Competition is Good For Us (Part Two)
Gulp. It's one thing to wax philosophical about competition by pointing to businesses that have nothing to do with walls and ceilings. It's quite another to confront a real-world situation. Do I still abide by the title of last month's article and continue to say, "Competition is good for you?"
You bet. Or, at least it's not going to make much difference. RMA Home Services-itself an amalgamation of independent firms around the country-had been doing business with Home Depot for a number of years as an independent contractor. I'm not familiar with the firm. Those of you who bump into RMA in the marketplace are in a better position to say whether this company is a formidable competitor, or just one of the bunch that chases your type of work.
However, I do know enough about the installation services marketplace to hazard an educated guess that this acquisition won't make a bit of difference in the business fortunes of most of you reading this. For years Home Depot has been acquiring installation firms in a variety of construction sectors, but this is as much a defensive move as part of any grand strategy. Some background is in order.
Home Depot, archrival Lowe's and a few other big box warehouse home centers, have thrived over the last several decades thanks to favorable baby boom demographics that has boosted home remodeling to record levels. Key to their business growth has been the do-it-yourself crowd that tackled home improvement projects partly for economic reasons and partly because they simply liked doing it. This audience of craftsmen surely can appreciate more than most the personal satisfaction one gets from building something beneficial with one's own hands and sweat equity.
Now, that same demographic bulge is turning against the big boxes. Baby boomers are aging and ever less inclined to spend their weekends in physical toil. At the same time their income levels are at a peak, so they have money to hire others to do their dirty work. The DIY market has evolved into BIY, for "buy" it yourself. For years Home Depot and the other big boxes have attempted to adapt to this changing marketplace by aiming for more trade business, and boosting installation services for the evolving BIY customer base.
Installation services always have been problematic for the big boxes. They started simply with referrals to local independent contractors but quality control has been lacking for reasons most of you surely can identify with. The vast majority of contracting firms out there, in any trade, are not very reliable or businesslike. Customer complaints about contractor performance would reverberate to Home Depot, etc., whose own reputations got soiled but who in reality had little control over the local independents they referred people to.
This led to a new tactic of partnering with larger, reputable contractors in a variety of trades. For instance, in November 2001, Home Depot and ServiceMaster teamed up on a pilot program in Orlando, Memphis and Sacramento to provide a wide range of co-branded maintenance and repair services. That program lasted less than a year, although the two companies still cooperate on an informal basis in some local markets. I don't know in detail why their alliance didn't work but it's probably safe to say interests didn't always coincide between one firm whose main interest lay in providing materials and the other service.
Now it appears that Home Depot's management has decided in certain cases it's better to have the control that comes with owning the service firm. There is no more mistaking where the buck stops when conflict arises between the materials and service side of the customer purchase.
There's no guarantee, however, that Home Depot will operate RMA Home Services better than it performed as an independently owned business. In fact, it's probably better than an even bet that they'll do worse. Home Depot's skill lay in mass merchandising. That's a far different business than construction work.
RMA Home Services has 20 branch offices across the U.S. but is accessible in only about 900 of Home Depot's 1,600 stores. So independent local contractors are still in the ballgame in those markets where RMA is absent. In fact, even where RMA exists, I suspect local contractors may get a piece of the action when there is more business than they can handle.
RMA affiliates also presumably pursue business apart from Home Depot referrals. Their Home Depot connection certainly can be counted as a marketing asset, though it's probably not enough to give them more than a tiny boost in business. Other contractors in a given market are likely to hardly notice the difference in their fortunes, as long as they tend to their own business. That means doing quality work at a competitive price, of course.
But it also means paying attention to marketing themselves. This is a subject unto itself, one that has been dealt with in various articles in this space over the last several years. The main idea, however, is that companies large and small must understand what they have to offer to their marketplace that is different or offers better value than competitors. Once they gain understanding, they must toot their horn getting the message across to prospective customers.
"Tooting one's horn" doesn't necessarily mean advertising to a mass audience. Yours is a business where most work comes from relationships and referrals. Nonetheless, there are ways to toot your horn to remind people you have done business with in the past, that there are certain advantages to doing business with you.
What are those advantages? Only you can answer this question. It should include a track record of successful jobs completed on time, within budget, and with minimal hassles. It may include creative solutions to problems that arose on previous jobs. Perhaps it also entails a few skills or services not offered by most competitors.
The major problem faced by most construction contracting firms is not competition but themselves. Some are tremendous companies to do business with but they don't have the introspection to define why that is. If this seems to describe your company, take a moment to visit this magazine's online archives (www.wconline.com) and read my article, "What's Your USP?" from the August 2002 edition.
Meantime, keep repeating the mantra-competition is good for me ... competition is good for me .... Then just make it happen.