The Home Service Expert Podcast - Delivering An Outstanding Customer Experience With HomeAdvisor

Episode Date: February 7, 2018

Craig is the President/CEO of HomeAdvisor, a $500M+ home service company that’s also the world’s largest digital marketplace for home services. In this episode, we talked about company culture, marketing, customer service…

This is the Home Service Expert podcast with Tommy Mello. Let's talk about bringing in some more money for your home service business. Welcome to the Home Service Expert, where each week, Tommy chats with world-class entrepreneurs and experts in various fields, like marketing, sales, hiring, and leadership, to find out what's really behind their success in business. Now, your host, the home service millionaire, Tommy Mello. I have to say, I'm really excited about this new interview. Ladies and gentlemen,

I'm going to be interviewing the president of HomeAdvisor, Craig Smith. He joined HomeAdvisor in the year 2000 and oversees operations, including the company's sales force. And he has over 2,000 employees that direct up to him. I can tell you he's been on the board of a lot of different things, including the Children's Hospital of Colorado. He's been a board advisor for the National Cyber Security Center, the board of directors for Beanstalk Foundation, and the A-plus Denver Association. At HomeAdvisor, he was responsible for developing a new sales strategy that helped contribute to over 40% year-on-year growth. Prior to joining HomeAdvisor, he worked at Al Pormar Foundation

as a member of a three-person account management controlling over $500 million in assets. Ladies and gentlemen, I do not want you to miss this interview for one reason and one reason only. Leads are the lifeblood of our company in the home service industry. And no one knows that better than our man here, Craig Smith. And you're going to want to be part of this because he can tell you how to get more leads and what's changing in their program and what's going to be happening with the new purchase of Angie's List. So please listen to this interview. You're going to get a lot out of it. I'm excited to present Craig Smith. Can you tell me a little bit about yourself and just, well, first, how's your day

going? It's going really well. Thank you for having me on the show, Tommy. It's a pleasure to spend some time with you. Yeah, you know, I've always been a big fan of lead gen companies. And when we talk about lead gen, I mean, you guys are the mothership. You guys are the monster, whether it's affiliate marketing, TV marketing, any type of marketing, you guys are it. I mean, you guys literally set the foundation for affiliate marketing. Tell me a little bit about when you got started, what it was like starting, and where you've grown to now with the company. Yeah, so I started with the company in 2000. The company was founded in 1999, so I've basically been here from the beginning. And, you know,

it's been a tremendous journey. It's been a lot of fun. You know, we started with, I think, kind of your basic lead gen platform, which at the time was, you know, highly disruptive to the market. This was when yellow page advertising was very prominent, was a $12 billion industry. And 20, 25% of that was home improvement spend. And all the ad dollars were going to, you know, traditional forms of media that was harder to measure and less efficient because it didn't do as good of a job of bringing buyers and sellers together efficiently when the homeowner had a need and the service professional had the capacity to do the work. And there wasn't a feedback loop.

There wasn't a vetting that was going on either with those older mediums. And we introduced the notion of comprehensive background checks. We have the most comprehensive screening and background check in the industry. And then the ratings and reviews that we add on top to provide real-time feedback on the quality of work that the service professional is doing. And we're over 16 million ratings and reviews that have been verified through our platform. So we've become a reliable place for homeowners to go and seek somebody who's available, who's credible through both the screening and the ratings,

and that they can connect with more directly. And so, you know, we started more on the lead gen side. That's still a big part of our business, but have evolved into a marketplace that does more on-demand connections, more one-to-one connections with services like Instant Book, Instant Connect, same-day service, features that allow the homeowner right from their smartphone to review a few pros, choose the one they want to work with,

schedule and book service directly. And I think it's kind of the power of a growing marketplace, and we're continuing to, I think, lead innovation in that way to create more value for all the parties. Yeah, I mean, it could literally, a small company, it could make your business. I mean, it literally can be the driving force. And what I've noticed is the small guys that actually don't get a ton of business and they have time on their hands to answer the phone and really get back to these customers are super successful. And obviously, the big companies that are on these things like White on Rice, but I feel like it's those in-between companies that struggle, not with HomeAdvisor, but maybe lead generation in general. What are your thoughts on that as far as the companies?

You've been doing this a long time, 17 years. Tell me, what makes somebody successful on HomeAdvisor? Yeah, I think you nailed it. When we started, one of the intentions going in was to create a platform and a marketplace that would empower a small business to compete with anybody. And they would do it based upon the screening and the quality of their reviews. And so you didn't have to have a huge marketing budget to be successful and to kickstart your business and really grow cost effectively. And those companies do exactly what you described. They're hungry and starting out generally smaller, and they're willing to call leads back very quickly. That's the first key to success.

It's calling within 15 minutes is kind of the magic threshold to being very responsive to homeowner requests and really the on-demand nature of homeowners these days. They want to get a response immediately to whatever their need might be, know that they're taken care of and can move on to the next task on their list. So that quick response is important. And those smaller businesses were equipped and willing to do that. On the other end of the continuum, the larger businesses that have established call centers and teams that are set up to call quickly on these leads do very well, too.

