Lead machines or money pits?

March 6, 2017 -  By

We look at review sites from the contractor’s perspective.

Want to get a rise out of a landscape contractor? Mention home-service review sites like Angie’s List or HomeAdvisor.

To those who love them, the sites are business-building, lead-generating machines. To those who despise them, many of whom have renounced them, they’re swindling schemes sucking the marketing dollars from unsuspecting small businesses.

“Other than Thumbtack, I’ve tried them all—Angie’s List, HomeAdvisor, Porch” says Justin Shigley, owner of Lightning Lawn & Landscape in South Lyon, Mich. “I’ve sworn off them all. They say they’re looking out for you, they say you’re going to get work—it’s nothing but a gimmick.”

While the sites ruffle feathers, they are a fact of life for contractors. A 2016 survey by BrightLocal found that 84 percent of consumers trust online reviews as much as a personal recommendation. Furthermore, eight in 10 consumers conduct online research before making a purchase, according to Forbes.

Even if you’re not sinking money into a review site membership or advertising plan, your business may still appear and receive reviews and ratings on these sites. And if you are spending advertising dollars on the sites, it’s important to know how to use them to their full potential. Increasingly—especially with Angie’s List now offering a free consumer membership—you should be conscious about where you pop up online because it’s where people are going to learn about your business.

“Make sure all your listings are correct on these websites and make sure your profiles are built out because this is where a lot of people are finding you,” says Shaun Kanary, marketing director for Weed Pro, based in Sheffield Village, Ohio.

Correction (2/10/17): The original version of this article and graph incorrectly stated that HomeAdvisor had a $300 monthly membership. HomeAdvisor’s membership costs about $300 annually. LM also updated the company’s user statistics and the copy to more accurately represent HomeAdvisor’s paid packages as “packages” instead of “advertising packages.”

To view the entire chart from the February issue, click here. 

Know your customer

The best way to take advantage of home-service review sites is to understand the different types of sites out there and the type of customer who frequents these sites, experts say.

There are two primary business models. First, there are directory-type sites, like Angie’s List, that focus on the contractor’s profile and consumer reviews. The second type are bidding sites, like HomeAdvisor, where a client inputs his or her project information and the site refers it to its contractor members to bid on.

Other sites that use the directory model include Yelp! and Houzz. Thumbtack and Porch are other bidding sites.

Though it’s not always so cut and dried, experts say bidding sites may attract price-conscious consumers, while directory sites attract clients who may be more interested in quality.

“Be aware of the type of consumers that are using each site and match your product pricing,” Kanary says. “For example, Houzz is typically higher-end clientele that likes visual elements. Landscapers do well because it’s a visual service. That consumer often doesn’t care about price so much. They just want to make sure they have the most beautiful house on the street.”

Thus, make sure your Houzz profile is filled with high-quality photos that show off your work.

Meanwhile, sites that are based around bidding or rely heavily on discounts are often breeding grounds for “tire-kickers.” Rather than let that scare you off, Kanary says to embrace it by creating offers tailored for these sites’ users. This approach can give users a taste of the service and quality your company can provide.

Directory site success

Giuseppe Baldi, general manager for Baldi Gardens in Arlington, Texas, says he was surprised to see so many negative comments on a recent LM Facebook post asking about contractors’ experiences with review sites. For the past 11 years, Baldi has used Angie’s List to generate leads for his company, which performs about 60 percent installation projects and 40 percent contract maintenance services to a mostly high-end residential clientele.

Baldi first heard of Angie’s List in 2005, when a customer mentioned that he left a positive review on the site. Soon after, Angie’s List called, asking Baldi to purchase an advertising package. Until then, Baldi Gardens’ client base was mostly built from word-of-mouth referrals, like many companies in the industry. Always looking for more leads, he reluctantly decided to give it a try. He started at about $500 a month and says his dad—Ricardo Baldi, who owns the company—“thought they were crazy.” But the competition on the site was low and the leads quickly snowballed, he says. The company began winning Angie’s List awards and generating more leads than ever. Today, about 80 percent of the company’s leads come from the site, Baldi says.

