The Middle-Class Squeeze

There’s nothing “best in show” about a pest problem, and you can bet a customer calling for your services isn’t ringing out with “glee.” But actress Jane Lynch’s witty video ads for Clark Pest Control might have changed the minds of consumers on the fence about DIY vs. hiring a pest control company.

Lynch is considered an “influencer,” and you might have seen her in movies like Talladega Nights, Best in Show and The 40-Year-Old Virgin — and of course, TV shows like Two and a Half Men and Glee. “We are always trying to be top of mind, right in front of you, because pest control is often a need-based service and if we can hit people regularly with a consistent impression, when it’s time to pick a company, we hope they’ll call us,” says Nicole Kirwan Keefe, vice president of strategic growth for the Lodi, Calif.-based company. (Clark was purchased by #1 Rollins in April 2019.)

Clark Pest wants to reach the right eyeballs. “We want to be strategic and specific,” Kirwan Keefe says, identifying a target household income minimum of $75,000 in some California markets and $100,000 in affluent areas like San Diego and San Francisco. “There are still a lot of people coming into our market that buy pest control,” she says, relating that the company conducts bi-annual database studies to determine who’s already buying their services and what demographic the firm should go after to build its customer base.

“We look at long-term customers and new customers, and we find out what they watch, where they shop — we know if they like the outdoors or going to Costco,” Kirwan Keefe says. This data is not expensive or difficult to access today, she adds. “This gives us an idea of where we can find them, in places they like and trust.”

Is the sweet spot for pest control sales changing with the shrinking middle class? Just who is buying pest control today — and how can PMPs identify the sweet spots in their markets?

Since 70 percent of the gross domestic product (GDP) is consumer spending, it is obvious that robust consumer spending is a major factor in growing the pest control industry, says Victor Hammel, chairman at Rentokil Steritech (#3) and former president/CEO at J.C. Ehrlich.

However, the middle class often struggles with earnings levels that classify many people as “underemployed,” Hammel points out. Housing, health care, education debt, inflation and taxes all play a part in how much of a household’s budget is left over for the extras.

“I think the old-school classification of what it took to be middle-class might have shifted,” Kirwan Keefe agrees. Those “niceties” include things like extra money in the bank, family vacations and overall comfort. “But I don’t know if there is less of a market for pest control. Regardless if you’ve got the extra money to do it, there are certain issues you have to treat.”

Kirwan Keefe feels “there is plenty of market for us.” However, she notices that affording “everything you feel you should want and be able to have as middle class” is harder to achieve. The typical $75,000 household income that PMPs have traditionally focused their efforts on is pushing closer to $100,000, even in California markets that aren’t inflated like the Bay Area.

A shrinking middle class is a sign of economic progress, according to Pew Research, which notes that a greater movement up in the income ladder in most countries, including the United States, from 1991 to 2010 resulted in an overall improvement of economic status.

That doesn’t change the reality that income is discretionary. There are choices middle class households — and every household, for that matter — must make as they add line items to their budgets.

The question is, “How do we grow the next generation of pest control users?” says Kevin Smith, chief marketing officer at Rollins.

His biggest concern is relevance. Consider the banking industry. We do business at the ATM rather than tellers. Prior to coronavirus, movie theaters lagged in business because of at-home experiences that were easier and cheaper. Gas stations traded attendants for self-service pumps. No matter how much discretionary income a person has or does not have, the service must be relevant to be on the radar.

“We have to make sure we solve the problem we were hired to fix, that we make it easy for customers to do business with us in terms of scheduling and payment, and we reinforce the value of what we do every day,” Smith says.

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THE ECONOMICS. Before news headlines shifted to 24/7 COVID-19 coverage, shrinking middle class headlines appeared in papers and online journals for the last several years. What middle class means has stayed the same. People expect a steady job, a home, resources to raise their family and maybe an annual vacation. The issue is, accessing the middle-class lifestyle isn’t as easy as it used to be. Home prices are up, health-care costs climb every year and the expense of education is burdening graduates with significant debt. Quickly, the bills exceed the paycheck.

Based on income, about half of Americans are considered middle class, according to the Pew Research Center. Middle class is defined as a household income of about two-thirds to double the national median, which is about $48,000 to $145,000 for a family of three (2018).