If you're not willing to do those things, it can be a bit of a struggle and a bit of a challenge because it is a competitive marketplace. And there are other companies that are willing to do that. We, in recognition of that, launched a program for the larger medium-sized business called Elite 360 that takes a lot of that chase out of the equation for those medium-sized businesses and drives more inbound phone calls that they can react to and close. I talk to a lot of those medium-sized businesses. They'll say, hey, I'm the world's best closure. If you get me in front of a homeowner, either on the phone or in their house, I'm going to win the business. I've got years of credibility. I understand the industry. I

understand pricing. You just need to get me in front of them, but I'm not going to chase them. And so we've created products and solutions that enable them to succeed in our network as well. And that's kind of been the notion, the evolution of where we've gone as a business. You start off building a product that is a bit more one size fits all because it has to be in the early stages. And then as the marketplace matures and evolves, you add more customization so that we can address each of those segments, either the really early stage business to the medium size to the large business. And not only that, as you know very well, remodelers, interior, exterior are very different than plumbers, electricians and more service dispatch oriented businesses and the mechanical trade. So we've

developed some customization within those industry themes as well to better address specific business needs. Yeah, you know, I think you make a good point. I think in every business, you got to kind of take that shotgun approach. And as you grow, get narrow and focus. And I think you guys have been through a lot of changes. I mean, you talk about the Elite 360, which I'm going to dive into in a little bit. But tell me a little bit about Service Magic Days and some of the stuff you guys learned, because that was really successful. I mean, it was a great campaign. You guys had the same concepts,

but I know you wanted to rebrand yourselves. You wanted to make some changes and you've done it. So tell me a little bit about that. Yeah, I think Service Magic created a really solid foundation for the business. And, you know, it's a foundation that we were able to leverage when we rebranded. It was a bit more of a one size fits all product. It was a lead based product for everybody. It was also kind of a one size fits all, maybe overreaching consumer brand as well. And we intentionally did that when we started. We consider or want to at least create the flexibility of being a broad services-based platform where you could find home improvement, repair, and maintenance professionals, but you could also find any other service, be it a dog walker, an attorney, a mechanic. And we wanted to create

the ability to expand into other verticals. We realized that was too difficult to do. It's already complicated enough within home improvement to provide the level of customization and the homeowner experience that they are looking for and expect. And so strategically, we narrowed the focus to the home and anything that happens in and around your home specifically, but not worrying about all those other service-based categories. You could leave that for others to deal with, but we want it to be the best marketplace for anything related to the home. And so that gave us, I think, a real catalyst, really narrowed down that homeowner focus and the experience they have when they visit the site, get the feedback from focus groups and research around what they value most,

and develop a strategy to support that, and do the same thing on the service professional side, where we could go deep by researching, you know, what are the greatest needs of the small, medium, large-sized business by industry category and really customize the experience there. And that's where you've seen the acceleration of product like instant booking and same-day service and instant connect, Elite 360, the mHelpDesk back-office product that we offer to our service professionals now that allows them to manage all aspects of their business right from their mobile device, be it, you know, scheduling, billing, fleet maintenance, you know,

anything else that you need to run a business effectively is sitting right there on your mobile device. And that is something that the market was really calling for and we were able to offer. But if we had been in all those other categories, we wouldn't have been able to execute well against that. Yeah, I was talking to one of my managers the other day we actually we have so much fleet maintenance and we're buying 10 trucks a week we decided to open up a shop and he said what exactly can we handle on our own and i said i'd rather specialize in a few things and be the best at it than do engines, transmissions, exhaust systems. So I think what you guys just did over the years is you've kept specializing, specializing, specializing. And you always look at yourselves and say, how can we do it better?

And you've got a lot of good feedback coming in. What I'm so curious about, you guys have over 2,000 employees, you're half a billion dollars in assets. Tell me, I'm experiencing explosive growth right now. I mean, I've doubled. We're going to, by the end of the year, be over 200 employees. I mean, we're flying. And what I've noticed is there needs to be systems, and that's a very vague explanation, but it's still, even if you've got the right systems to get the right employees, there's all kinds of systems. There's the right training, everything. The experience trumps everything. And you know more about this stuff because you've seen it. You've seen the transformation. Tell me a little bit about how to handle explosive growth. How do you even prepare

yourself and what are some of the challenges? Yeah, first of all, congratulations on all your growth, Tommy. That's phenomenal. I think there are a few things to consider. You know, you can't, and this is kind of personal in business, you can't be afraid of failure. And you need to build a culture that rewards that and expects it to a certain degree. I think as you grow and scale, putting the right measurement in place to understand the implications of the various decisions you're making, whether that is a change to your marketing strategy or your customer service or your sales approach or your pricing, you know, having a methodology for solid measurement to understand and make, you know, decisions around whether or not to invest more and continue to do something or not, but to confidently do so. I also think, you know,