Advertising with Angie’s List means buying real estate on the site. Contractors buy space by ZIP code and on specific categories. This puts them at the top of the results for those searches. If a consumer searches for a landscape designer in Cleveland, it’s possible that the top companies that appear in the search results are all paying to advertise with Angie’s List. Directory sites typically mark paid listings in some way, but it may be cryptic. On Angie’s List, the consumer gets a high-rated contractor either way because the site says it doesn’t allow low-rated contractors to advertise. Still, the first company that appears in the search results is not always the top-rated company. It’s most likely the contractor that spent the most money with Angie’s List.

Baldi Gardens has grown its advertising budget with the site every year since joining. Baldi says the price, which guarantees a certain number of impressions, depends on how many consumers are in the area and in which vertical category you’re advertising. For example, advertising in a broad category like landscaping would cost more than advertising in irrigation. In holiday lighting, a company could advertise for as little as $20 a month because it gets fewer eyeballs, he says.

Typically, Baldi has spent about $500 per month advertising with Angie’s List. In 2016, however, he spent just under $14,000 for the year. He says the site’s advertising fees have gone up due to an influx of subscribers from its new free consumer membership option (see sidebar). There’s also been an influx of competition participating on the site, so Baldi says he now must spend $1,200 to get what used to cost $500. Still, he says it’s worth it.

“We’ve made a lot of money from the site,” says Baldi, whose company will generate about $1 million in 2016. “We’re spending an average of $20 per lead for really quality leads.”

A key to the site is building many positive reviews over time, Baldi says. One of the biggest fears contractors have when using these sites is the fear of negative reviews, particularly unjustified ones or those from disgruntled customers.

“I think a lot of people get a bad taste in their mouth after they get a negative review that Angie’s List won’t take down, so they give up,” Baldi says. “To be honest, we’ve gotten some negative ones. I welcome those. It’s all about how you handle it.”

So how do you handle it? It’s simple: thank the positive commenters and respond to the negative commenters in a logical and civilized manner. Baldi’s typical response is to apologize and offer to do whatever he can do to fix the issue.

“Customers will see the response and see that we handled it appropriately,” he says. “Sometimes it gives you a chance to defend yourself. And if they’re saying ‘this company is too expensive,’ we’re not looking for customers that are looking for the cheapest option anyway.”

He says contractors who complain about Angie’s List either haven’t been with the site recently or haven’t given it enough of a chance. After advertising with the site for a decade, he’s seen a positive evolution year after year. “It’s gone through a considerable transformation,” he says. “In the beginning, it was very geared towards the consumer side. I think now they realize that the majority of their revenue comes from advertising, so they reevaluated their priorities.”

This contractor-focused mantra has come to fruition with the site’s new account manager model, Baldi says. In the beginning, the account manager was faceless and located in Indianapolis, where the company is headquartered. Recently, Baldi Gardens’ account manager moved to Dallas, Baldi says. She tells him about updates, how to implement them and checks in every once in a while. She even took Baldi to lunch recently.

“Now, we have more of a face-to-face (relationship),” he says. “That’s a big deal.”

Bidding site basics

Shigley, owner of Lightning Lawn & Landscape, is fed up with all home-service review sites. He says he has experience with many them, but no longer uses any. In addition to Angie’s List, which he says he used the most, Shigley tried HomeAdvisor and its predecessor, ServiceMagic. Unlike the directory model of Angie’s List, HomeAdvisor uses a bidding model, where up to four contractors can bid on a consumer request at once.

In some ways, Angie’s List and HomeAdvisor are similar. Consumers can leave reviews and ratings for contractors and both have an option to offer coupons and special rates for users. Yet, in advertising practices, they differ drastically.

