featured in advertising on TV, inviting homeowners to join the organization. Cost to homeowners varies by market but averages about $29 per year. Prominent among her claims is that “companies don’t pay to be on Angie’s List.”

Getting on vs. Being Seen

Technically, that’s true. Contractors don’t pay to belong. They do, however, pay to advertise. And being onAngie’s List, if you’re a contractor, and being seen on Angie’s List, are two different things. This is where the money comes in.How is it that home improvement companies spend $20,000, $30,000, or $40,000 on Angie’s List if the list is, as implied, a completely unbought and therefore unbiased online community of homeowners? Well, that’s why Angie is on TV. The more subscribers Angie has, the more the company can charge service providers for its services.

What’s in It for You

What you, the contractor, pay for — I write this as someone who once purchased advertising with Angie’s List on behalf of a home improvement company — is access to that list, more specifically the ability to pitch offers to Angie members. One of these specials is called The Big Deal. Our company’s Big Deal was for an average size roof of 20 squares, for $8,888. Homeowners had to buy online and Angie took 10%.

I was skeptical: Who’s going to whip out a credit card and buy a roof online?

The reality: We sold 27 roofs in a week and could hardly keep up. We were high-fiving down the hallway. Priced right, it was profitable work.

The average actual price of those jobs was around $12,000 due to larger roofs and add-ons.

But it came back to bite us. An offer, to be effective, has a beginning and an end. This offer was scheduled to last two weeks. But after the offer expired it went on living on Angie’s List for months and months, despite my efforts to remove it. Three months after the promotion, I had a salesperson on the phone calling from a house saying that the homeowner was demanding that we honor the online price. I said: “Tell him to print it out. I want to see it.” The homeowner made the print-out and we honored it. But then I started getting calls from other homeowners who had bought a job at full price. They’d say, “Hey, I signed a contract with you last week, but can I get this [promotional] price?”

Trying to work this situation out with Angie’s List on the phone, I encountered layers and layers of management but no-one capable of resolving the situation. And when an Angie’s List representative contacted my company to renew our advertising — the opportunity to extend these offers to the Angie membership — the price had risen from $9,000 in 2011 to $30,000 in 2012 because, I was told, “our footprint is enlarging.” Everything being negotiable, we settled on $12,000.

Who Is the Customer?

Angie’s leads were gold — very high conversion rate — and we were able to negotiate that ad rate down. But dealing with Angie’s was a nightmare.

Let me quote Angie back to herself: “Sharing experiences is the heart of who we are.” So let’s not pretend here. Less than 35% of the revenue for Angie’s List comes from homeowner subscriptions. A small group of Angie-approved service providers — about 10% of those eligible to advertise to Angie’s List — generate the rest.

Who is Angie’s actual customer? Is it the homeowners on the list, or is it the service providers who are sold access to that list? Angie’s List is a lead-generation business. And it will be interesting to see what happens when the public figures that out. —Sales veteran and trainer Mike Damora has been the sales manager at several large home improvement companies. 

 By Paul Winans, Remodeling Magazine

Something I always make a point to read is “Corner Office” in the Business section of the Sunday New York Times. The author, Adam Bryant, interviews a CEO, asking how the individual has grown as a leader and manager.

Angie Hicks, the founder of Angie’s List, was interviewed for the June 24 paper. I was struck by the following exchange:

Adam Bryant: “How has your leadership style evolved over time?”

Angie Hicks: “I’ve realized you just have to take extra care and make time to talk to people. I’ve realized you need to over-communicate. When you’re working with people, even if you think you’ve said something, maybe you need to say it two or three more times. And make sure you’re praising people, and make sure that you’re giving them feedback, because their perception of how much feedback you’re giving them is always less than what you think you’re giving them.”

Wow, what a simple, yet powerful life lesson in leadership and managing! Most leaders are fast-paced and understand (or think they do) things quickly. Many employees are somewhat slower-paced and are highly motivated by feedback from their boss. Sounds like a bit of a disconnect, doesn’t it?

What Angie Hicks does is take personal responsibility for connecting with her people. By doing so she sets an example for all who work in the company.

How would this look at a remodeling company?
-Say important things more than once.
-When communicating with an employee ask him or her, “Tell me what you heard me say,” before ending the conversation. Let him or her know you really want to make sure that you were effective in your communication.
-Give people feedback. Praise immediately and then do it again in front of everyone. When offering insights on how an employee can do a better job, that is best done in private but do it, as your feedback and your attention is priceless to an employee.

• From: Remodeling magazine April 2012
• Posted on: May 1, 2012

Turning Tables

By Mark A. Newman

Feeling a little “burned” by Angie’s List, Yelp, or similar websites? Now you can rate those clients who don’t pay on time, don’t pay at all, or create new ways to make your life a little more miserable. Simply click on randyslist.com to see if your new client has been a thorn in the side of your fellow contractors too.

According to Rob Baugher, CEO of Baugher Inc., in Homewood, Ala., a list like this is long overdue. “I’ve had clients who did not pay, and I [later] found out that other contractors also lost dollars with the same [customer],” he says. “[Had I known,] I could have avoided him.” Another of Baugher’s clients — an attorney — had a pattern of not paying contractors “because the legal fees were inexpensive to him and most workmen never sued to collect!”

While just about every contractor has, at some point, probably imagined starting a list like this, Randy Simonton, owner of Deck Masters, in Montgomery, Ala., has been the first to make it a reality. “We don’t have nearly as many bad customers as we do good ones,” Simonton points out. “But [the bad ones] wreak havoc on profits, and I was tired of my pockets getting emptied a few times.”

