He doesn’t make big adjustments between lead sources in the short term, however. The company makes an annual plan and tries to stick closely to it. This approach has driven Southern Industries’ marketing costs down when most contractors struggle with ever-increasing lead costs. In 2007, company lead costs fell to $170.39 from $186.93 in 2006.
DIVERSIFY SOURCES Besides helping you generate the number of leads your business needs at any given time, having many sources also allows you to control costs by balancing expensive leads against inexpensive leads. Southern Industries, for instance, uses 21 lead sources. Last year, high-cost lead sources such as TV at 20.8% (of sales) and newspapers at 18.5% brought in 11.7% and 11.9%, respectively, of net good business. However, canvassing leads that generated 6.8% of business at a cost of 8.1%, and self-generated/referral leads that pulled 12.7% of sales at a cost of a 5% bonus commission for the first and 2% for referrals, combined to bring the average lead cost down to just over $170 — far less than the industry average of around $247 per lead.
Unique Home Solutions, in Indianapolis, generates leads from 25 sources. The primary lead source is TV advertising, which runs at about a 20% cost, says president Bob Dillon. But, since the company could hardly afford an overall cost of 20%, “our overarching strategy is to have one costly advertising source and then use cheaper things to supplement, so that we have a blended mix that allows us to control our overall lead costs.”
A blended mix of lead sources makes good sense at any time, but it’s even more important as lead costs rise. As a percentage of sales, the cost of Dillon’s TV advertising has increased by a third in three years, while “the response rate is just about the same as always,” he says. On the other hand, the cost of leads from shows and events, his second biggest lead source, run around 10%. In addition, the number of relatively lower cost canvassing leads is on the rise, Dillon says. Like other contractors, he finds that Internet leads are also increasing.
Last year the company Web site became Dillon’s third most productive source, at fairly low expense. “We try to run it at a cost of 5%,” he says, and sees his Web site continuing to evolve as a major lead source. “It’s something I’m forcing myself to learn,” he adds.
Dillon plans to further develop lower-cost sources such as the Internet and canvassing so that he can continue to use TV. The pay-back, he says, is in the branding. “I figure that 5% of the 20% cost of TV leads is a branding cost that I’m willing to incur because it helps shows and events and helps to drive the Internet. It even helps our canvassers — fully 30% to 40% of the people they talk to know who we are.”
FACE-TO-FACE With traditional media becoming more expensive and/or less effective, home improvement contractors are moving to expand efforts to get face to face with homeowners. Schutzman, for example, is focusing more attention on shows and events this year. The Carolina Building Group doesn’t operate a showroom, but will create some of its own events, such as get-acquainted parties at the homes of recent sunroom customers.
Gorse opened a new showroom in a high-traffic part of town and uses it for community events such as a food drive as well as company promotions. Sales from the showroom jumped to more than $1 million last year versus some $279,000 in 2006.
Being “a very grassroots operation” is in large part the reason why U.S. Home Exteriors scored a record month in June — nearly $700,000 in sales — Johnson says. Since opening its doors four years ago, he adds, “we haven’t had the capital to dive into TV in a big way, and maybe that’s fortunate.”
The company’s primary lead source was, and remains, telemarketing, but canvassing and trade shows have become more important. Since the beginning of the year, Johnson has focused more on shows and events. He has also diverted some money and focussed attention on the canvass department, which, he says, “is proving to be a good decision.”