Keeping it simple has been a kind of unofficial slogan of Home Depot’s merchandising team. One area where that approach is gaining traction is in the home services area, where the “whole-home” pricing structure is designed to make explanations easy to understand for the do-it-for-me customer.
Case in point: the retailer’s “any home, any size” $199 carpet installation offering.
According to George Sherman, president of home services for Home Depot, the program represents a “blended” approach to home improvement retailing that combines the carpet segment with the home services division to work toward the unified goal of selling more carpet.
“It’s a move away from a stand-alone P&L to more of an integrated organization,” Sherman said, as he walked the aisles with Home Channel News (for video slide show, CLICK HERE) and pointing to the $199 sign. “This is the best example in the store.”
The strategy is playing out against a backdrop of declining average tickets for the world’s largest home improvement retailer. In the third quarter, the company’s average ticket declined about 2.8 percent to $55.86.
The average ticket decline that Home Depot saw in the third quarter is an industry-wide phenomenon. According to research from Yankelovich prepared for the Home Improvement Research Institute (HIRI), homeowners anticipate completing fewer projects in the next 12 months (2.8 versus 3.4) than they completed in the past year. They also expect to spend less on those projects ($1,320 versus $1,535).
The Home Services area is by nature a big-ticket area. “For a store associate to sell an installation, that’s pretty darn compelling from a financial standpoint,” Sherman said. The company is hoping simplicity will have an impact on consumer’s decision making.
Home Depot’s “whole-home” installation program began about a year ago in the carpeting area. In the spring of this year, Home Depot experimented with the concept as a temporary promotion for blind installations.
The experiment worked and went company-wide. Today, signage in the Atlanta store here across the street from the company’s store support center promotes a single price of $118 for whole-home blind installations -- same price for installation regardless of how many windows are covered. It’s a low-price approach that Sherman says encourages multiple projects in multiple rooms.
“The product and the serve are married together,” Sherman said. “It’s one value proposition.”
In addition to carpeting and blinds, the Home Services division attracts DIFM customers with cabinets, countertops and water heaters.
Another key benefit of the single-price installation offering: the associate is armed with a simple, compelling value pitch. Some fine print applies. For instance, installing carpet over stairs is extra. But the idea of simplicity is the key to the program.
“It’s a lot easier for the associates to get their arms around selling it,” said Craig Menear, executive vp-merchandising for Home Depot. “It’s easier for the customer to understand that the deal represents value for them. And it works.”
He describes the “make-it-easy” approach as “a pretty big win for us.” The merchandising team and Sherman’s Home Services team are operating today with increased teamwork and a “clarity of strategy.”
Asked about the complexity of running installation services compared to other parts of home improvement, or other retailers, Sherman said the challenge varies. Blind installations are relatively straightforward. The division has become adept at carpet installation. Kitchen installations stand at the top of complexity and also degree of difficulty. “Any time that you are potentially asking a customer to not use an area of their home for a month or longer, the complexity runs pretty high.”
Faced with these high stakes, the company is committed to doing its homework on the contractors who do the work.
“Part of the complexity of our role is to manage the vast network of service providers around the country -- in most cases third parties,” said Sherman. “The level of rigor behind the onboarding process, how well we scrutinize these folks and how well we understand the customer service they provide at the local level -- these are our key concerns.”
The key to measuring the program’s success, according to Sherman, is the company’s “voice of the customer” feedback program that solicits comments and ratings from customers. “The critical metrics for us are the voice of customer surveys that we administer after an installation is done.”