446: Aggregation Theory and Pet Care
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What is Aggregation Theory and why is it important in pet care? With the recent purchase of Rover by Blackstone, many pet business owners are wondering what it means for them. Today, we break down how Aggregation Theory applies to dog walking and pet sitting, how other industries have navigated dominant players, and what independent businesses can do about it!
Main topics:
What is aggregation theory?
How does it apply to Rover?
What can independents do?
Main takeaway: Remember, the personal touch, community involvement, and specialization in services can be your biggest strengths as an independent business.
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A VERY ROUGH TRANSCRIPT OF THE EPISODE
Provided by otter.ai
SUMMARY KEYWORDS
pet, rover, services, aggregation, platform, companies, clients, sitters, care, pet sitters, suppliers, caregivers, theory, users, offering, talking, aggregate, provide, pet owners, data
SPEAKERS
Meghan, Collin Funkhouser
Meghan 00:00
Oh Hi there. Welcome to pet sitter confessional an open and honest discussion about life as a pet sitter. Thank you to our sponsor, pet sitters associates and our Patreon members. We have had some new people join recently, people like house and Hound concierge, Tracy, Stephanie, Ashley, Lisa and Jillian. Whoo, thank you for finding value in the podcast and helping to support it and keep it going. We really appreciate you. If you would like to help the podcast as well, you can go to petsitter confessional.com/support. To see all the ways you can help. Have
Collin Funkhouser 00:34
you heard of aggregation theory? Now hang with us here. Aggregation theory refers to a framework or this concept that explains how companies achieve market dominance by leveraging a digital platform to aggregate that's bringing together consumers and suppliers and other value chain people. So people that are going to add value to either the consumer or the supplier, so they kind of sit in between supply and demand. This theory was really popularized by a guy named Ben Thompson. He's a technology analyst and founder of st hackery who he writes blogs in this podcast. But he articulated that this theory was a way to explain how certain internet companies or companies that use the internet to as their main front to their customers and the supply, and particularly places like Google, Amazon, Facebook, and Netflix explains why they have achieved such significant market power and influence. It really describes how these companies have managed to aggregate in that's bringing together a large number of both the users and the suppliers on their platforms by leveraging the internet's ability to distribute at zero marginal costs. If you listen to Ben Thompson, you will hear this phrase, ad nauseam zero marginal cost that means for every additional thing they ship or every additional supplier they bring in, it costs them basically $0. Because of the internet, you don't have to build another storefront, you don't have to add more shells, you don't have to add anything else like that. The Internet allows you to add things that basically zero cost to you, you then take that, and then you can target users with unprecedented precision because of data because of tracking because of the analytics. This aggregation of supply and demand combined with the control of the user relationships allows these companies to dominate their prospective markets.
Meghan 02:29
We're going to walk through the six tenants of this aggregation theory and we're going to dive into the weeds here, but it will be worth it, there will be a payoff. And you will know what we're talking about in a minute. So
Collin Funkhouser 02:40
aggregation theory, the first tenet of this is that is a consumer centric platform. These companies build digital platforms that attract a large user base, or customers by offering superior value, often through a combination of ease of use a wide selection and personalized experiences, then they aggregate demand by attracting a large number of users, these platforms become attractive to third party suppliers or producers who want access to that demand of the users, you have people who want to sell the users on the platform, something this ultimately creates a network effect where the value of the platform increases as more users and suppliers joined. Then there's the reduced transaction costs. Because these companies are based in on the internet because they're digital, they reduce the costs associated with finding and transacting with consumers or suppliers. These companies provide a streamlined process for browsing, purchasing and delivering products or the services that are needed. They also I've talked about this a little bit now they've they leverage data and personalization. So a company who is good at aggregating they they leverage data collected from their user base to personalize the experience that they receive. And they also improve their offerings through targeted advertising, which strengthens their market position because they know I've got all this data about this person. Now that I know that data, I can now offer them