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Monday, January 04, 2010

Local Search: A Winner-Take-All Market?

Earlier today, David Szetela asked for big bold predictions for paid search for 2010, for his PPC Rockstars show.

Partly jumping off Aaron Wall's earlier guest post about Google testing flat-rate pricing on local search ads, I called in to predict that there would be a further shakeout in local -- not that one particular local search engine (like Yelp) would win, but rather that in the race for growth and low cost leads by small to midsized local companies in any given market, there's going to be a major change afoot.


(So I'm really making a broader point about a massive shift that is happening in the local listings category - though that point was motivated by the experiments Google is working on right now in the PPC space.)

Local businesses may have a history of doing a lot of marketing without thinking in the past, but that's because the core medium (yellow pages, primarily, for many) didn't reward thinking, and didn't offer much means (other than buying a really big ad) to differentiate yourself. Google's new flat-rate click pricing for the local little guy may be a way to "relieve" them of the pressure of actually marketing. But that just illustrates that those looking to relieve themselves of the effort of marketing will be out-marketed by those who take a special interest in it.

This state of affairs will continue for the majority who sheepwalk their way through local lead generation and reputation management efforts.

A small minority will outwork, out-savvy, and out-hustle the rest. They'll win big. While winning big in a local market isn't the same as the "winner take all" quest for customers in the Amazon sense, it's still cool & lucrative to be a winner. Small is the new big, remember?

Let's walk through an example.

The pitter-patter of little feet here at home (mice, squirrels, or possibly raccoons partying in our attic, and ready for a long, toasty winter) has started to disturb those wintry sweet dreams.

We went to our usual go-to source for "pest control". The Yellow Pages? Are you kidding?

Word of mouth is fine, but what if you run out of information before you have the problem solved? It's pretty cold out. I don't want to go up and down my street knocking on doors telling people I have a raccoon problem.

Being a co-founder of HomeStars has its benefits: you believe so strongly in the local ratings and reviews concept, you want to use it for real!

Turns out the search for pest control companies in my town produced a no-brainer "best vendor". One pest removal company in Toronto has 105 reviews -- all resoundingly positive. I like to think I'm good at picking up on fake reviews, and on top of that, so is the HomeStars editorial team, so I'm not too worried. Normally, if a company scored perfect, I'd be suspicious. In this case it looks legit.

Success begets success here. Once you get such a great reputation, you keep coming up as a company with a great reputation. More homeowners will hire this company, because others have vouched for them. That's regardless of the level of investment by the company, GTA Wildlife Removal and Pest Control (sorry the word "Control" is obscured by the crown denoting "Best of '08"). Clearly, they need to understand how to help their customers find the website to write happy reviews (and be open and aware that any unhappy customer could write a negative one if they so choose). It also helps that they reply to customers -- shows they have a pulse and are even more engaged. And it helps that most of their competitors didn't make the effort!

That's a far cry from the days of yore. How did a business like this get noticed in the Yellow Pages? Pay more? Not really fair, was it? And it offered consumers no voice.

Since most people searching categories are looking for the "best," it's not going to cut it if you don't have positive reviews. Or if you're great at bringing in leads through high pressure marketing but then fail to deliver great service. In fact, the traditional ways of using cash to bring in local home improvement leads, when you're a less than reputable provider, can backfire! The more disgruntled customers you leave in your wake, the more race online to post about their experiences. The situation snowballs. It's not 1974. It's nearly impossible to pull off a "coverup".

Winner take all doesn't matter as much in pizza or Greek food, over at Yelp. People like to try different restaurants, and what tastes good is pretty subjective. $50 is at stake, not $1,000 or $50,000. By contrast, most homeowners aren't planning to hire a variety of pest control companies, or window installers, or garage architects, in the next year or two. They want to hire the one that people like themselves say is the best. At the very least, they'd like confirmation that the company they do plan to hire delivers quality service for the money, and that in the event of problems, they're present and accountable, and follow up.

So that's where we stand with getting rid of the furry critters from our attic. Can 105 reviewers be wrong? I'll be hiring this company. And will keep you posted!

[photo credit: Tammra McCauley]

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