Technology is a catalyst for change and is changing the competitive landscape in the house cleaning industry.
Once an engineer, always an engineer. Numbers, systems, efficiency, and synergy are part of my DNA. In my pre-cleaning business days, I made my living figuring out how to better use tools and technology to improve production, reduce costs, and more. I enjoy the challenge more today because emerging technology-based opportunities have such incredible potential to make our industry even more relevant to the daily lives of consumers.
[EasyDNNnewsToken:Left Justify Embed 300 x 250]Even the most basic forms of technology – ones that we’re no longer aware are technology – are being used in new ways. In advance of the Disruptive Innovation Summit at the ARCSI Convention this fall, I want to begin reporting on some of the “unseen” ways hardware and software have always been empowering both consumers and businesses – though not always toward the same purposes.
To begin, let’s look at 10 terms/concepts that you’re going to want to know, understand, and begin to look for as you continue to work on growing your business.
Review Sites
With the transfer of the “reliable testimonial” from our individual sites to the domain of the service review sites, a simple database-driven information collector (or aggregator) like Angie’s List or Yelp has become the new and more convenient way for consumers to compare and contrast house cleaning companies. They are making it possible to speed up the process – even making it unnecessary for a potential client to even visit our websites.
More than that, in the past six months, we’ve seen these sites add more features – one by one – to make it easier for consumers to use their site to shop for and even pay for services – without ever visiting the company’s website, marking the beginning of their conversion into an Online Marketplace.
Online Marketplaces
Online Marketplaces take the concept of helping consumers select a cleaning contractor to even handling the sales transaction. Rather than passing the lead on to a contractor, they actually make the sale themselves, making the consumer their client.
This is where we find Homejoy, Handybook, and newcomer HouseCall – three of the most recognizable home cleaning online marketplaces. They are a connection between the consumer and the service provider, primarily managing the client data and financial transaction – and keeping that data while passing on a percentage of the transaction and only as much information as a Third-party Service Provider needs to perform the cleaning.
Several review sites – Angie’s List included – see this as an opportunity and are moving into the Online Marketplace space.
Third-Party Service Provider
In the cleaning industry, we are well-acquainted with the concept of a Third-Party Service Provider: a contractor who provides service to some else’s client. Other terms used include independent contractor or sub-contractor.
Though in the minority among residential cleaning businesses in the US, the third-party service provider model is gaining dominance in the home services industry at large. We’re seeing more use of the third-party service provider by emerging online marketplaces like Homejoy and may begin to see traditional cleaning businesses operating as third-party service providers in the increasingly adopted B2B2C e-commerce model.
B2B2C = Business to Business to Consumer
You’re likely familiar with the terms or codes B2B and B2C, identifying the two main types of users of a service or product.
B2B2C is an e-commerce model where businesses that have a consumer-focused product establish and leverage a relationship with a business who already has the trust of the consumer to help sell their product. Consider this example:
Review sites like Yelp and Angie’s List and lead generators like Thumbtack and HomeAdvisor have risen to a place of trust among consumers and now often hold the role of that middle B in the equation, serving as the connection between the cleaning business and the consumer. This is largely what may allow them to make a successful conversion into a full Online Marketplace.
The place where that middle B in B2B2C operates is likely to be the internet, which places cloud-based and mobile solutions at the heart of the Internet of Things.
IoT = Internet of Things
Our editorial director CeCe was recently telling me about how her friends have built some smart features into their home, one being a doorbell that lets them see – on their phone – who’s at the door even when they aren’t home, or even unlock the door to let in someone they can see and approve – again on their phone.
This is just one example of the Internet of Things, where the internet lets an individual connect two or more unlikely points, in this example, a smart phone and a doorbell with a camera and an electronic lock-unlock switch. This is one of many ways technology is enabling the management of various systems in a home: door locks, appliances, thermostats, security and surveillance systems – all can be controlled from your smart phone from anywhere you have an internet connection.
Selling, installing, and supporting these Smart Home devices will become a big business with sales projected to be over $50 billion by 2020. A company with a key to the home and a weekly service schedule could remain or become the trusted middle B of a B2B2C model instead of giving that spot up to review sites or lead generators. Additional opportunities could exist from synergies between the technology and cleaning service provider, as well as offering a simpler and convenient access to a broad range of other services and products to the consumer.
Venture Capital
How much capital – cash – did you have or borrow to start your cleaning business? That was your Venture Capital, probably including some savings, maybe some donations from friends and family, investments cashed-in and possibly even a portion by a bank or SBA loan.
