Should a Contractor Advertise with Amazon Home Services

Posted by | May 02, 2016 | Marketing Advice | 4 Comments

Amazon has decided to compete with companies like Porch, Angie’s List, Houzz, and Yelp by offering its own home improvement lead generation service for its loyal members. This really makes a lot of sense for Amazon, since they are the best at knowing their customer’s buying behaviors. I think this can be a real blessing for certain service providers. Yet, I also think it can have a real negative effect on certain home improvement contractors. 

Pros Cons signpost in a beach background

Positive Reasons to Advertise

  • Small in Size or Limited Resources: If you are new in business or you have a limited marketing budget, Amazon could possibly be a great place to get leads and build your business. You really have nothing to lose. You can setup your services and account pretty quickly. Then you sit back and allow Amazon to work their magic. If you are very responsive, professional, and have reasonable prices, you will get work! Also Amazon is one of only a few companies that offers a pay for performance model. This means you only pay when you sell a project. This is where I think it can have negative results too, and I’ll talk about that below.
  • Market Domination: If you want to make sure consumers find you everywhere, you might be one who will want to consider Amazon. Maybe you see that your competition is on Amazon so you feel you need to be there. That is something you will have to decide.

Negative Reasons to Advertise

Now for the negative part. Let me be clear. I am regular user of Amazon and a raving fan of how this company has built an amazing business model. I use them myself to buy hundreds of products – including flowers! (yeah they made it easier to buy flowers than ever before.) Yet, I am hear to help my clients spend and market wisely and build THEIR brand. Key phrase in the last sentence: Did you catch it?

Advertising on Amazon builds Amazon’s brand more than it does your own. When you decide to get leads from Amazon, you are a subcontractor for Amazon. Amazon is the General Contractor and you are the service provider. If there is a problem on a job site, Amazon is the one who ultimately owns the job, not you. They take responsibility. You will then forfeit your client(s) to be owned and serviced by Amazon.

This is a very bad model if you are trying to grow your company and have customers that become raving fans. If your customer comes through Amazon, they cannot call or email you outside the Amazon system. So when 6 months from now, your client calls you back and says, “Hey Dave, I loved the painting work your team did for me last fall. Can you come out and give me a bid for painting 2 bedrooms?” You will have to respond with, “We’d love to do that. Please sign into your Amazon account and fill out an estimate request. We’ll then create the proposal and submit it through Amazon. Since you heard about us through Amazon, we are not allowed to work with you outside of Amazon!”

What that consumer does not know is that they are also going to pay a premium too. Since Amazon is acting as the general and taking responsibility, they have to get paid too, right? So, their fees will normally add anywhere from 10-15% on each project.

Example of How This Plays Out

The reason I am writing this blog is because I have been testing out Amazon’s Home Services with a few clients. It took us awhile to figure out the system and how it worked. Over the 8-10 months, my client was on Amazon’s early adapter program, he got several leads a month. It took quite a few months to sell a project, but it finally happened. The job was a profitable one even after paying Amazon. Sounds great, right?

Then around 2 months later another great lead came through. This was where a problem surfaced. The Amazon customer knew there was a markup on the price, but he did not want to pay the mark up. If my client did not mark it up to pay Amazon, he would have lost a lot of money (all the profit). The prospect also wanted to work with them outside of Amazon. Based on the contract they signed, they were not able to do this either. It was a rather large project (could have been over $15k). It was at this point they knew they could continue with Amazon because this prospect would always pay 12-15% mark up and have to work with Amazon. They would not be able to send him any emails, customer satisfaction surveys, get referrals from him etc. So any business success in growth would be at the mercy of Amazon Home Services.

You Decide What Is Best For You

Personally, I would not recommend a serious business owner to be involved with Amazon Home Services. It will be complicated. I would not allow this lead generation service to distract you. I would not advertise just to make sure my name is everywhere. That is not always the best way to market your business. I think it is best when you can build a brand where consumers know, like, and trust YOU…and they can work with YOU and not through someone else. You have to decide, but the only reason I can see advertising and using Amazon for lead generation is if you do not want to market your business at all.

 

About David Chism

David Chism started his business out of a passion for helping small contracting businesses grow, be more profitable and become better known to their target clients. One lifelong hobby of David is using techie gadgets. So this blog is a place where he writes about technology, marketing ideas, just for fun (humor), personal thoughts on small business and more.

4 Comments

  • Chris says:

    Great reasons to build your local brand, amazing that you cannot retain customers outside of Amazon, thanks for sharing.

  • David Chism says:

    Chris, it is amazing that Amazon would not allow you to contact customers outside of their system. I get why they would do that, but it does make it challenging!

  • Steven Sherman says:

    Hand a customer your business card when you’re done with the job and have them contact you directly for future projects. There’s no way Amazon would ever know or care/do anything about it. I would need to read the agreement in detail but I’m guessing the control and communication over the customer/project is only for that specific project.
    Amazon takes 20% now.

  • David Chism says:

    It is in the contract, Steven. I would not mess with Amazon. All it takes is for them to do a little “undercover” work (secret shopping) to nail you. I have had homeowners try it – where they contact the contractor AROUND Amazon after submitting a form through Amazon. It is really tricky. I contacted Amazon and talked to them. If they found out, you’d be banned right away. It is possible that you could face a legal battle with Amazon as well.

    My advice, don’t use Amazon Home Services unless you know what you are getting yourself into!

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