specific things that we wouldn't be able to otherwise. Then there's the disintermediation of traditional players. That's this is a big word, but basically, it this is where the company can now bypass traditional companies in the value chain where they are directly connecting the producers or the suppliers with the consumers. There's no more intermediary there, it's the consumer can directly go and find the supplier that they want to, which helps reshape the industry reduce costs, and makes it a little bit more personal. Once the critical mass of users and suppliers is as has achieved the platforms these companies can then monetize their service of making that connection through various ways whether they're advertising subscription fees, or transaction fees. Again, these are this is really focused on companies like Amazon, Google Facebook, at Netflix, these are all examples of aggregation theory in action actually living this out in their business models, where they dominate these respective markets by effectively aggregating both the consumers and the suppliers onto their platform. So
Meghan 05:14
if you are still awake and with us, you may be wondering why we're talking about this. If you did not know rover was recently bought by a very large investment firm called Blackstone. So it's been in the news recently from an investment and business perspective, everybody's been talking about why did they do this? What's the point rovers never posted a profit, so why would somebody buy them out? We think rover is another example of aggregation theory. And here is why so the first point of customer centric platform rover provides a user friendly platform that connects pet owners with pet caregivers. This platform is designed to cater to the specific needs of pet owners looking for trustworthy and convenient pet care services. Point number two, aggregating demand and supply rover aggregates demand by attracting pet owners who need the pet care services and simultaneously, it aggregates the supply. By enlisting a wide range of pet caregivers, anybody can sign up, you pass a background check, you're good to go. It creates a large marketplace where the needs of both the pet owners and the caregivers are met. Number three is the reduced transaction cost. With a platform like rover it's really simplifies the process of finding and vetting and booking pet care services. For pet owners. It reduces the effort and time required to find suitable caregivers. They don't have to go to Google anymore, they just know they can go to rover and find a sitter automatically. For the caregivers on the site. It provides access to a broad customer base without the need for individual advertising or marketing. Again, all the sitters are just on the one page, boom, you're done. With data and personalization rover utilizes the user data to enhance the customer experience. When you go onto their main page, you can say how many pets you have, what their needs are the owner preferences, and it can match sitters based off of that. So it's that personalized recommendation and the reminders and the tailored services for the pets needs and the owner preferences. Point number five is disintermediation of traditional players. Which means by directly connecting the pet owners with the individual pet caregivers rover bypasses the traditional pet care services like kennels or professional pet sitting companies, this direct connection can often lead to a more personalized care and potentially lower costs for pet owners. Then there is the monetization and scale. Obviously, rover monetizes this platform by taking a percentage of the transaction fee from the services books. And as more users both pet owners and caregivers join the platform and use it rover benefits from network effects and economies of scale because they make profit on both the center and on the pet owner. So as we mentioned, Blackstone acquired rover, why did they do that? Why now what is so awesome about now versus five years ago or 10 years in the future? What might Blackstone do now that they have rover, some potentials are the leveraging the data and technology utilizing this data they have 12 years now of analytics from owners and sitters and different services, I'm sure that their IT department is just swamped with analyzing all of this every single day, they can they can use this to better understand what the customers need. And the preferences can lead to more personalized services and improve the experience of the user make it faster, more efficient, better, easier to handle, and potentially increasing that user retention and attracting new customers. Now
Collin Funkhouser 08:36
the data aspect is going to be huge, especially when they learn more about each individual user on the platform and each individual pet with their profile and the information. They're knowing how to match what recommendations to give, and how to go about setting up reminders and all of those things. So that you can really because again, about this aggregation theory is about finding the best possible match for the supply and the demand. And they do that through data. And they do that through the technology services that they have.
