With ClubLocal and new SaaS tools, ReachLocal wants to be the Amazon of local services

By Michael Carney , written on February 25, 2013

From The News Desk

Few companies have a better vantage point from which to judge the lack of technical sophistication of local merchants than ReachLocal. Similarly, few are better positioned to reimagine the way consumers interface with these service providers. That’s because the online local marketing company already has 22,000 local merchant clients and a salesforce of more than 1,000 individuals across 12 countries on five continents.

In the nine years since its launch, the now publicly traded company has lead the transition of local lead-gen spending away from yellow pages and onto the internet, with its business now on pace to generate $500 million in annual revenue (although its meager profits suggest either that its still investing in growth or that it’s not a very rich market).

It’s from this market-leading position that the company today announced plans to launch its consumer-facing ClubLocal online booking service, and three small- and medium-sized business (SMB) focused SaaS products, ReachSite, ReachConvert, and ReachCommerce.

ClubLocal, which launched into private beta in Dallas/Fort Worth in July 2012, is a dramatically different method of booking home services that more closely resembles a concierge than a marketplace. The company curates and vets the best local vendors in 17 categories currently, such as handymen, plumbing, electrical, appliance repair, home cleaning, locksmith, and pest control, focusing initially on what CEO Zorik Gordon calls “need-based verticals” – aka the ones you need right now as opposed to restaurant reservations or salon appointments.

The company completes criminal background checks, in person interviews, and ongoing performance reviews on all service providers and then negotiates discounts on behalf of its membership. ClubLocal offers consumers an online and mobile app-based blind booking service through which they can access trusted service providers without putting in the typical legwork of sorting through other listing or recommendation platforms such as Yelp, Angie’s List, or the Yellow Pages (on or offline).

The blind listing means that the consumer doesn’t know whether ABC Plumbers or Acme Plumbers will show up, only that whoever arrives will carry the ClubLocal seal of approval and will be priced at or below market. In this way, the service is similar to the way that AAA books tow trucks or that Uber books black cars.

Also a major improvement over the norm is that all appointement slots are two hours, rather than the typical four- to eight-hour window given by most services providers. ClubLocal also provides all merchants with an iPad and vendor mobile app that enables consumers to receive realtime status and location updates. Similarly, merchants can accept mobile payments and send digital receipts to consumers, all of which is aggregated and stored within their ClubLocal profile. In its early beta period, the service has seen a 23 percent repeat usage rate among consumers.

For merchants, the service is a low risk proposition because there is no upfront advertising spend. Rather, the SMBs only pay ClubLocal once a booking is complete and service has been rendered. At that point it’s a 20 to 30 percent cut of the booking value, negotiated on a merchant by merchant basis. But because the company handles all customer acquisition and billing, while also filling excess capacity, merchants are glad to pay it. In exchange, they receive an end to end customer acquisition and transaction management platform. The one downside is that ClubLocal owns the customer relationship, as is the case with Uber, and merchants cannot market directly to that client after the initial service.

We have seen other startups tackle this space recently, including MyTime which launched in Los Angeles in January to provide a marketplace for everything from beauty to automotive to home services. The GRP-backed company takes a different approach to its relationships with the consumer and merchant than ClubLocal, and focused on rolling out a deeper yet more narrow offering, covering 60 verticals in a single market initially. The similarities of the service suggest that there is a problem to be solved in this space, while the differences suggest that consumers will get to vote with their time and dollars which model they prefer.

Rather than simply rolling out the comprehensive ClubLocal offering, ReachLocal unbundled the platform into three self-serve SaaS products for those merchants who don’t want third-party bookings or who want to use the same tools to manage their direct business. The first such tool is ReachConvert, a SaaS-based lead conversion automation product that automatically sends targeted emails to prospective leads, while delivering notifications to business owners of inbound leads and responses via text message, email, or mobile push notification. Beta users using ReachConvert have converted 30 percent more leads into customers, according to the company. The product will launch publicly in Q2 of this year and will be priced at $199 per month.

For all its automation, ReachConvert exposes a major weakness of most local merchants which – dramatically effects their conversion rates: terrible websites, or no website at all. ReachSite, is a custom website product that includes basic search engine optimization (SEO), dynamic content optimization for multiple device types and screen sizes, and lead capture to build the company’s marketing list. The service also includes analytics tools to track marketing effectiveness and will release as a beta product in Q2.

Closing the loop, to use online marketing parlance, is the ReachCommerce product which enables local merchants to book appointments, schedule their technicians, provide estimates and invoices, communicate with consumers, take payments online, and manage retention all online rather than over the phone or email and via paper, pen, and carbon copy. Like ReachConvert, ReachCommerce will launch in North America in Q2 at a rate of $199 per month plus $2 per booking (as well as 2.75 percent for credit card processing).

Collectively, ReachConvert, ReachSite, and ReachCommerce give small businesses all the tools traditionally available to their larger competitors for maximizing the effectiveness of their customer acquisition spend. ReachLocal certainly knows the local merchant space and has a first hand perspective on the deficiencies in the market. The company is confident that its new suite of offerings represent the best solutions available.

“Across the board, we want to help our merchants better utilize their resources,” says Gordon. “They see huge ROI by letting our technology focus on acquiring and converting customers so that they can focus on delivering great service. At the same time, we are thrilled to deliver to sonsumers better pricing and better service than would otherwise be available."

[Image Credit: securecat on Flickr]