having a strong team value and, you know, culture around what you're looking to accomplish and ensure that everybody's aligned to go after that and get it. And I think we've been very committed from the beginning, recognizing that we're a marketplace that services the homeowner customer, the service professional customer. We get very excited here and we celebrate success that we hear of the service professionals that are in our network, those stories that we get routinely about somebody who was running, you know, one truck and is now up to 20 and they've exceeded their dreams well beyond their expectations. People get really excited about that. And so it becomes more than just a, hey, I'm coming to work for a paycheck and to get through the day. It is, hey, I'm coming to work to go above and beyond for our customer. And, you know, it's very gratifying and rewarding

to hear those great success stories that are created from the value of our marketplace and staying committed to that. But always keeping each of those stakeholders in mind, you know, how is this change impacting the homeowner? How does this change impact the service professional? And then, you know, as soon as you create more value there, we're the beneficiary of it. And then I think, I think there are relentless passion for customer satisfaction, you know, constantly measuring your customer satisfaction and raising the standard each year with a commitment to get better and getting everybody rallied behind that. Because if you do those things, everything else will take care of itself. Your reputation will be strong. Your repeat use will be high. Your brand loyalty will

be good. And that's when the flywheel really starts to spin. Yeah, I've seen it with you guys. I mean, I have a concept that I'm going to put out on my book and it basically says start out with the end in mind. So I built a quick chart. It says, what kind of income do you want to make? And then you move backwards. What amount of money do you want to make? And then you move backwards. What amount of money do you want from each job or where are you averaging per call? And then how many of the jobs that you book the appointment for are you completing? And then how many of the, it goes back and forth, but what it does is it allows you to see those KPIs that you're talking about. And along with this comes the infrastructure. So if you're in any home service company, I don't care if you're plumbing, chimneys, gutters, whatever it may be, I think that you need

to really plan on what your infrastructure needs to look like based on your growth. And you guys, that's one of the questions I want to dig a little bit deeper into is how did you prepare for the growth? And how did you guys have any expectation of how to build that kind of infrastructure? Because without it, obviously, you know, customer satisfaction is the most important thing, but you've got to have the infrastructure to handle that. And obviously, when you're growing as fast as you've done, you've got a lot of turnover. You're picking your people out of the crop and there's turnover and you're constantly training. So tell me about that, because I feel like a lot of people that are listening might be a 15, 20, 30 million dollar company. But they're going, how do I hit that hundred million dollar mark?

Some of them are a hundred thousand dollars wondering, how do I hit that million dollar mark? But either way, I believe it starts with the right people in the infrastructure with processes backing that up. But considering your explosive growth, how does that look? Yeah, I think, you know, one thing to consider is patience. You know, it took us 17 years to get to where we are. And I think if you are taking the short view and trying to grow too quickly, you know, it can create a lot of challenges. And there's nothing wrong with, you know, really rapid short-term growth. Clearly, we all want that.

But growth that is sustainable typically comes from, you know, taking a longer view. And I like what you had to say there is, you know, have the end state in mind, but have that end state, you know, further out. Because if you build a corpus of loyal fans who really love your business and your product, and they're coming back to you and word of mouth really takes off, it becomes easy at that point. You're not having to grind to get to growth every quarter, but you have the tailwind of a really satisfied customer base. And so that may mean in the early days, you're operating at a slightly tighter margin and you have a bit more overhead because

you're going above and beyond the customer service relative to what your revenue might permit. And you're taking home a little less take-home pay early on. But as you're going through that, you're building this really incredible foundation where you're in a position at some point to take price and to start getting some leverage off of that operating base that you have. And you're doing it in a way where you're leveraging your reputation. People are willing to pay more because you've become so highly regarded and they're confident in the work that you're going to do. People are willing to pay more because you become so highly regarded and they're confident in the work that you're going to do and the experience they're going to have. And so when I say take a long view and be patient, I don't want to stifle any

ambition, but I think that's how you get to a really sustainable, highly profitable business that is a legacy multi-generational business, which I know a lot of our pros aspire to do. And that's one thing that I love about our service professionals and that we talk about internally. It's not just creating success for these small businesses in the short term. I love talking to our customers and their passion for creating a multi-generational legacy business.

And that is what small business is all about. It's a really special thing to help contribute to that. Yeah, I think that's a great point. And you brought me up to a book that I just read. It's called Raving Fans. And it's a funny story about a guy that meets his fairy godmother named Charlie, which is kind of funny in itself. But it's a great book.

I'm not plugging it. I'm not getting anything back from it, but it talks about three essential elements of just going out of your way to no longer create a happy experience, but to create a raving, happy, loyal customer. And in this day and age, with every access that the end user has

to reviews from the BBB to the licensing commissions, you got to create raving fans to make it. And there's no better customer than a referral. So I agree 100%. And that really just kind of struck a note because I just read the book. But, you know, a lot of times and I've heard this from any lead company, but especially in the past when people used to use you guys when you were Service Magic, is some people might have a cliche that these customers are just price shoppers. They're not really good customers. Now, I will 100% wholeheartedly say that we do absolutely amazing.