Meghan 09:04
There's also strategic partnerships and collaborations. We know that rover recently partnered with Walmart a year or so ago, forming these partnerships with pet related businesses or pet food companies, veterinary services, pet supply retailers, it could provide additional revenue streams and marketing opportunities exactly
Collin Funkhouser 09:21
with a coupled with the data that they're going to have. You can imagine now where if the sitter or the owner get an alert on their phone saying oh, the pet birthday is coming up, why don't you add a birthday cake or some birthday cookies to your stay to have them shipped there or, Oh, you're going away for two weeks. Don't forget to stock up on XYZ. This is where the data analytics and the recommendations can really shine. There's
Meghan 09:43
also the potential for increased monetization. This could include adjusting fee structures or introducing premium services or maybe an enhancement to your profile. You can get the basic profile for free or for more customization like brand colors or different features. of the calendar, it can be an extra $5 upcharge a month. They may also expand advertising opportunities on the platform as well. You could see ads start popping up on the sidebar at the top partnering with chewy or Walmart or Banfield vet, we'd like to talk about what this means for independent pet sitters. But first, as pet care professionals, your clients trust you to care for their furry family members. And that's why pet sitters Associates is here to help for over 20 years they have provided 1000s of members with quality pet care insurance. Because you work in the pet care industry, you can take your career to the next level with flexible coverage options, client connections and complete freedom in running your business. Learn why pet sitters Associates is the perfect fit for you and get a free quote at Pet said llc.com. You can get a discount when you join by clicking membership petsitter confessional and use the discount code confessional when you go to checkout, check out the benefits of membership and insurance once again at pets@llc.com. If rover is an aggregation platform with new investment, money behind it and a lot of money. How do we continue to run our businesses as independent pet sitters, we have to recognize several things. The first one being rover has enlarged the pet care market faster than otherwise would have happened. We did an episode a few years ago, that basically said the same thing of when they partnered with Walmart. What is this mean? Walmart is the largest grocery and retail chain in the entire world. So what does this mean that rover has partnered with them? Well, more awareness of the pet care industry of sitters and walkers and people leaving town and it'd be okay to hire somebody to have somebody come over and watch your pet while you while you're out of town that
Collin Funkhouser 11:32
more people are aware of pet sitters than ever before. And that means specifically in please hear this, that means that more people are looking for options and trying to find a good fit for them. Because we all know that not everybody is for everybody, nor should they be and clients can be picky, clients are going to be looking for very specific things. And now that their eyes are open, and they can see a wider market, they're going to get excited, they're going to look out there and okay, where else can I go? What else is out there? What other possibilities are there. And as just more and more people grow? That awareness of just pet sitting pet care dog walking in Home Services becomes more of a thing that's going to benefit us in the long run. But that
Meghan 12:17
ultimately means that we need to stick to our guns and have our boundaries and say no, when we aren't comfortable with something or don't want to do something. Because if there's a wider market of pet parents that are contacting us, it can be very tempting to say yes, I want to do this, you are just little bit outside my service area. But it's okay this one time. No, if you do not have to do that, just because people are clamoring for your services, you can still be selective, you can still be picky, you can still be premium. And that is a good thing. Yes,
Collin Funkhouser 12:46
but it means that that top of that funnel is a lot wider than it used to be because there are more people out there that are going to be contacting you. And that's always good. Just have those good processes, like you said, Make and have good procedures have good boundaries, to weed people out, not all of them will be a good fit. But statistically, there's a higher likelihood of somebody being a good fit if more people are reaching out to
Meghan 13:05
you. I feel like with apps, we have said a lot of times it's kind of a race to the bottom as far as prices. But I feel like it's the opposite. These days where prices are actually rising on rover, so much so that we are starting to see potential clients mentioned that their rover sitter was too expensive, and they're looking for something else. So as the prices on rover increase, higher prices become expected and accepted by clients. And that's great for independents like us, because that means that people are more willing to be okay with what we're already charging and have been charging for a while. Yeah, one
Collin Funkhouser 13:37
of the immense challenges of the pet care industry is convincing somebody to pay for something that they've either gotten for free or basically free before and now saying no, no, you need to pay for that. And they're not used to that. So again, as people become more aware of pet sitting as a thing they can get somebody else to do. They are also simultaneously becoming more aware that it's something that they are going to need to pay for and pay well for and that is going to benefit us. So
Meghan 14:03