Traditionally, the pest control industry has targeted residential clients with household incomes of $75,000 or more. Hammel reflects back to 1970 when he joined his family business, J.C. Ehrlich in Reading, Pa. Back then, the customer base was 85 percent commercial and residential services were mostly one-time termite jobs. He explains, “We recognized the need to modify our service program for residential purposes and then market it.”

This meant appealing to the middle class and their needs. So, the company built a year-round protection plan and billed customers’ credit cards monthly. At the time, this service offering was much different than the typical billing schedule of sending an invoice three times a year after service. By 2005, the company had grown its residential base to 40 percent of the overall business.

Smith says that consumers are thinking more about their purchase choices because of downward pressure on discretionary income. “The fact is, consumers are having to make tougher choices about what they use and don’t use. They ask, ‘What can I do myself? What is a nice-to-have? And, what is mandatory?’”

Does your prospective customer also have a gym membership or a lawn that needs mowing? What about a home cleaning service or an accountant to do taxes? Every service provider is feeling some pressure, Smith says. “I was with my CPA (recently) and he is feeling it,” he says. “People are saying, ‘Wait. I can go online and for 100 bucks I can get my taxes done.’”

Consider what happened in the cable/communications industry when so many consumers decided to “cut the cord.” Costly bills for land lines, data plans and cable television became a financial burden for some. “Many said, ‘Whoa — I’m not paying $150 for all that. I need to spend less money,” Smith says.

Enter innovations like Roku, Netflix and Hulu. “Consumers can shrink that cable bill in order to do something else with their money,” he points out.

Marketing to groups with more discretionary income is a no-brainer. But, Smith says, there’s a segment of the population that intersects all income brackets — the consumers who do not want to see bugs in their homes. “They will be willing to not have other things in order to continue the service,” he says.

But the service must be darn near perfect because one thing that hasn’t changed over the years is the value of quality service and word-of-mouth referrals.

“That has always been the best way of getting business for a home service provider of any sort,” says Barry Murray, an industry marketing consultant for the last 12 years and former vice president of marketing for Truly Nolen. Today he’s director of sales and marketing at Petri Pest Control (#87). “If you have a bad meal at a restaurant, you tell 10 friends about it. If you have a good meal, you might tell one or two people.”

Smith says, “In most instances, the demand for residential pest control is going to be episodic — I see a problem, I need someone to help. A lot of those people will try to handle the problem themselves, then they discover they can’t. And, that is when we need to be really good.”

WHO’S BUYING? Before getting into how to market to middle-class consumers who want fast, flexible service, PMPs should focus on who this customer is today. A dozen years ago, the typical residential pest control customer may have been a female baby boomer or Gen-Xer. “They were what we referred to as ‘soccer moms,’” Murray says. “If I opened up a contract folder and pulled out 10 letters, eight of those would be signed by a woman.”

That’s not the case today. Millennials are the new generation of pest control buyers, and they shop, work and live differently than their predecessors. They search online for service providers. “Brand is less significant than it was in the past,” Murray says. Search results are based on location not company name, necessarily. “They are searching for ‘pest control’ from their mobile devices.”

According to Pew Research, 5.3 million of 16.6 million U.S. heads of households are millennials. Generation X is 4.2 million of this prospect pie, and baby boomers make up 5 million. Just 2 million are the Silent Generation, who are in their 70s and 80s. Millennials dominate in terms of sheer numbers. But their disposable income is less significant. An estimated 5.3 of 17 million U.S. millennials households are living in poverty compared to 4.2 million Generation X and 5 million baby boomer households.

Millennials also feel strapped by higher education debt and are less likely to own homes. “Millennials dominate the ranks of the nation’s renters,” Murray says. “We are looking at home costs that are probably the highest level on a per-income basis than they have ever been, and millennials are the first generation coming into the workforce that are making less than the equivalency of the baby boomers that preceded them.”

Reflecting this change, Murray feels the fastest growing segment in residential pest control is multi-unit sales.

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So, there is this leading generation of potential buyers that has different buying habits, less disposable income and is more likely to rent than buy a home. Plus, the definition of who is head of the household is different than in previous generations. The country, by and large, has experienced a demographic shift with the largest number of people identifying themselves as multi-racial. Households don’t necessarily include a married couple. “Millennials, for the first time, surpass all other generations in the number of households led by single moms,” Murray says. “And, people are cohabitating to a higher extent.”

