Angie Hicks no longer owns Angie’s List, but her story warms hearts. Her story is that she was “inspired by the frustrations her co-founder had trying to find reliable contractors in suburban Columbus,” and thereafter went door to door in that Ohio town signing up subscribers for a listing service where members could share their experiences — typically in the form of reviews — about contractors and other businesses they had used. That was in 1995.

Today Angie’s List has more than a million members in more than 170 local markets. Members post an average of 40,000 reviews each month. Angie is featured in advertising on TV, inviting homeowners to join the organization. Cost to homeowners varies by market but averages about $29 per year. Prominent among her claims is that “companies don’t pay to be on Angie’s List.”

Getting on vs. Being Seen

Technically, that’s true. Contractors don’t pay to belong. They do, however, pay to advertise. And being on Angie’s List, if you’re a contractor, and being seen on Angie’s List, are two different things. This is where the money comes in.How is it that home improvement companies spend $20,000, $30,000, or $40,000 on Angie’s List if the list is, as implied, a completely unbought and therefore unbiased online community of homeowners? Well, that’s why Angie is on TV. The more subscribers Angie has, the more the company can charge service providers for its services. 

What’s in It for You

What you, the contractor, pay for — I write this as someone who once purchased advertising with Angie’s List on behalf of a home improvement company — is access to that list, more specifically the ability to pitch offers to Angie members. One of these specials is called The Big Deal. Our company’s Big Deal was for an average size roof of 20 squares, for $8,888. Homeowners had to buy online and Angie took 10%. 

I was skeptical: Who’s going to whip out a credit card and buy a roof online?

The reality: We sold 27 roofs in a week and could hardly keep up. We were high-fiving down the hallway. Priced right, it was profitable work. 

The average actual price of those jobs was around $12,000 due to larger roofs and add-ons.

But it came back to bite us. An offer, to be effective, has a beginning and an end. This offer was scheduled to last two weeks. But after the offer expired it went on living on Angie’s List for months and months, despite my efforts to remove it. Three months after the promotion, I had a salesperson on the phone calling from a house saying that the homeowner was demanding that we honor the online price. I said: “Tell him to print it out. I want to see it.” The homeowner made the print-out and we honored it. But then I started getting calls from other homeowners who had bought a job at full price. They’d say, “Hey, I signed a contract with you last week, but can I get this [promotional] price?”

Trying to work this situation out with Angie’s List on the phone, I encountered layers and layers of management but no-one capable of resolving the situation. And when an Angie’s List representative contacted my company to renew our advertising — the opportunity to extend these offers to the Angie membership — the price had risen from $9,000 in 2011 to $30,000 in 2012 because, I was told, “our footprint is enlarging.” Everything being negotiable, we settled on $12,000.

Who Is the Customer?

Angie’s leads were gold — very high conversion rate — and we were able to negotiate that ad rate down. But dealing with Angie’s was a nightmare. 

Let me quote Angie back to herself: “Sharing experiences is the heart of who we are.” So let’s not pretend here. Less than 35% of the revenue for Angie’s List comes from homeowner subscriptions. A small group of Angie-approved service providers — about 10% of those eligible to advertise to Angie’s List — generate the rest. 

Who is Angie’s actual customer? Is it the homeowners on the list, or is it the service providers who are sold access to that list? Angie’s List is a lead-generation business. And it will be interesting to see what happens when the public figures that out. —Sales veteran and trainer Mike Damora has been the sales manager at several large home improvement companies. He is a regular columnist for REPLACEMENT CONTRACTOR, a sister publication to REMODELING. Reach him at [email protected].

Stay tuned for REMODELING’s April 2013 cover story, which takes a look at online review sites and how they help or hinder remodelers in building their business and managing their reputation.

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