while you may see this as a negative thing, because rover is taking up a larger market share and basically squeezing out the independence, there are things that we can do to stand out and run a thriving business. Let's look at two examples where there are dominant businesses under aggregation theory and they still have independent businesses. The first is Amazon and independent bookstores. With Amazon being the dominant business. It's a prime example of the aggregation theory and action because of the book market. It aggregates a vast selection of books you can buy any type of book you could ever possibly want on there including ebooks. They offer competitive pricing, and they provide a convenient shopping experience. You can get your book in well instantaneous if it's an ebook, and within a day or two. If it's a paperback then there's a thriving independent businesses or independent bookstores. Despite Amazon's dominance, many of these independent bookstores still have carved out successful niches whether it's selling old books or just selling raw romance novels. They do this by offering curating these selections hosting community events really involving people in the community providing that personalized recommendation creating a unique in store experience. An example of this is Pauwels books in Portland, Oregon that Colin visited almost now. 10 years ago, oh
Collin Funkhouser 15:18
man makes you feel old. But it's known for its extensive
Meghan 15:21
collection and community involvement. There are some great old school books in that shop. The second example is Google and niche SEO agencies. The dominant business here, obviously being Google. And as the predominant search engine, it really exemplifies this aggregation theory. It is the go to platform for digital information search, and it's a major player in the online advertising space, versus the niche SEO agencies which are the independent businesses the small ones that they thrive at by offering specialized services tailored to specific industries. I'm thinking of Amy Tolman with Pet Sitter SEO, she is awesome. We have had her on a couple of the interviews here on the podcast. And if you have not listened to those or if you don't know who she is, get connected with her. She is all about SEO specifically for pet sitters and dog walkers. These agencies provide personalized service and in depth expertise in their niche, something larger or more generalized firms that may not match that. So through all of this the aggregation theory, the rover by and Blackstone impacting small businesses and small pet sitting businesses. What can we do? How does this apply to the pet sitting industry?
Collin Funkhouser 16:31
And specifically, what are things that we can do and you've heard a theme pop up every now and then we've been talking here. But the first one really is personalized service and relationships. You need to leverage the personal touch that only you can provide in your business and build those strong relationships with your clients and their pets. offer personalized services that larger platforms are not going to be able to like those detailed updates, customized care plans and flexibility in services, really dig in to know and use your experience your expertise to design and then communicate that care package that routine, how are you going to do that become that one on one connection that your client has, so that they can rave about you so that you do become the go to person when recommendations when experience and when knowledge is necessary for where you live,
Meghan 17:26
because that's going to help raise your platform in the community, focus on that local community, engage with it, attend community events, maybe even host local events, sponsor, local sports teams, or little league or events and network with local pet stores and vet clinics and groomers. And all of these things that a larger platform is not going to get connected with your local community.
Collin Funkhouser 17:49
Because while a company that can't has aggregation theory, on its side is going to be able to partner with these other large other big data, heavy businesses. They are not local, they're not local to your community, you know, your local vet, you know, your local trainer, your local groomer, your local go to nutritionist, all of those are things that you can go in and have a relationship with, so that you can connect your clients to that, because here's the thing, as we've talked about on the podcast before and bears out time and time again, when times get tough, when things get hard. What do communities like they like to support local? Exactly, they like local, they'd like to know that you're local, that your recommendations are local, and that their money stays local. Yeah,
Meghan 18:32
we just had somebody in our local community today an arborist who was outbid by $50. And he was outbid by a company that isn't even in our state. And
Collin Funkhouser 18:42
there was quite a community uproar about this about wanting to support him in the years that he spent here in the community doing amazing work. Because that's the other thing is that we look for that quality and that trust, as you ensure your high standards of care and professionalism. People will come to you they will find that because trust is a key factor in our industry, not just a key factor. It's the factor. So client testimonials, positive reviews are very influential and are only given when they see that quality when they experience that trust in you. So seek after certain certifications, additional trainings for you and if your staff if you have them to delve deep into that like first aid, fear free, other specific training things, then advertise those qualifications to then raise that platform so people know that they're not just getting any old pet care. They're getting the best pet care because of what you have.
Meghan 19:41
Yeah, I mean even winning awards in your community. I am the best of pet city and for my city. Those are great, great testimonials marketing, online presence, social proof. These are really important a strong online presence with a professional website and active social media profiles not saying you have to post four times Today, but you need to be active on there to, to note, let people know, I am still here, I take care of pets, this is what I do. This is how I do it. And you can have peace of mind when you book with me,
Collin Funkhouser 20:10
because that's exactly right. It's not just about saying all the credentials and things that you have and all of your years of experience, it's about making yourself more than just a pet sitting or just a dog walker, because you're not, you're somebody who provides peace of mind, you're somebody who gives a professional the ability to go and do the work that they want to do, they can focus on the things that they want to focus on, they can live a life that they want to live guilt free, they can go to the party, they can go to on that vacation, they can go see the parent that they need to go see, they can live a life with their pet with your help.
