Homeowners Are Spending: What Does this Mean for Businesses?

Full Podcast Transcript

Darren: Here we are again for another hoist hangout. And today we're talking about spending money. Something most of us, probably all like to do specifically homeowners. And homeowners spending and why that is up. We're basing a lot of our discussion today off of a very thorough report from Angi. And that's the company we're talking about, not individual, formerly known as Angie's list now going by Angi. The Economy of Everything Home 2021, it's their report. And yeah, it is very interesting and we're just going to dive in because it's very applicable for home service businesses, because there's a lot of factors going on economically that are impacting what homeowners are doing and how they're spending.

A lot of this is the result of COVID and the pandemic. People were sent to their homes, whether they liked it or not. Both personally and a lot of many cases, professionally. As people retreated to their homes, consumer spending followed them. There was an unexpected boom of economic activity around the home and no longer were homes viewed as this force where we just save and protect. But they're the new epicenter of our personal and professional lives.

Specifically what's driving some of this is the characteristics that shape home service demand. And one great stat was that the median home age in the country is 43. So across America, our homes are just aging, right, as we are as well, but homes are getting up there in age. And so that means nearly 40% of America's housing stock was built before the 70s. And this, while it's not necessarily true that older houses all require more spending, there's that relationship between home age and home spending.

Secondly, is the role of consumers and their ages, their incomes, and their family sizes and how that factors into this. Specifically, we'll touch on ages and I'm just going to briefly mention it right now, but what is currently unique about the demographics of homeowners is that we have two large segments. One segment is the baby boomers, excuse me, and the other one is the millennials. The boomers are all reaching that stage of life where they don't need a large home, but they want to age in place. So what they're doing is a lot of renovations to help them age in place. The millennials on the other hand are hitting that age where they are beginning to move into homes. So if they're moving into older homes, they're more inclined to renovate to accommodate their stage of life, which in some cases is a growing family.

Elin: All right. So to summarize a lot of what this report covers, I mean, Darren covered a lot of it already. But the market is obviously bigger than it has been in the past few years and it's growing. So the first, most important point, is that the two largest groups of people are the boomers and the millennials. And obviously the boomers are focused on aging in place, staying in their homes. And the millennials are entering the stage of life where they're buying homes. So the market clearly is much bigger than it was. So the second point is that interest rates dropped by 30% or more in many cases, which has left current homeowners with cheaper mortgage payments and therefore, more disposable income. So they have more money to spend on home renovations and updates. And those lower interest rates drove more buyers into the home ownership market. So that's where the millennials come in with the low interest rates. It's obviously a very attractive time to purchase a home. So there's a much higher demand for home services as people moved out of their rental units and purchased homes. And with that disposable income people living in smaller homes are also moving into larger homes.

So the jump in home ownership has caused home costs to rise, which has pushed those new buyers to move into older homes, more affordable homes that may require more work. So that's why the millennial generation now is moving into older homes. And obviously, as Darren mentioned earlier, the median age of homes in the United States is, what was it? 43?

Darren: Yes.

Elin: Years old? Yeah, so moving into older homes and giving those new homeowners a little bit more work than they would otherwise want. And the final big point covered in this report is obviously due to the pandemic and just the drive and technology is that most people's lives have really shifted to focus on online and digital. So this has allowed people, most people are working remotely right now so they're able to move away from cities into larger suburban homes. And it's also pushing a digitally native generation to more seamlessly satisfy their demand for home services by migrating to online subscriptions and project fulfillment. So this kind of leads us into the fact that these homeowners are, they're online and that's the place to reach them right now.

Darren: Perfect. So that's how we got to this point on why homeowners are spending. And Elin just went through the factors that are helping shape the market. We're going to elaborate on that last one, about how consumers are going more online because that's our area that we like to talk about. So Ryan, how about you start us off with what business owners should be prepared for going into the future?

Ryan:Sure. Yeah, not a problem. So there are many things you have to do to be prepared as Elin so eloquently stated that millennials, for example, not only are going into homes more frequently now because of the interest rates, which are great. The new housing costs are not so great so now they're going into older housing's market. So you have a bunch of people in old houses that likely need a lot of work. And like Elin stated before as well, they're, a lot of times they're working remote. So they're staring at their yards 24/7. They're the same old dish where they're looking at every single day. And so they have some budget because their interest rate is so low and their house is an older house so they don't have to spend so much. And now they're willing to spend, which is great. And it's great for your business and you can reach this homeowner, no problem.

But the problem is, are you prepared to have an influx of work? If you're not prepared to have an influx of business, then you're going to completely fall flat on this opportunity. There really is an opportunity out there right now to take advantage of how much these homeowners are spending. And so one of the first things you can do is either staff up right now or get prepared to staff up. A good phrase that I heard from a friend of mine and a mentor of mine is, said he always have to keep your bench warm. And what he meant by that was make sure that you have, putting people that are willing to jump in and work just in case you get an influx of extra work, an employee leaves or something of that nature.

