Over the last 30 years, HVAC contractors have been threatened with one bogeyman after another, such as unfair utility competition, consolidation, big box retailers, and on and on. The latest is the threat from the shared economy. There is a potential threat, but it’s not what you think.
Let’s Look at the Uber Model
I’ve become a big fan of Uber, the paid ride sharing service. As near as I can tell, it’s cleaning the cabbies’ clocks. If Uber’s available, I won’t take a cab. My daughter works at a largely female marketing firm and told me the account executives are instructed to use Uber and avoid cabs. Why is Uber winning?
Critics of Uber claim that the ride sharing service in winning because…
• It’s cheap,
• It doesn’t pay drivers well,
• It doesn’t pay benefits to drivers (who are independent contractors),
• It’s anti-union,
• It lacks government oversight,
• It avoids regulations,
• It collects data on customers,
• It has lax insurance,
• It is unsafe,
• It will drive everyone else out of business,
• It will replace drivers with driverless cars the first chance it gets,
• It charges more during periods of peak demand and a reduced supply of drivers, and
• It is discriminatory because it has drivers who refuse to allow service dogs of blind patrons in their personal vehicles.
Phooey. I’m sure there are other criticisms, which like those listed above are likely wrong, distorted, or propaganda.
Uber wins because it is transparent to customers, offers flexibility to drivers, and self-regulates better than any government bureaucracy. It’s not price, though price, worker/driver exploitation, and lack of government oversight are the most frequently cited criticisms.
If the cab industry had done a better job, Uber would have struggled to get off of the ground. Like many people who travel and have used cabs through the years, I’ve encountered…
• An inability flag down cabs,
• Cabs that were old, beat up, and nasty,
• Cab drivers in the U.S. who could not speak English,
• Cab drivers who were argumentative,
• Cabs that charged radically different prices for the same route,
• Cabs that didn’t accept credit cards and didn’t advertise this deficit, and
• Cabs that turned a two mile trip into a 60 minute tour (ka-ching).
To be fair, most taxi rides are fine. The cabs are clean, available, and get you from point A to B with a minimum of fuss. However, with Uber this applies to ALL rides. The only Uber driver I’ve had who didn’t speak English well was in Denmark and he still got us to our hotel without fuss. With Uber I always know what a ride will cost in advance, always ride in a clean vehicle, and know when and where I can expect the driver to show up.
Interestingly, price has nothing to do with my preference for Uber, except that Uber’s prices are transparent and appear to be flat rate. I never know what I’m going to pay in a cab with its bill by the mile/minute approach.
Uber is better for passengers and also better for drivers. The Uber drivers I’ve talked with are generally happy. They work when they want. For most, it is supplementary income or a bridge between jobs while they search. They make more money with Uber than they would with a taxi as well. According to an article from Fiscal Times, “A study of Los Angeles cab drivers found that, on average, they worked on 72 hours a week for a wage of $8.39 an hour. Uber drivers, on average, worked less than 35 hours a week for $19 an hour.”
The key is accountability through its app. When a journalist, writing for Business Insider, spent a week as an Uber driver, he noted the following:
One passenger I had had a particularly interesting observation. She was a blonde, young, attractive girl. She said that taking taxis was a nightmare. She claimed to have experienced dozens of negative situations in taxis, where she had no way to alert anyone. She had been using Uber for the last year and he said that not a single time had she felt unsafe.
I've heard similar stories from other women.
There is a good reason why Uber does not have a problem with harassment, while taxis do. The reason is the app. After each trip both the passenger and the driver gets rated. If the car is dirty, smells, or should the passenger feel harassed, you can rate the driver the moment you step out of the car. Should something dramatic happen, and you take advantage of the opportunity to send a message directly to Uber, a person in management will receive SMS about this at the moment you send the message. This creates a very safe system, and is in my view the reason why there's been almost zero incidents with 150,000 drivers.
This system is far better than any permit system and is the secret sauce behind the great experience that is Uber.
Apply Uber to HVAC
So what does this have to do with HVAC? It’s this. Many of the concerns people have with taxis apply to HVAC contractors…
• Consumers cannot be certain when a technician will show,
• Service trucks are feared to be Exxon Valdez horror stories (i.e., big as a supertanker and leave an oil slick wherever they go),
• Technicians communicate with difficulty and can look scary,
• The consumer has no idea what a repair will cost,
• Consumers are afraid of being taken advantage of, and
• There is little recourse when treated badly.
These may not apply to your company, but they apply to many companies. They apply to enough to create a perception that’s become reality for many consumers. This creates the opportunity for an Uber like threat.
Most contractors fear an auction approach with a race to the bottom to underbid each other. Probably, this reflects the experience most contractors have had with the third party insurance/warranty companies.
Price isn’t the weakness. The vast majority of consumers don’t know what a repair should cost. The weakness is inconsistent and uneven service quality. If this is ever adequately addressed through an app or review site that gains traction, look out. The service will become the industry’s 900 pound gorilla.
While the industry has some structural weaknesses, it also has structural impediments. Ride sharing is characterized by easy entry into the labor pool and a nearly inexhaustible supply of drivers. HVAC faces a growing shortage of skilled labor.
The need for a ride is frequent in cities, which aided Uber’s adoption. Consumers call a contractor a couple of times a year for maintenance and may go years between calls if they skip maintenance.
In short, the shared economy isn’t likely to overwhelm HVAC anytime soon, but that doesn’t mean a contractor shouldn’t prepare. Prepare by addressing the industry’s weaknesses within your own company.
• Find a way to communicate arrival times more frequently and consider setting fixed appointments for a premium.
• Retire old trucks. Maintain existing ones. Wrap them boldly.
• Teach soft skills to technicians every week. Hire for attitude and train for skills. Wear uniforms and enforce good grooming.
• Be transparent in your pricing. Go beyond flat rate. Do not be afraid to post some repair prices on your website (so what if Bubba figures out you charge more than he does).
• Put a strong feedback system in place with multiple ways for consumers to rate your service with you. When there is a problem, bend over backwards to get it resolved to the customer’s satisfaction, even if some customers are wrong or abusive (no one says you have to do business with them again).
Uber has taken off because the taxi industry sucks. While you cannot control your competition, you can make sure your company performs so well your customers would never consider a similar service to Uber for HVAC. Who knows? Maybe you will influence your competition.
And remember, it’s not about price.
If you are really worried about price, buy a copy of The Power of Positive Pricing for $28.95 at Shop.ServiceRoundtable.com. Learn how to price strategically to grow your top line and build your bottom line.