I use you guys as company. I'm not saying this because we're interviewing. I would tell you honestly what we're using, what we're not. And I've not noticed that. I've noticed there's what I call the Flintstone people. They're the yeah, but, yeah, but, yeah, but, yeah, but, yeah, but. And that's not, those are the, you know, you get used to that. But tell me about what you would say to those customers that you've had in the past that say that. Yeah, I think you have a full range. I mean, you know, this is a, you know,

a marketplace that reaches, you know, collectively it's the biggest marketplace, you know, reaching homeowners. And so, you know, you are going to have some people that come in and are price shopping and their number one, you know, objective is to get the lowest price possible. But that is a small portion of the total. So you have to be prepared to run into some homeowners along those lines. But you also, given the demographic skew that we have with higher household income, higher home value, the majority of those really expect, and our surveying supports this, what they're sensitive to is quality of service and quality of workmanship. And that's what they want most out of the home

advisor and Angie's List experience, not the cheapest price. We can't exclude, and there will always be people who are looking for that, but the vast majority are more value-oriented and quality-oriented in what they're looking for. And that's why they've come to us, because we've got the ratings and we've done the background checks. And as a service professional and a contractor, that's one piece of mind. You're not having to compete with somebody who doesn't pass our background checks and is not screened and may not carry the same overhead and doesn't pass our background checks and, you know, is not screened and may

not carry the same overhead and, you know, doesn't service their customers well, you know, you have to have great ratings and pass our background check to compete in this marketplace. That's just the way it is. And so, you know, that I think levels the playing field from a pricing perspective as well. Yeah. Dale Carnegie wrote a book, How to Win Friends and Influence People. And the number one thing he said is people are more interested in themselves. And I believe that in the home service niche, the majority of the people are owners answering the phone, a lot of one man, two man, three man shops. And the first thing the customer says is, what's the price? The first thing I ask is, what exactly are you looking for?

And I go into questions and I ask them and I qualify them and I tell them. It's not always about price. There was a double blind study from a garage manufacturer, Clopay, and they really did a good job of the survey. And it said the number ninth thing was price. And I don't have it in front of me, but there was eight other things that were more important to people. And a lot of times, small companies, especially small companies, believe that it's all about price. And I was in that same boat. I work with a company called Direct Energy.

We've actually used it, you guys. They got a call cap integration into HomeAdvisor. But the point is they know it's not about price and they never quote a price and they've got 1400 call center reps. So I would say that if that company figured it out, the people out there listening to this podcast should start looking in the mirror

and really accepting the point that it's not about price. And the people that do only buy on price are very, very limited in the United States. And those probably aren't somebody you should be marketing towards. So make your avatar or your perfect client, somebody other than price shoppers. But I just wanted to leave it on that as people that can talk about themselves, they like to be asked questions. So don't always just give a price. It might not be your service lead provider. It might be the way you're handling those objections. But, you know, I think that a lot of customers are price shoppers, but also a lot of the people on the phone right

now, or I'm sorry, on the podcast might be price shoppers when it comes to leads. You know, they might be saying, well, I could do this and I could do that and this and that. And I think you guys are more than fair on your cost. I think you guys have a brilliant affiliate program. Explain to me of somebody that says, I think that's just too much, because a lot of times they know you're selling it to four people. How do you combat that? Yeah, I mean, the vast majority of the time it's three. You know, there are certain categories which are in the minority that are four. And from a relative price perspective, I think some of the things that businesses don't consider is the efficiency that a solution like ours offers. So the ability to do the type of work

that is your highest margin work. So when you're thinking just about word of mouth and general referrals, you know, you find yourself doing work that is less desirable, lower margin, or in areas that is highly inefficient. So you're, you know, you're driving around far too wide of a geographic coverage area and wasting time, you know, with you or your fleet staring at the dashboard. You're not factoring that into your cost. And that is real cost. You could, instead of doing, you know, two jobs in a day that are spread throughout the city, do three or four jobs that are concentrated in a more desirable neighborhood. It also allows you to build a strong reputation in some of these more desirable neighborhoods. They're hard to break into because, you know,

word of mouth is powerful there. But if you go in and start doing a good job, we have a lot of homeowners that are turning to us in these higher value neighborhoods. That's a way to get a foot in the door and to build that reputation and to expand your business there. It also, you know, I think one of the great things about the home advisory model is you can, you know, turn the lead flow, the homeowner flow on and off as you see fit. So if you have capacity in your schedule, you know, next week, then you're turning it on associated with where your crews might be. And so you're filling in areas where you would have had idle time and you're already paying the team, or you don't have any work to do and have some gaps in your schedule. So you have to, I think, evaluate the efficacy and the return, kind of considering those things as well. And I do. I mean, we get, and it depends

on the industry, of course. So, you know, this is, this is in general, but the individual service professional close rate is about 25% self-reported, you know, by the pros. So, you know, very high close rates on the lead demand that we see come through. Yeah, and I think just like customers that are price shoppers, nobody that ever looked at your platform, I don't think they've done money mail or TV, radio. They've never done any of these sources that still work. And they really don't know

the most important thing about their business. And those are key performance indicators to know what they really pay per acquisition. And if you look at a lead source, interestingly enough recently, and I think you're gonna really dig this story, Craig, we work with a lot of called PFP programs or pay for performance.