The hardware, software, and intersections of the two – like Online Marketplaces – are the high-value evolution of the client relationship. Investors with deep pockets and smarts – like the ones on ABC’s Shark Tank – have the market research and projections to show that their 6-figure investments will be paid back plus more in, usually, a few years’ time.
CBT Insider has included a few news items in the past year announcing when some of these technology-enabled marketplaces or review sites have sought and received large sums of new Venture Capital. Why? Because Venture Capital is a signal of where cutting-edge Disruptive Innovation is leading consumers, and the businesses that serve them.
Disruptive Innovation
Originally defined and named by Clayton Christensen of the Harvard Business School, Disruptive Innovation is the creative application of established technology to traditional markets making what was complex and costly a simpler, easier, and more affordable for people.
That unique doorbell and remote door locking that I mentioned earlier is a great example of the application of Disruptive Innovation connecting pieces of technology that already exist:
– SmartPhone or Tablet with Video Camera
– Mobile App with Unique Account Login
– Wireless Internet Connection in a Home
– Wireless or Data Internet Connection on a SmartPhone
– Basic Remote Control Functions (as simple as those for a remote control toy car)
– Video Camera in a Doorbell
With the first four pieces of technology in the list above, you could simply be using the Facebook app on your phone or tablet. And wireless doorbells have been in use for more than two decades. All of the hardware existed to enable the use of an internet connection to give a home owner more control over the entrances to the home.
Now consider at least one way this singular piece of Disruptive Innovation could help you improve your customer service: in the event of a lockout, ring the doorbell to alert the home owner to a visitor; the home owner sees the technician via the app and unlocks the door. The home owner avoids a lock-out fee and loss of service, and you look like the hero doing everything to make sure the home is cleaned on time and well.
This is just one example of the ways Disruptive Innovation is already changing the way we live personally and professionally, and the adoption of these new opportunities is being driven largely by the Millennial Generation.
Millennial Generation
The Millennial Generation is a demographic of young adults who embrace the value created by Disruptive Innovation, and the anticipated growth of their purchasing power is one of the driving forces behind the market changes we see in the house cleaning industry.
CBT is privileged to have generational expert Robert Wendover of the Center for Generational Studies preparing a consumer profile of the millennial generation for our July issue. All cleaning business owners need to know what drives the behaviors and choices of the different generations of consumers in order to be able to reach new prospects and grow their businesses.
Deal of the Day
The Deal of the Day is a technique to find new prospects by selling services at or below cost; it is enabled by technology in several ways.
The main way is that a business’s adoption and implementation of technology can create task efficiencies that reduce overall business costs – operational costs. This makes it a little easier to refrain from raising rates a little longer and to offer deeper discounts and specials on a Deal of the Day.
Another way that technology makes Deal of the Day pricing work is that usually a business owner has control of how long the deal is available and even how many of the deals are offered. In traditional sales advertising, that level of control isn’t usually possible.
The flip side of the Deal of the Day, and similar crowdsourcing sites like Groupon and LivingSocial, is that they may have created an expectation among consumers that services aren’t worth regular price, which makes Predatory Pricing a potentially more successful competitive strategy.
Predatory Pricing
Predatory Pricing is the illegal practice of selling a service at or below cost in order to force competitors out of business. A company engaged in Predatory Pricing needs cash reserves or access to outside capital – namely Venture Capital – in order to stay in business, with the idea of being profitable in the future when smaller competitors are no longer in business.
While it is rare for a company to be charged with Predatory Pricing in the legal sense, it is not uncommon for large, well funded companies to sell services at or below cost to capture market share and reduce competition, leaving smaller companies to focus on the value of their services to justify their prices.
Continuing the Discussion
Many questions remain to be asked, and I believe there are multiple “right” answers in this on-going discussion. But there are two things cleaning business owners should take away from this overview:
1) The cleaning industry is large, well-established, and strong, and we have the mechanism in our trade associations to effect the changes we want to see when we speak with one voice.
2) There are a lot more opportunities to create change, to manage in the ongoing effort to grow our individual cleaning businesses, and to mold the way consumers think about cleaning services.
Watch for a continuation of this discussion in future issues of Cleaning Business Today and at the Disruptive Innovation Summit at the ARCSI Convention on November 4th.
Tom Stewart and his wife, Janice Stewart, are co-owners of Castle-Keepers, the 1st company to achieve CIMS certification. Tom is a nationally-recognized leader & innovator in the house cleaning industry. He is co-founder and Publisher of Cleaning Business Today.