To even appear on the site, contractors must pay an annual membership of about $300. On that plan, a contractor can build a profile and use HomeAdvisor’s offerings, like digital marketing or educational tools, but contractors say that’s not why they’re using these sites. They want leads, which cost an additional $10-$30 apiece, according to HomeAdvisor.

“You tell us how much you want to pay for specifically, and we build your package around your budget,” says Matt Zurcher, senior vice president of customer care for HomeAdvisor. “If the contractor says, ‘I want to spend $500 a month in these ZIP codes for lawn care leads,’ we’ll connect them with consumers in that area and let them try to win that job.”

When a consumer visits HomeAdvisor, he or she completes a questionnaire, which describes the project. The site connects local contractors to the prospective client. If a contractor decides to bid, he or she is charged for the lead. Typically multiple contractors will receive the same lead, although members can pay more to be the first or only one who received the lead.

Packages vary drastically with HomeAdvisor. Shigley does not recall the package he had, but he says it was a few hundred dollars on top of the membership fee and produced almost no work.

Kanary says the industry average for lawn care services (fertilization and weed control) is $110 per “quality lead.” In his experience, HomeAdvisor was about $30-$40 a lead for lawn care, but the close rate on those leads was only about 20 percent. Baldi, who does mostly installs and maintenance, reports paying up to $100 per lead with similar close rates on HomeAdvisor.

The site does offer some benefits. For example, it’s one of the only sites that doesn’t take a cut of a job sold on its site. In some cases, Angie’s List users report forking over more than 50 percent of their revenue for deals sold directly through the site.

Other than a great price, consumers on HomeAdvisor, like many of these sites, are looking for convenience, Zurcher says. If your company isn’t going to win in the price category, being the first to respond is another way to succeed.

“We’ve done research that shows if you contact the consumer within 15 minutes, you’re twice as likely to get the job,” says Zurcher. “Fifty percent of sales go to the first pro that contacts them. If you’re the first guy through the door, it maximizes your chances of winning that job.”


Small business support

While Angie’s List and HomeAdvisor are the most-established home-service review sites, they are not alone in the space. Up-and-comers like Thumbtack, Porch and Houzz are all gaining popularity among contractors.

While Thumbtack’s bidding-style system seems familiar, Dustin Glasoe, owner of United One Landscape Management near Phoenix, Ariz., says affordable packages and a seamless interface make it stand out among the crowd.

Glasoe has been using Thumbtack since 2014. His mostly one-man operation, which is about half maintenance and half installation, pulls in about $50,000-$85,000 per year. He says Thumbtack has been instrumental to his business, accounting for 99 percent of his leads. The affordability factor—
he spends about $50 a month on leads—makes it a great resource for a small operation like his, he says.

“The great thing is, if I send a bid out and don’t win the job, I only lost a couple dollars, which is not a big deal,” he says. “Plus, if the customer deletes the project or doesn’t review my bid, the company automatically returns my credits.”

A consumer who is using Thumbtack, which doesn’t charge contractors a contract or membership fee, enters information about a job he or she wants completed. Contractors then receive a text message saying that a new job is available. Through a mobile browser, the contractor can view the lead and decide whether or not to bid on it. If he opts to bid, he must pay a certain number of credits to do so. Bidding typically costs no more than four credits, and the credits come out to about $1.67 each. Only five contractors are allowed to bid on a single lead, and each lead notes how many contractors have already bid on it.

The system also lets him contact customers, solicit reviews and send quotes. The interface creates a great user experience, and the person-to-person customer service experience has been even better, he says.

He encourages other small businesses to try their luck on Thumbtack.

“It’s pretty straightforward and the best part right now is they don’t have any contract,” he says. “Then when it does cost you money, it’s really minimal. For any small company, I think that’s the way to go.”

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About the Author:

Dillon Stewart graduated from Ohio University’s E.W. Scripps School of Journalism, earning a Bachelor of Science in Online Journalism with specializations in business and political science. Stewart is a former associate editor of LM.

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