And part of that requires a base buy. And I'm not gonna go into details about it, but basically what we found is pay-per-click advertising the top of the Google, for those of you that don't know what that means, it's just paid ads on the top of Google are the best thing for the base buy. Well, they drove three times the leads that we were driving, but they got us three-fourths

of the revenue. And we know that because we've got really good analytics within our CRM. So long story short, they were getting us a bunch of leads for remote control calls not working or a keypad malfunction and just low hanging fruit because they were doing what's called broad match. And we usually try to go towards exact terms. What my point is here is every lead's not created equal. You could have your phone ringing off the hook and they could do it maybe cheaper, but that doesn't mean the quality is there. And I think, Craig, you really spoke to that as saying you guys focus on quality because you care now more than ever about the lifetime value of your customers. Because there's obviously an opportunity cost to have to change clients.

And you know the old saying is it costs 10 times more money to get a new customer than to keep an existing one. So I'm just a big fan of the quality of leads and the people. One thing that I've noticed about you guys in the last few years, and you could probably tell me when it started, but you went affiliate marketing and you know what I'm talking about. I'm not going to go into details. I'm not trying to confuse anybody on here, but you guys really started to promote your own business all over the place. I mean, more than I've ever seen.

It's on TV. It's everywhere. Tell me about the thought process, because I think you're getting more loyal customers. I think you're building a brand now. I think the companies that do all affiliate marketing, they never build that brand. And you guys just dove into it. Tell me about that process and what the outcome was of that? Yeah, I mean, I think there are a few factors at play there. You know, early in the business, you just don't have the size and marketplace to cost effectively, you know, spend on brand marketing. It's not efficient. Once you reach a certain tipping point in scale, you know, that media starts to make a lot of sense. And so we started with a more digital focus, but have, you know, really accelerated the TV and the brand marketing as the marketplace has matured and the efficiency of that media has gone up. The other thing that we do now a lot of is look at what media is driving the highest return for our advertisers. So what yields the best close rate, the highest value customers, the lowest cost of marketing or highest return on their ad spend. And, you know, now that we have a

framework in place that allows us to measure that and to get feedback from our pros, we can go invest more media dollars in the areas where they're seeing a better return. So it's just kind of a natural evolution of the marketplace where as you get scale, you can get a lot smarter and extract a lot more efficiency for everybody. And that's when marketplaces are great. That's when there's just a ton of value for everybody who's a participant. But it takes time. It's just not something that happens overnight. And so an experience somebody may have had 10 years ago or even two years ago is going to be significantly different than their experience today because our marketplace is getting smarter, more mature.

We have really sophisticated technology and algorithms that help with better matching, getting the right homeowner to the right pro at the right time so that they can win. You know, everybody wins. We want our homeowners to get more work done successfully and with a great outcome. We want our service professionals to win more business and improve their return on investment. And, you know, you can do those things when you have the tremendous amount of homeowner demand we have, the size of service professional network we have, and the technology that sits in between. You can always, you know, refine and improve on that. So everybody

wins just a little bit more every day. And over time, that becomes dramatically better. Yeah. You know, I talked to a guy last week and I was telling him a little bit about HomeAdvisor because he's in the real estate industry. And he said he used you guys all the time. And I don't think at one point in your guys's maybe self-reflecting, I'm sure you guys do. But at first, when you're in business, you're out to make a profit. You're out to make as much money as fast as possible. But when you could reflect, you got a lump sum of money. You're deciding where to spend it. You go, that's what we want. So how do we get a happy customer to use us all the time? Because you guys charge for leads, just like Google charges the businesses. So you say to continue, why would Google,

why would everybody go to Google? Well, they go to Google because they give the consumer exactly the data they want. They got advanced algorithms. So when you self-reflect, you say, man, if we give this customer an amazing experience, they're going to come back all the time, therefore creating more money. But you're taking care of the customer. Now, that's why you guys got these prequalifications. That's why you want them to only get the best rated experiences out there. And that's why we've got to up our game and create raving fans,

because if not, every year that goes by, and you're not doing background checks and drug tests on your employees, and you're not really hiring the best and making sure that you're the best, it's going to give you a disadvantage. Trust me, the guys out there listening, the gals out there running the home service businesses, you got to take this interview with Craig and you got to use it. You got to use it to improve your business because literally you get bad reviews. You get people that smell like nicotine and they're not presentable and they're bodily odors or whatever. What's going to end up happening is you're not going to be allowed on these sites because

they're trying to create a better atmosphere for the end user. So I just really wanted to kind of really knock that on the head, Craig, because I think it's so important that they understand that this is what's happening and you guys are doing it. And you recently purchased Angie's List. And this has got me really intrigued because I've been involved with Angie's List a very long time as well.

