David & Goliath: How to Compete with 'Big Box' Stores

Competition is nothing new, although the cast of new competitors that have entered our market has changed. “Big Box” stores like Home Depot and Costco jumped in and continue to build market share steadily. In more and more instances, consumers potentially perceive the “Big Box” as a better alternative to the local contractor.

Like or not, perception is reality in the mind of the consumer, and successful contractors need to stop whining about these “Big Box” competitors and take a good look at them from the homeowners’ perspective to gain a better understanding.

‘Big Box’ Perceptions
Trust — Bad experiences with local providers, along with negative media hype, make people feel they’re better off with a big national brand
Loyalty — Memberships and/or repeated past purchase history for other household items, have instilled loyalty amongst some consumers
Less Hassle — Local stores, convenient hours, prescreened contractors, less pressure in-store vs. in-home, and more, for a true retail experience instead of a contractor experience
Savings — Previous experience with other products/services, plus the idea that a national company has better purchasing power and will pass the savings along
Higher Standards — Compliance with all codes and regulations are more likely with a larger company than a “Mom & Pop” company
Financing — Flexible programs, even for poor credit scores, with extended terms and below market interest rates, and even “Cash Cards” for future purchases in certain situations.

The “buck stops here” with us, not some customer service department, somewhere out of state, by someone who doesn’t have a relationship with the customer.

Big Box Realities (Local Contractor Advantages)
Specialization — Focus on HVAC and Energy Conservation is the CORE of what we do. We’re specially trained, and comfort is our only business. It’s like a general practitioner versus a specialist; whom are you going to when you need brain surgery?
Experience — More personalized service is standard with us. We can provide less run around that is rampant in big corporations.
Choices — More diverse product choices to precisely accomplish the homeowners’ goals are better with us, because we don’t have a single brand or segmented product line focus. It’s a better end result by having the flexibility to apply the best solution for any situation.
Market Experts — We live here and work here, we raise our families here, so we intimately understand the subtle nuances of our market. We can customize our approach to best serve our clientele, rather than a generic one-size-fits all approach.

Over time, it’s possible that the ‘Big Box’ business will begin to overtake our organic business, creating an unhealthy dependency, opening us open to making more concessions than we would normally.

Big Fish — Each homeowner means more to us than to a “Big Box”. We must deliver amazing experiences every time to keep them coming back, because we don’t sell other stuff like paint, bushes, etc.
Accountability — The “buck stops here” with us, not some customer service department, somewhere out of state, by someone who doesn’t have a relationship with the customer. We can show up, boots on the ground, and get into the trenches to ensure satisfaction.
Relationships — Human nature people want to be valued as individuals, not just account numbers. We have smaller, long-term, dedicated staffs to pay attention to all the details that matter client-by-client, whereas it’s impossible for the “Big Box” to get down into the weeds at that level with the homeowner.
Community — Support and participation in local events and organizations, serving on charity boards, sponsoring and coaching local teams, etc are second nature to us. “Big Boxes” have initiatives and programs, but not at the personal connection levels we can accomplish.
Service — Emergency service and 24-hour response are second nature for us. Good luck trying to contact someone in an emergency at the “Big Box” level who can actually make something happen in an expedient manner to handle any issues.

Crafting simple, easy to understand messaging and marketing to educate the consumer why our team is their best option is crucial.

Cheaper — Cheaper is not always cheaper. We can provide investments directly to the homeowner without the heavy burden of kickbacks or commissions to the “Big Box”, making local ultimately more affordable.
Better — Bigger is not always better. We rely on repeat, on-going business, and referrals from happy clients as the lifeblood of our business. “Big Boxes” have big marketing budgets driving consumers to their stores for a multitude of reasons, none of which are related to long-term service.

Leverage Your Advantages
Just as David defeated Goliath, we can dominate our local markets versus the “Big Boxes” if we refine our processes to leverage all of our valuable advantages. We can view them with skepticism, making excuses or playing the blame game, or we can take responsibility and action to control our own destiny. Crafting simple, easy to understand messaging and marketing to educate the consumer why our team is their best option is crucial.

Consolidated branding is also key, so that everything reinforces every marketing effort; vehicle lettering matches our websites, which matches our direct mail, which matches our print media, which matches our TV/radio, and on and on. Our guarantees should be the very best in the market, measurably superior to the “Big Boxes” too, removing all the risk from the consumer on a local level.

I’d be remiss if I didn’t acknowledge some potential advantages to the contractor who participates in these “Big Box” programs. Participants have a steady, easy stream of leads they most likely have not been able to generate at the same rate on their own. They also can often improve their manufacturer relationship, because they’re moving significantly more boxes than they did on their own. And, smart contractors intelligently leverage their “Big Box” relationship with their organic leads; i.e. “If ‘Big Box’ uses us, you can trust us too, since they’ve already fully vetted us for you.”

On the flip-side, there are some real disadvantages as well. The potential dilution of your company as your customers’ primary brand is a serious risk in a local market. After all, we are in business for us, right? Also, interference with our existing clients can occur, because it’s hard to serve two masters.

When we’re doing tons of business with a “Big Box” and they say, “Jump!”, we ask, “How high?”, sometimes at the detriment of serving our own clients. Over time, it’s possible — even likely — that the “Big Box” business will begin to overtake our organic business, creating an unhealthy dependency, leaving us open to making more concessions than we would normally. Most importantly, when we’re working for and generating reviews for the “Big Boxes” we’re helping them build their asset in our local market, instead of building our own asset. It seems obvious, although sometimes we cannot see the forest for the trees, but we could actually be slowly and methodically building up our competitor to the point of devaluing our own business overall.

The bottom-line is: HVAC is a great business, and done properly you can build a cash machine to serve you for many years. There will always be new competition, which actually serves as proof positive of how great our industry really is. Great companies embrace competition, and use it as the fire to forge a legacy in their market.  Commit. Decide. Succeed.