The target customer is also more educated, has more access to information and is more technologically sophisticated. And, they want service right now. “They’re a click away from knowing everything they need to know about their purchases,” Murray says.

They’re also cost-conscious. “That is why they buy from Amazon,” Murray points out. “They literally have a price list in front of them of practically every purchase and they can compare.”

In a nutshell, the soccer mom is no longer the majority buyer of residential pest control services. “We are in the midst of just about every significant demographic shift,” Murray acknowledges. And, as a result, “We have to make a significant shift in how we approach people, how we market to people, how fast we get to people, and the types of programs we offer them to fit their lifestyles.”

WHAT CONSUMERS WANT. Pest management firms know customers want fast and flexible — and service frequency “as needed.” Perhaps this “as needed” service offering is a way PMPs can target middle-class households that have varying buying behaviors and more budgetary constraints.

“We can’t think in the constraints that we once did — and we can’t think in service structure constraints,” Murray says. “We have to be more cognizant of being in the midst of where our customers are.”

This means looking at the way other industries accommodate customers. Smith relates it to the “liquid expectations” concept where consumers compare all industries rather than companies in specific categories. “Today’s consumer says, ‘Wait a minute. When I take my car in for service, I can make an appointment online and they send me the bill in advance. I expect that for any service.’”

Smith adds, “The idea that a customer’s pest problem was handled is not enough anymore.”

Are you communicating with customers the way they prefer? Can you offer online scheduling? Does your website offer an online chat tool so people can get instant answers? Will you allow people flexible billing options such as using PayPal? Can you text a customer before arriving to the home?

“Our competition is all other services,” Smith says, not just other pest control companies or even other service businesses.

Customers who make a choice to treat for a pest issue in the moment are prime prospects for ongoing service. But, they might not want a traditional package. “We might have to evolve to on-call services — a more flexible service structure,” Murray says, acknowledging the challenge of delivering IPM when visits are inconsistent.

Speaking of how pest management companies talk to prospects, a move toward digital marketing allows Clark Pest Control to hyper-focus messaging to its target audiences. This allows Clark Pest to speak to a customer base that changes dramatically due to the variance in California’s demographics.

Location rules. As such, companies should position their marketing — and branches — in target markets where prospects will search for pest control services. “The greatest marketing move a company might make is moving closer to their sweet spot,” Murray says, relating that “location optimization” is the latest search engine play, with people searching for “pest control near me” for services.

Google’s algorithms churn up results based on a user’s geography. “If you are servicing upper middle-class neighborhoods but locate a branch outside of that geographic area because your office real estate is cheaper, that could negatively affect your online search results,” Murray explains.

And as for targeting household income, while PMPs maintain that the $75,000 household income marker is a general starting point, there is value in reaching into other income brackets. Massey Services’ (#5) Vice President of Marketing Lynne Frederick says, “The reality for our business is, consumers do not want bugs in their homes, so I think there will always be a need for our services. From my experience, they will choose pest prevention over home cleaning.”

How can PMPs appeal to their typical customer and those who simply can’t stand the thought of pests?

First, be in the right place at the right time. The best customer to target is the type of customer you already have, Murray points out. Use your existing database as a launchpad.

“Spending huge buckets of money on television and radio doesn’t provide that sledgehammer effect that it used to have,” Murray says, adding that branding is important, but the online marketplace is a wide open field with no real barrier to entry for smaller companies. “So, you can literally be a brand-new guy who is tech- savvy and come out and perform pretty well against the big guys right out of the gate.”

Next, be convenient, responsive and competitively priced. “Small guys can’t think like small guys,” Murray says. “Think more adaptively — be quicker and more reactive,” he advises.

Hammel suggests advocating at the National Pest Management Association’s (NPMA) Legislative Day to ask politicians and lobbyists to focus energies on what actually grows businesses. PMPs “should ask their congressperson what she/he is doing about these issues to ease the burden on and revitalize a vibrant middle class,” he says of health-care costs, education debt, housing prices and inflation.

Smith wants to see more professionals in the field talking to customers directly about how pest control protects property and public health. “I’m not sure we get that message out there at the belly-to-belly level with technicians talking to customers, reminding them of the value of the service we provided for them that day. This is a huge opportunity for our industry.”

He adds, “At the end of the day, all of us need to continue to make our industry relevant for each successive generation of potential pest control users.”