I love the concept. It used to be what's called a closed network, meaning you had to be a member to leave a review. I knew a new CEO took over and I knew something was going, but I didn't really understand what until, I think I heard it about six months ago, you guys were purchasing them.

Tell me, everybody here on this thing has heard of HomeAdvisor. They've heard of Angie's List. Tell me the whole process and the thought of taking that over. Yeah, well, at the core, it comes down to what we've been talking about kind of throughout this discussion. As you bring more people to a marketplace, there's just a lot more efficiency and a lot more value for all. You know, the more consumer demand you bring in, the greater the service professional network is to service that demand and the higher quality that it is, the more interesting things you can do. It makes services like same-day service more efficient because, you know, you can reliably and predictably get somebody to somebody's home within two hours if they have a garage

door break or, you know, a pipe burst or an electrical problem. But that's due to the size of marketplace and the liquidity that exists. And, you know, when you're looking at the number of, you know, different tasks and coverage areas and capacity of businesses and everything that's involved, it's a really complex thing to line up supply and demand efficiently. You need scale to do that. And what Angie's List brought to the marketplace is a lot of scale

and a lot of very high-quality service professionals. And so we took the two strongest homeowner brands and brought those two brands together. The brands will coexist and the products will coexist. So it allowed us to, on the service professional side, so what it allowed us to do is kind of expand the range of offerings we have to our service professional community, expand the reach to more homeowners and kind of bring the best of both worlds together to grow the value. I love it. I love it. So I'm going to dive into the nuts and

bolts of this stuff because you teased me earlier. You didn't realize you were doing it, but you said, hey, we got all these analytics. We know what forms of advertising are the best. It was like walking out Christmas morning and there was presents, but I couldn't open them. So I kind of wanted to dive back into that because you don't have to give me your exact stats on this stuff. I know you guys, you have a lot of data that's proprietary to you, but you know, you've seen the marketplace shift. We know Google works. We know Bing works. We know TV works. We know direct mail works. Everything still works. But if you were going to make a pyramid at the top forms of marketing at the top and all, and you got to take this with a grain of salt because some of these guys might

be smaller, but let's say you're a pretty successful company. You've got a full staff. You do everything. You're doing HomeAdvisor. You're doing Angie's List, Yelp. You're involved in PPC. You're doing direct marketing. You've got affiliate marketing figured out.

Everything. Where is the best bang for the buck that you guys have seen, and how do they work together? Yeah, I think that's the key is you want to have a, you know, diversified media strategy that is, and like you said, it's, you know, your strategy is different depending upon the phase of company that you're in. Like the way I look at brand marketing in the very early stages is all about how you're servicing your customers, who's calling, how professional they are, how they show up at the door, and the brand image that you project, the quality of the truck that you pull up in, the follow-up that you have.

That's the brand investment you're making. And so you're in those kind of early, say, you know, 200,000 to 2 million in revenue days, you know, you're focused more on direct response marketing, marketplaces like Angie's List and HomeAdvisor and other digital marketing that you can measure and turn on and off and has a lot more flexibility in how you can target that spend. And investing the brand dollars in a great experience, great customer service. Those are the businesses that I see do best. They have a good sales team, and that really means being professional, having a great presentation, be it, like I said, the van, the literature, everything that you show up with and how you present, great customer service, follow-up, and professionalism.

And then as you enter that next phase, I think that's when you can start looking at, you know, broader reaching brand-oriented media. And that's effectively what we did. But I think that's where you can look at things like TV and you can look at, you know, traditional media, brand-oriented media. It's going to reinforce, you know, the strong brand that you've built early on and reactivate a lot of customers who may have forgotten about you. Once you've built that base of hundreds, thousands of satisfied customers in the market,

having that TV out there is really great to reactivate that audience or to remind them to share that word of mouth referral if somebody should come up. And it's just more efficient once you've built your crews up to a size where you can make the return work. But in those early stages, it's hard to make that brand media work efficiently. You just can't be as targeted in the spend to make the ROI work. And you don't have the base of raving fans out there that you're reactivating through the TV. So I think it's kind of in phases and what works depends on what phase you're in as a business. Yeah, I agree with that wholeheartedly. And that's kind of what I was looking for is it really depends on the size and scope of your business.

I just I heard this a long time ago and I've lived by it is he who could pay more per acquisition will always win. Now, with that being said, I do believe you have to have great customer satisfaction rating. And that's, I look at three things when I look at a technician, close ratio, average ticket and customer satisfaction. If not three of those things are great, you're not a good ticket and customer satisfaction if not three of those things are great you're not a good technician and customer satisfaction is first so we've got great crm that allows us to do that but i think it pisses a lot of people off because they say you're you're ripping people off and i say this i could go buy a phone at walmart for 30, but people are, you know, that the new iPhone 10 is sold out. No one could

get one. They're a thousand bucks. Yeah. And these people in the home service industry, especially they go, they started in 1976. No offense. Listen, these are the best workers I've ever met. They're super intelligent. They did great in the double truck yellow book ad. But they go, you can't charge those prices. And I say, you haven't changed your prices since 1989. So I just I'm really the main thing I want to express here. And I went back to pricing is just I want some people to realize that price cannot be the only driver of your business. And if we talk about one thing, and this is just leading me into a really important question, because I know we're running out of time here, is you guys have been able to grow by acquisition. And you guys, I know a bunch of companies you swooped up. You just go in.