So first piece of advice that I would like to give is to make sure you have a warm bench, that make sure you have people that are on standby, ready to jump in and work with you at a moment's notice because if you really do take advantage of the spending and you lay out a good marketing campaign and also the business goes crazy, well then there you go. You have the staff to fill that need and you can grow, grow, grow. So my really quick initial piece of advice would be to staff up or be prepared to staff up. Elin, what kind of advice do you have?

Elin: Right, so I think second, it's most important to know your customer. So as a home service business at this time, your potential audience spans three different generations. And obviously that's going to require a few different methods to reach each. So obviously we mentioned earlier, the boomers and the millennials are the, they make up the largest portion of this audience and they are vastly different. There's a big age gap between them. And obviously, they have different lifestyles, different needs. So boomers obviously are reaching the point where they're focused on aging in place and staying in their homes. And obviously they are a little bit less tech centered. There's a stat online that boomers are 80% more likely to go online via a desktop device, which is obviously vastly different than millennials, which are mobile everything. So obviously it's important with that millennial generation to make sure that your digital presence is optimized for mobile. So I think it's important to understand that you're talking to a lot of different people and that you need to talk to them in a few different ways. So say you're running an online campaign. It's important to segment that audience and make sure that you speak to them a bit differently. Boomers have the largest disposable income as they're in retirement. So they're more willing to pay for a quality service a little bit more, but they're still interested in comparing prices. So leading with price is still very important to that generation. Whereas millennials value transparency, they kind of grew up with advertising being thrown at them. They're used to those ads reaching them on their phones all day, every day. They know that they're being targeted. So something really important to that generation is finding businesses that are authentic and transparent, reading those online reviews to make sure that they're reputable. So that's really what's important to that generation. So just make sure in your marketing that you know who you're talking to and that you can't talk to everyone the exact same way.

Darren: That's great. As a business owner, learn to know your customer and talk to them the right away. There are a few things that should also be considered in this changing environment as homeowners are spending more and that is expanding the service offerings. And this won't apply to every business, but it should at least be considered because these are ways to satisfy user demand for home services through online format. So first is online subscriptions. And again, we know this doesn't apply to everyone but a commonplace you'll see this is appliance repair. That industry is huge. There's people repairing their home, their appliances and homes frequently, and you can get appliance repair plan all across the country. And that subscription service is sold and it's great. It provides assurance. So that's something that, if possible, should be considered. You see subscriptions for handyman services, maybe for lawn mowing, you can get subscription services for socks, razors, car washes, restaurants are doing it. We're all probably familiar with streaming services. Wine, chocolate, exercise, any Peloton fans out there? The list is endless. And I don't know about you guys, but my subscription list is getting out of control.

There's a term out there called power subscribers as defined as someone with 10 or more recurring payments. 10 or more recurring subscriptions that they have each month. And I just foresee this going up. And before too long, we're going to lose track of our subscriptions. And there's other services and apps out there that help us keep track of all of it. So, Truebill is one of them. And if you want to get involved with them, they help you keep track of your subscriptions and know where your money is being spent. But anyways, we're seeing this shift from a transactional economy to a relationship driven one, and that's what subscriptions help. They help build that recurring touch point with the customer. And it's a constant reminder that people have a relationship with the brand. So online subscriptions is one that you should consider. Another one is online scheduling.

Elin: So going back to what I mentioned with the two bigger generations that we're talking to, that subscription-based model, do you think that that fits everyone or is catered to one target more than the other?

Darren: This one's probably catered toward the younger demographic, but at the same time, subscriptions provide assurance. As I mentioned, the appliance repair, I think anyone would be open to that. No matter what age you are, it's essentially an insurance policy for your appliances. I don't see the boomers getting into the subscription services for the razors or their socks or their chocolate, but yeah, probably this would slant more towards the millennials. Would you agree?

Elin: I would. I would, yes.

Darren: Yeah, so the other item that I mentioned was online scheduling. Obviously, most businesses should have this down by now. If COVID didn't force you to do it, get on board. If you have scheduling, get it online. Again, this price leans more towards the younger demographic, but people just want to control their schedule. And if they can go online, pick a time slot two weeks from now to have their lawn mowed, to have their windshield replaced, whatever it is, they will do that. So keep that in mind. Next is on-demand services. So consumers are looking for convenience, speed, and simplicity. So if you are a business that can provide or offer this, you should strongly consider it. And what I'm talking about is, some industries that are already utilize this are travel, education, delivery, shipping, parking, subscription, pet care, family care, home services, the list goes on. There are many, many companies using the on-demand economy. So, more companies are popping up to meet this demand every month. So if you aren't on it, there's probably going to be a new company evolving within your industry to provide that on-demand service. There's obviously huge benefits, the ability to have real time fulfillment of goods and services. Convenience is huge as well. So keep that in mind if you're looking to expand your service offerings.

