Homeowners have a diverse array of service needs, whether it be an urgent plumbing issue or a long-deliberated decision to look for professional lawn care. While homeowners may have a preferred provider for some services, they typically seek advice for new provider needs. Historically, referrals from friends have been important, but digital sources are increasingly critical in this search.
This search process highlights the crucial role of customer acquisition: ensuring that when emergencies or other home services needs arise, your business is the first one customers turn to. For scaled providers, especially those that have expanded by acquiring local firms, mastering customer acquisition is even more vital as there may not be an immediate source of referrals. Effective strategies not only enhance the value of these acquisitions but also ensure a steady stream of new customers, solidifying the company’s reputation and reach.
In this edition of L.E.K. Consulting’s Executive Insights, we explore the vital importance of customer acquisition for home service providers and offer practical strategies for achieving it.
The importance of customer acquisition
Customer acquisition drives the success of residential service providers, particularly for scaled providers that have purchased local providers for a premium. These scaled providers need to add value to the local assets they acquire, and a more effective and efficient customer acquisition process is one way to achieve that. Residential services companies have a variety of customer acquisition approaches, each of which can benefit from scale:
Referrals: Referrals from former customers or other professionals (e.g., a plumber referring a homeowner to a remediation contractor) are crucial. Digital referrals, amplified through social media and review sites, have become increasingly important. Scale provides benefits in referral program design and online reputation management. For example, a scaled provider may have more resources and a better understanding of best practices for referrals in services like window installation or kitchen remodeling. Structured referral programs can incentivize customers to refer friends and family by offering discounts or rewards, further expanding the customer base.
Advertising: Traditional advertising methods, such as billboards and local magazines, remain valuable, but online advertising through search engines, paid digital advertisements, review sites and social media is increasingly crucial. On average, online searches and news websites account for 39% of homeowner activity when they are faced with a residential service need, with media and advertisements accounting for another 12%. The importance of online channels varies by service, ranging from 26% for landscaping to 47% for window replacement. Heating, ventilation and air conditioning (HVAC) services are below the average at 32% due to the greater adoption of service plans, which discourage “shopping around” (see Figure 1).