You see them entering the marketplace. They built a nice platform. Boom. You snap them up. I know that that's the fastest way to grow, and it's a scary way to grow. And now you guys just bought a monster company ansi's list tell me first of all my point about the whole pricing stuff was your i would never buy a company that just sells on price that just says we're not going to do marketing we're not going to have a website

so that was kind of what led me into this is tell me what looks good to acquire and tell me how to grow by acquisition yeah you hit on a good point as it relates to price. It's not price, it's value. If you're just looking at price, that's without context. Like the iPhone, at $1,000, my wife tells me this all the time. I'm like, I'm not going to pay that. And then she'll come back to me and say, but you use it more than any other thing in your life. It is attached to you. Don't you want the best of the best? And if you look at kind of the cost per relative use, it's a great return. Absolutely. service professionals do, people are willing to pay more for good value. If they know it's going to be done on time, it's going to be done with high quality, and they're not going to have to

bring somebody back out to fix it in the future, or it's not going to break again six weeks down the road, they will pay for that. And that is value. And if you're consistently delivering on that, you can demand a higher price because you can back it up and people are willing to pay for that. The same is true through acquisition. The price that you're willing to pay is tied to the value. And some companies can derive unique value. I think in the case of Angie's List, we're positioned to derive the highest level of value. So the price that we pay almost doesn't matter. It's all about by bringing these things together. And like I said earlier, kind of taking the best of both, we can create tremendous value for our homeowner customer,

for our service professional customer. And we're already seeing it just in the first 30 days. So it is great value, and that's what you're looking for. You know, I always, you know, I read, you know, Ben Graham's investing, you know, when I was younger. It's all about seeking and identifying value, and that's what kind of drives that decision matrix. Well, a cool thing, too, that I love about acquisition is you'll find somebody with a lot of holes. They've got a perfect business, but your company could go in and plug those holes and turn it into just a cash machine, an ATM machine. You know, you got Amazon now doing home services. And I got two more things that I'm going to wrap it up. I know you're a busy guy and I really appreciate this. You got Google, who just teamed up with Walmart because they what Amazon kills it

at is the fulfillment, right? They got fulfillment houses everywhere. They deliver. They're working with Uber now. They're working with FedEx. They're working with you, you know, everything that you could think of out there. So Google said, who do I who could I partner up with to deal with this? Google just spent one hundred million dollars on the Google guarantee. You guys just bought Angie's List. I think between the three of you, Amazon, Google teamed up with Walmart and you guys, you guys are like, you're like the old days, Steve Jobs and what was his name? Microsoft. Bill Gates. You know, Steve Jobs called Bill Gates up and said, I need when he went back to Apple to return, he said, I need a lot of money and you're going to give it to me. And he goes, well, how do you figure he goes? Because if not, you're going to become a monopoly.

They're going to tear you apart. And he goes, talk to his lawyers. And guess what? He gave Steve Jobs the money. And I look at you guys and I mean, you guys are really powerhouses. What are your thoughts on that? You see these competition coming in. But Google, Amazon and you guys, tell mehouses. What are your thoughts on that? You see these competition coming in, but Google, Amazon, and you guys. Tell me what your thoughts are. Yeah, I mean, I think on a relative scale at this point in doing that and do it consistently over a long period of time. And that's how you ultimately you know, ultimately win the market. Technology, those companies all have great technology. You know, we have great technology.

It'll be hard to compete on, you know, technology alone. But the one thing we can do is overwhelm our customers with, you know, a great experience and create those raving fans that you were talking about previously. And once you build that corpus, you know, momentum becomes incredible and it's really hard to disrupt because you have, you know, the best product with the most content and information about the service professionals to make a really informed decision. You know, you're going to get the best choice. And ultimately, why would you go anywhere else? I think the other thing that puts us in a strong competitive position is our commitment to focusing on the home. We're not trying to be all things to all people and figure out business extensions because we have a bunch of cash sitting in the bank.

We are focused just on creating a world-class marketplace for home improvement. And by being intensely focused on that, it puts us in a strong competitive position as well. But no doubt, there will be a lot of competition coming from both those companies and others as well. It's a $450 billion industry. We see a lot of venture capital coming into this segment every year because, you know, we still have such shallow, you know, market penetration relative to the total size. So long way to go. But if we continue to deliver a high value of service, I feel very confident about our prospects. I love it. So final thing, I want to talk about some takeaways. You have this on Improve It 360. It says, according to a 2011 study by Harvard Business Review, companies that tried to contact prospects within an hour of receiving a lead were nearly seven times as likely to qualify that lead as those who tried to contact the customer even one hour later. And that more than 60 times likely are the companies that waited 24 hours or longer. So I think that that's a powerful stat. This is a Harvard Business Review study.