Annual membership fees to join Randy’s List range from $9.95 to $29.95, or there’s a one-time $79.95 lifetime membership. Before you can search the database you must enter at least 15 of your worst — or best — clients. Simonton says 72% of the entries are positive four- and five-star reviews, which can encourage leads and referrals.

Dirty Laundry

Richard Feeley, president of Feeley Mediation & Business Law, in Marietta, Ga., and a REMODELINGcontributor, says that if you air dirty laundry online, be extremely diligent in your review of the entire project and its circumstances to make sure that the disgruntled client isn’t justified in his actions. “An unjustified negative report could expose the remodeler to costly litigation,” Feeley says. “In addition, publishing negative information about clients, justified or not, could end up backfiring if the public gets wind that you’re known to publish negative reports about customers.”

But Randy’s List has apparently struck a chord in the contracting world — it had contractors signing up from all 50 states and Canada within about a month of going live.

—Mark A. Newman, senior editor, REMODELING. www.remodelingmag.com

The following guest post is by Payam Zamani, founder, Chairman, and CEO of Reply.com Inc., a leading marketplace for local advertisers.

The local newspaper and the yellow pages have been slowly dying for more than a decade, leaving small businesses and merchants few options for local advertising. In its place, Internet companies like Groupon, Yelp, and ReachLocal arrived on the scene to reinvent local advertising online – but none has proved to be a digital nirvana for local businesses, because these solutions do not provide a simple and scalable way to connect with consumers who have a real-time need for their services.

Let’s look first at daily deal sites such as Groupon and Living Social. While these sites are good at taking advantage of local disposable income, they don’t particularly help small businesses grow a base of loyal customers who are not just interested in the next lowest offer. On the other hand, consumers that have an immediate need (such as a leaking roof) can’t realistically wait until a relevant offer is available.

On the other hand, while directory sites such as Yelp,Google Places and YP.com may help local consumers in the event of a real-time need, most primarily focus on simple listings and reviews… which means consumers may need to sift through dozens of reviews to find the right service provider. Reviews also may or may not be from a real customer, and more often than not these reviews are getting posted by reputation management companies and friends and family.

Directory sites simply provide raw information and otherwise add little value to consumers; they don’t offer a meaningful and cost-effective opportunity for small advertisers that will translate into a profitable method of building a business.

The traditional internet solution of web search doesn’t quite hit the mark either. For example, if I’m at work when my wife calls to tell me about a leaky roof, I might search for roof repair from my office in San Ramon. Based on my IP address, I’ll be provided a list of roof repair services near my office… 50 miles from my house in San Carlos. As a consumer, where I happen to be undertaking my internet search doesn’t mean it’s the same location I’ll need the service rendered.

The small local advertiser also has major challenges in order to become SEM enabled and profitably marketed on Google or Bing. Think about the complexities of building the database of right keywords, addressing low quality scores and page ranks, investing in website optimization in order to be able to turn expensive clicks into buyers and so on.

So how is a roofer supposed to generate reliable leads from these services? Does he have to run display ads on Yelp just to have a presence on the site at a cost of $600 eCPM (which is arguably one of the most ineffective ways of generating ROI from marketing on the internet)? Is he supposed to become a search engine marketing (SEM) expert and know the thousands of keywords that he needs to bid for in order to get just the right local customer who is in need of his services at the right time?

And while companies like ReachLocal try to make this process less complicated and offer to do the work on behalf of the advertiser, the junior support staff assigned to these accounts simply takes an ineffective solution for local advertising, primarily SEM, and make it less effective by adding their overhead and markup.

The outcome of all these ineffective offerings is that local businesses try them all for a short period of time, and then they stop. These services in return keep on hiring more sales people to sign up more new advertisers to make up for churn and hopefully grow. The bigger they get, the bigger their problem.

Here is what is really needed to have a successful local advertising model:

1. Perfect Matching: We need to create the next generation of Google Ad Words specifically for local; a platform that is designed for perfect matching between a consumer’s demand and the advertisers capacity to offer the specifically requested service in the specified geography. No more guessing, but rather perfect matching in order to avoid wasted ad dollars which has turned SEM into an ineffective solution for local.

2. Simplification: We need to simplify online marketing. By simplifying I mean massive simplification. Local advertisers are intelligent entrepreneurs who are active on social sites such as Facebook and LinkedIn. If they are given the appropriate tools, they can do their own advertising on the internet without the need to get ReachLocal’s junior staff involved. But the tools need to be designed for them and allow them advertise profitably.

3. Digestible Formats: We need to sell traffic to local advertisers in a manner that they can digest such as leads, calls and appointments. Sure, some local advertisers are able to monetize their website traffic, but most cannot. Most small business owners are interested in real opportunities to offer their services. They are not interested in something abstract such as purchasing clicks or display ads.

4. Auction Based Pricing: Lastly, we need auction based pricing for units of traffic digestible by the advertiser. After all, performance based marketing has always been the promise of the internet. Until online marketing companies treat local advertisers in the same manner they would treat large advertisers, small business owners will not commit to spending significant money with them and do so for the long-term. Local advertisers can no longer be an exception but rather we need to build platforms ideally designed for them.

Local represents a massive opportunity. It represents an opportunity ignored by most major players, and many of the early solutions in the space have mistreated and misled local advertisers with their gimmicky offerings and solutions that make no economic sense. The local market is ripe for companies that are willing to extend the promise of online marketing to businesses of all sizes.