Meghan 20:47
Another thing we can learn from the two examples we gave of Amazon and Google are a specialization, consider specializing niching down and types of pets or services that are underserved by larger platforms like care for pets with special needs, medical conditions, exotic pets offering additional services, like grooming or training.
Collin Funkhouser 21:05
Or maybe you want to become the go to person for a particular breed. Or maybe you want to focus exclusively on doing walks or in home care. And really make sure that that is as best and as amazing as it possibly can be. Because here's the thing, when your clients are looking for that kind of care, that's what they're typing into Google. That's what they're asking for. They're not using generic terms, like drop in visits, or I need pet care or I need somebody to watch my pet. No, they they themselves are using the exact language to meet what they're looking for. And if you specialize into that, you pop up first, you're the first recommendation you're the first hit when they go looking for you. It
Meghan 21:48
can also help if you partner in network with other local businesses, like we just mentioned, pet stores, groomers vets for referrals and joint promotions. So network with other pet care professionals don't see them as competition but collaboration so that we can all elevate the industry build that support system, because we do need it. You can also stand out by offering a superior customer experience offering that exceptional customer service, those prompt responses, that easy booking process, the regular updates, it can all make a really big difference. And it's not to say that you need to be answering the phone at 1am When you're in the middle of sleep trying to get a new client. But you do need to have those responses of I will get to your I see your request, I will get to it as soon as I can, or within 24 hours or whatever it is to make sure that people know, okay, this is a business that will be prompt and response and I can trust them. You can also provide those extras that make your service stand out like video updates or small gifts for the pets or chilled water on your walks and adventure hikes. Welcome Home cards, birthday surprises, there are all these little things that you can do to not only add value to your clients, but allow them to experience something extra that keeps them coming back. And
Collin Funkhouser 22:59
throughout this entire process as you are digging into getting connected with your community, looking at specializing and niching down looking and enhancing your customer experience through the service that you're offering. Get feedback and continuously improve regularly, regularly set a schedule, we're coming up on a time where we can look out, do quarterly, monthly, or every six months, whatever it is regular feedback from your existing clients so that you can improve your services so that you know where you're lacking. ask those hard questions. Is there anything right now that would make you leave the company leave using my services or stop using my services for somebody else? Ask that so that you know how you can fill that in and what you can change. Stay informed about other trends and adapt your business accordingly as things change so that you can stay in tune with your client's needs with your community changes. As the economy changes, how are you going to adapt? As you have keep your finger on that pulse more and more closely? And not nationally, not internationally, locally within your service area? How's it going? What's the housing market? Like? What's the jobless rate? What's what what is going on with your community locally, when you stay focused on that when you're connected with other businesses, and not just groomers? Not just that, but we're talking about realtors, we're talking about massage therapists, we're talking about doctors, we're talking about car sales, whatever that is, stay connected locally, so that you can adapt and you can respond quickly to their needs.
Meghan 24:26
Because while it's good to have a national pulse of things of what other pet owners are doing, it really does come down to what you are experiencing in your own business, what sitters in your area are experiencing, and what you can do about that to stay adaptable to your clients and potential clients needs. Because when you remember that personal touch that community involvement and that specialization in services, you can play into your biggest strengths as an independent business and you aren't going to have to worry about other platforms because at
Collin Funkhouser 24:57
the end of the day, stay focused on you stay focused on what You're doing what you can do? Well, while we often want to look at and understand what is happening around outside of us, when we focus on our business, and we focus on serving our clients better, and best to our ability, that is our actual sphere of influence, we stay informed with things going around. But that doesn't preoccupy our minds. We stay focused on our business, we stay working on that finding those areas that we can improve so that our clients get the exceptional experience and the pets get the best care possible.
Meghan 25:29
We would love to know what you think about all of this. And if you have a differing opinion than we do, you can email us at feedback at Pet Sitter confessional.com. Or you can call us at 636-364-8260. Thank you very much for listening to this today. We hope you have found some value in it and thank you also to pet sitters associates for sponsoring today's episode. We will talk with you next time. Bye