Literally, you get seven times more likelihood. So the people that are out there that are saying, I failed, it didn't work for me, I didn't like it. What do you say to those people? How do we get them back in and try it? What is your advice, some takeaways from this? Yeah, I mean, there are a few things that are really important. To compete in a marketplace like ours, you need to have solid ratings and up from a business process standpoint, like you said, is critical. You have to be willing. And, you know, one hour is a big break point. You know, there's another break point even at 15 minutes. Like, you have to be highly responsive to these homeowners. And this is what they expect.

And you kind of have to accept that this is where the market is going. Millennial generation, you know, 80 million millennials spending on average $5,000 a year now, moving into homes, buying homes, they are a big part of the future. They expect that immediate response. They're expecting on-demand services that they can run right through their mobile device, and they expect somebody to get back to them immediately. And so if you want to reject that notion and say, I don't do that, you're going to miss out on a groundswell of millennials that are going to be the growth and the driver of the market moving forward. The baby boomers are great and they spend good money, but they buy in a different way and they expect things in a different way. And that is a declining group. The millennial group is where the growth is coming. So you need to think about how to adapt your business for where the growth is

and position yourself to do it. Because even if it's not within HomeAdvisor, outside of HomeAdvisor and Angie's List, this is what millennials expect. And so you're going to have to do it one way or the other. You know, would a baby boomer today probably still go to Blockbuster? Yes. Would they go to Brookstone Books? Yes. But guess what happened? You know, we got Redbox and now we stream everything because the millennials are changing the playing field.

And I love that analogy because if you think about what Blockbuster was and how it ceased to exist today, you'd understand what's happening to the marketplace. And that's the best analogy I could give. I always like to finish up, Craig, with giving you an opportunity with the last few thoughts. I could talk to you for hours. I love what you're doing. I definitely want to connect with you on a few things and maybe get you back on here

with a whole new set of questions in several months as this Angie's List starts to take shape and really manifest for you. But for now, I really like to just finish up if there's a book you'd recommend, if there's something that we might have left out that I didn't really emphasize on. I want to hear some closing thoughts from you, if you don't mind. Yeah, no, I don't really have any specific books. I mean, I think part of the key to our success and something that I think is important is, like I said, a willingness to take risks, a willingness to put yourself in uncomfortable positions.

You kind of analyze the children of the current generation, and we've kind of put them in this protective box a little bit. You just want to constantly be pushing yourself in that way to the point of being uncomfortable. Fail and learn from that and be resilient. And if you truly push yourself into those situations where you will fail and learn, that's where a lot of the growth comes from and I think is a key to success. I also, you know, would say to, you know, any service professionals, contractors that are listening, you know, we really appreciate, you know, their business and being participants in the marketplace. If you have any feedback, we want to hear it. That's how the marketplace gets better is listening to our customer and taking that feedback and adapting.

And I think we've done a good job with that. Perhaps not as fast as a lot of you would want but these things take time and we are listening and we are as you can see as evidenced in a lot of the work we've done taking that feedback very seriously so you know a two-sided marketplace like this doesn't work without everybody really giving great feedback on how we can improve and get better and we're here to make you successful so let us know what we can do to help accomplish that. Yeah, listeners out there, I absolutely, 100% wholeheartedly recommend

if you tried it five years ago, two years ago, eight years ago, get involved, spend a couple hundred bucks, realize now it's a different company. They've changed a lot. Just like if you had a bad experience with Walmart in the past and now it's a different company and maybe someone had a bad experience with you in the past. I'm telling you, the new programs, they've got a lot of exclusive leads. They got a lot of connecting to the right customers. They got a lot of data to back it up.

And I definitely think it's a great thing to turn on and start bringing a lot of extra money to you. But, Craig Smith, I really appreciate your time today. I'll reconnect with you. I want to talk to you about that other stuff we spoke about before the podcast. But thanks so much for being on. And I hope you have a great week. Really enjoyed it, Tommy. I appreciate it. All right. Hey, guys, I just wanted to say thank you for listening to the podcast. And I wanted to talk real quick about the new book I have coming out in November. It's called The Home Service

Millionaire. And I discuss everything it takes to hire the right people, train your sales people, how to get tax breaks. It talks about how to sell your company for the most amount of money. We've got a lot of great contributorships coming on. Everybody from Paul Akers about how to go lean to how you do sales from enterprise, how to get the best write-offs in the industry and save a ton on taxes and actually make your company look more professional. I got the CEO of Service Titan. I got the CEO of Valpak. We've got great people on here that know everything there is to know about marketing and Google.

And there's basically no secrets we left out of this book. Literally, there's people that have read it so far say, I cannot believe you're giving all this information away. And the reason I did that is I just feel like you guys could just take each one of these gold nuggets and run with them. I mean, the ultimate goal of the book is to make sure that everybody is successful

and makes money. If I could contribute to your lives, then that would be amazing. And I feel like it's the least I could do. And I really appreciate you listening to the podcast. I hope you enjoy the book. Go to Homeservice Millionaire. That's homeservicemillionaire.com and pre-order your book today. Thank you.