And the last one, which again, a lot of businesses are doing is some sort of delivery feature or even curbside pickup. We're seeing it more often, buy online, pick up in store. That's another model, a variation of this model that gives consumers control. It gives them the ability to shop, place orders and then drive to the store and pick it up. So again, we know these don't apply to every business but if it can apply to yours, it should be considered because it'll keep you one step ahead going into this changing economy where homeowners are just spending more.

Ryan: Those are great tips, Darren. And I think any business is going to be wise to pick up just even a couple of those nuggets of information that you laid off for them. So I think that's a great job there. You mind if I segue into getting into the psychology of why these homeowners are spending money?

Darren: Psychology?! Yeah, let's hear it.

Ryan: Well, we're talking about spending, right? Or we're talking about homeowners and what does it mean? Why are they spending so much? And so let's dive into really what makes them want to spend. And we laid out some facts earlier that, some motivations I guess you would call it, on why they would spend. But you really need to understand the homeowner. And why does a person really feel the need to spend money? Well, there are a few reasons that you can take into consideration for why a person would need to feel like spending money. They buy to portray an image. They buy to avoid the fear of missing out, FOMO, as a lot of people call that. They buy to gain or earn freedom. They buy to fit in and belong. They buy it for immediate gratification or to solve a problem.

So why is this important? Why is it that knowing what homeowners can spend can help you reverse engineer good sales campaigns? Well, you just, let's take it one by one and just look at it case by case. So for example, why homeowners buy to portray an image. So people do want to portray themselves in the best light possible. And this is where your branding for your company is huge. If you can portray your brand as the one that the homeowner associates with a high level of quality, then if they're using your brand, they're lifting up that their image and their image is much better. So if you have a solid brand that's with luxury or quality and better than your competition, more homeowners are going to be more enticed to use your brand because they need to portray that image. So that's one example.

Another one is the FOMO that we talked about a little bit ago. If you can project scarcity, then you can trigger this emotion. So for example, you're up late at night and you're watching TV, flicking around the commercials, and you see these infomercials late at night and they come on and they always say the same thing. Act now. Act now. There's only 20 left and you got to get it now or else they're gone. That is the prime example of trying to trigger the FOMO within people. So if you're a business and you're trying to reach these ever so spending homeowners, you could create a campaign that is projected on scarcity. That we have these coupons available, but there's really only 10. And to get it, you have to do X, Y, and Z. This can trigger that FOMO, people can jump in and sync up with your brand ASAP if you can do that.

Another one is buying to gain or earn freedom. So we talked about this a few episodes ago. And, in the way you pitch, in the way you communicate with somebody. And if they are, if you're just saying, hey, I'll cut down your tree or I'll mow your lawn, or I'll paint your house, then they're okay, but I can do that. But if you talk to them like, hey, your time is valuable. I can save you time by doing these things for you. So instead of pitching your service, you're giving them freedom. Say, "Go ahead and make that dinner that you've always wanted to make. Go spend time with your relatives because don't worry about your lawn, we've got you covered. Don't worry about painting, we've got you covered. Don't worry about house cleaning, we've got you covered." So if you can pitch that angle on giving somebody freedom, that's another great way to trigger some of these emotions that homeowners tap into when they're spending.

Also fitting in and belonging. According to a study published by the Journal of Experimental Social Psychology, low self-esteem is a big factor in whether a person will buy luxury goods that he or she may not be able to afford. So this ties in with portraying the image. So that's kind of an interesting bit of research I ran across.

So if somebody wants to boost their self-esteem, a lot of times they'll go online and they'll shop for something that's more luxurious. So a lot of times you'll see on somebody's credit card statements, a luxury item, let's say it's a handbag or a power tool or whatever it might be. And they're happy to continually pay that off month after month because it boosts up that self-esteem and it also helps them portray that image.

So if you can tap into some of these emotions though, then you can really figure out how to reach these homeowners when they're spending because they are spending. The data is out there, this great research is out there. And using some of these business tips and reaching these people psychologically will undoubtedly connect your business with more homeowners.

Darren: Thanks, Ryan, for the psychology lesson I didn't know that was coming today. But that works in wealth to this whole discussion about how coming out of the pandemic, homeowners have this new focus. Plus we have these market conditions that are working in their favor that have freed up a lot of resources. You have the aging demo, the demographic features that are, as Elin mentioned, with the boomers and the millennials, that things are looking very, very bright for businesses that are servicing the home service industry. So like I said, like we said, homeowners are spending and they're spending probably more than we think. But this is a time where business owners can take advantage of it. Yes, there will be hurdles along the way, such as rising cost of materials, supply chain issues, pronounced labor shortages, but these are merely short-term barriers for the market which makes project completion harder. But in the end, these hurdles will only stretch out consumer demand and delay project completion rather than prevent it, because people want and need what you have to offer.