Proposal

Certified Contractors Econ 561 Being a homeowner, you always have to deal with some sort of problem in your home that will cost time and money to fix. Most homeowners these days are not DIY (do it yourself) inclined so instead of spending time to do it, they rather pay somebody who knows what they are doing to fix the problem in their home. The Home Depot is introducing a new service called “Certified Contractors”. This new service is geared toward those customers. The service also specializes in doing contract repairs for the elderly and disabled. This will build strong relationships with the customers and community. The program ranges from simple around the house repair up to whole house remodels including add-ons and new construction. From and economic standpoint, we will be meeting the demands of customers who cannot do it themselves. ELASTICITY OF DEMAND By Home Depot providing this wonderful service to our customers, we are meeting the demands of our customers. With reasonable pricing starting at $50.00 for basic repair, we are beating independent contractors who usually charge double the price for a simple repair. Home Depot is backed by a 1 year warranty on labor and the product the customer purchase for installation has its manufacturer’s warranty and also the customer has 90 days to return the product if it does not function correctly. As you can see we are meeting the demands for the “do it for me” customer and providing a great service as well. On an average day about 30% of customers that shop the Home Depot, do not know how to start let alone know what they need for the project or repair that they are trying to accomplish. So the Home depot feels that we can help that 30% by meeting that demand head on and making that customer feel appreciated so they want to shop with us time and time again. FIXED AND VARIABLE COSTS The fixed costs will be insurance, bonding fees, and any other licenses or permits that are required for the contractor to participate in the Home Depot program. Variable cost will be dependent on which type of job the contractor is doing, whether it is a small job or a large job. These costs include, materials, labor help, gas, permits (depends on state), and equipment needed to complete the project. We want to eliminate as much fixed costs as possible and basically pay for variable costs as they are needed. INCREASING REVENUE The Home Depot will be taking several steps in increasing the revenue by utilizing this program. We will go by a six step process that will guarantee that we will raise revenue in each store by at least 15% which in turn will create more bonus money for the store. These steps are taken from a small article from small business digest and will definitely help a big business like the Home Depot.” Rule #1: Functionally satisfy at least the minimum; emotionally satisfy the maximum. If functional needs satisfaction were the true differentiator of top brands and survival brands, Coke would not be an Alpha-Pepsi clearly proved that it was preferred in blind taste tests. To work toward becoming an Alpha, companies must meet at least minimum functional needs and provide higher levels of satisfaction and significance than the competitors. They must make customers feel smart, appreciated, more attractive, more respected, and/or more fulfilled.Rule #2: Don't compete on price. Alpha companies don't gain or maintain their Alpha status based on price alone. In fact, they compete less of price than their competitors do. Don't get confused about the importance of price. Price is the final value judgment customers make-it is the conclusion they create based on weighing all of the benefits a product or brand seems to offer. Rule #3: Drive expectations. Companies must differentiate their brand not by what it does, but by what it makes customers want. If the company can satisfy those things better than anyone else and at a higher level of emotional needs satisfaction, it then generate controlling influence with customers and competitors. The company that can drive expectations-among customers, distributors, and/or referral agents-to the highest level has the greatest immediate influence in the marketplace. Rule #4: Measure causes over outcomes. Measuring and comparing sales, profits, market share, brand awareness, stock prices, margins, or any of the other outcomes that businesses spend so much time worrying over only clouds the focus on the causes that drive those desired outcomes. It is far more productive to understand the company's performance in terms of causal factors, such as perceived satisfaction of needs (especially self-satisfaction and personal significance), than in terms of final outcomes. The list is long, but other key causal factors driving revenue generation include communications effectiveness, brand differentiation, and loyalty generation. Rule #5: Critical change occurs once competitors start to follow the company's lead. This process of leading the pack starts with driving new and higher customer expectations. Once competitors discover that the company's customers are influencing customers of other products to buy the product because the company has set new, higher expectations, those competitors start to follow the lead. When this happens, the company has established a level of influence momentum that can be sustained for as long as they protect the "Alpha assets" that got them there, such as product performance, availability, company personality, customer support, and so on. Rule #6: Deep, sustainable strength takes time. Like almost everything else in life, developing deep sustainable strength takes time. Although a company can become an Alpha in a short period of time, to sustain that leadership status takes much longer. Customers, competitors, distributors, referral agents, and even employees need to become accustomed to seeing the company in the leadership role and following its lead. The corporate management also needs to accustom the company's culture to that new lead position. Companies that dominate their category make it a priority to maintain and protect their Alpha assets relentlessly.”-www.2sbdigest.com. PROFIT MAXIMIZATION Each month, each store will be put on a certain sales goal of $30,000. This goal is just for contractor service. It does not include the product being purchase from the store. By having a goal of $30,000, it will tell if the program is having a great output or a negative output in the company. It will also determine which markets that the program is working in versus where it is not working so next fiscal year, we can adjust sales goals to get the maximum profit out of each store. By doing this, it will also determine the marginal revenue and the marginal cost and where it equals off in each market. PRICING STRATAGIES Pricing will be solely calculated when the contractor visits the house. We will meet and beat any competitors’ price therefore trying to make a mark on a very broad contracting industry which has no barriers of entry. By utilizing the Home Depot’s pricing on certain item such as paint, flooring, and building materials, we can show the customers’ the savings that they are getting while giving them world class customer service. Customers’ first will diversify us from the competition and back by a warranty is the biggest piece to the puzzle. Most contractors do not offer a warranty on their work. Home Depot will offer a 1 year warranty that will cover labor and materials. If there is a problem, we will fix it. Since 1978, Home depot has focused on the do it yourself market. We want to move ahead with the rest of the world and let the home depot do it for you. We will make the experience as comfortable as possible. We will be with you every step of the way and have customer involvement in every process we take. Just give us a chance and we can build it for you. WORKS CITED 1. Home Depot Services. 2012 www.myapron/homedepot 2. McConell, C.R., Brue, S.L. and Flynn, S.M. (2009) Economics. 18thed Boston, Ma; McGraw-Hill Irwin 3. Six Rules of Increasing Revenue www.2sbdigest.com