Internet Plays a Bigger Role For many Replacement 100 companies, Web sites, contractor referral services, and electronic advertising techniques, such as pay per click advertising on search engines like Yahoo and Google, are becoming ever more important. Fifty-one percent of home improvement companies use Internet referral services as a lead source, and 95% get leads from a company site. The reason is simple: Consumers often do their homework before they pick up the phone, and the Internet is where that homework starts.
Last year lead costs were down and Internet leads tripled at Mid-Atlantic Waterproofing, a $35 million basement-waterproofing specialist with six branches in the Mid-Atlantic states. Currently, one of every five of the company’s leads comes from the Internet. President John Bryant says his operation, which once generated most of its work from telemarketing and spent $300,000 to $400,000 per office annually on that method, has been using pay per click at a cost of about $5,000 per month. Entering a keyword brings up a panel on the right side of the computer screen with links to pay-per-click advertisers. Mid-Atlantic bids on the cost of the service — which can run as much as $4 per click — to ensure it gets at least second or third listing. Mid-Atlantic closes on “50% to 60% of the leads,” Bryant reports.
Brand Building For many companies, large and small, the key to building referral and repeat business is brand. “Ten years ago,” says Rick Grosso, a well-known home improvement industry consultant, “I would never have thought that branding would play any kind of role in the home improvement industry. Today, it’s important.”
Building brand — i.e., creating top-of-mind consumer awareness — allows companies to dominate their markets by being the replacement contractor of choice.
Ten years ago, for instance, Fick Bros. Roofing & Exterior Remodeling, in Baltimore, was a commercial operation. Today the company only does residential work, specializing in high-end exterior products such as copper and slate, installed using its own crews. Now 90% of its business is repeat and referral, driven by proximity marketing, a 2% (of sale) referral reward, and a unique approach to using job signs.
“We’ve carved out a niche in the marketplace that fits what we do and the market we’re serving,” sales manager Jeffrey Fick says. Fick Bros. Roofing defined its target market — the upper-end owners of older, more expensive houses — and made itself the go-to company for slate repair or replacement, gutter relining, chimney teardowns, and custom wood window replacements.
But Fick Bros. didn’t do that overnight. Fick describes a steady revamping of the company culture, a managing-from-the-bottom process that has come to include pre-construction conferences and an approach to installation much like the lead carpenter system used by some design/build remodelers. The point is to deal with homeowner problems before the job begins, rather than after the job has been completed.
“We had to retrain our people — especially our field people — in how to deal with these customers,” Fick points out. “You have to teach an uneducated roofer how to talk to a high-powered brain surgeon who thinks he knows everything.”
For David Matus of Matus Windows in suburban Philadelphia, branding results from being the largest dealer in the Philadelphia area for one of the few window brands American consumers are aware of, namely, Marvin. “They’ve heard the name and they come to us looking for it,” he points out. In-house installers add to Matus Windows’ credibility. The company gets 60% of its work from repeat/referral and is building a substantial niche replacing wood windows in densely populated, historic central Philadelphia.
Challenges Ahead But not every home improvement company can count on word-of-mouth for additional business. For most companies leads are, and will remain, the biggest challenge. And for many, increasing the percentage of self-generated leads is a possible solution. Although some company owners have given up in frustration, others remain committed to getting the salesforce to do some marketing. “Slowly but surely we’re getting the sales reps to understand that they have a great opportunity to grow their own business,” Leen says, “to have a $1 to $2 million company with no overhead, no insurance issues, and the entire infrastructure at their beck and call.”
Braymiller says he pays reps an additional 5% when they bring in the lead on their own and sell it, but comments that he still has “guys who won’t go out and look for their own leads.”
At Matus — where marketing costs are 2% — the challenge is to maintain and manage growth, which hinges on the company’s ability to find good installers. Matus has expanded at an annual rate of 15% until last year, when its sales grew by 25%.
For Kuhlke, the challenge lies in making a transition from the anonymity of telemarketing to a referral-driven business. But that ties into the home improvement industry’s catch-22: One-truck operators undersell established companies, but established companies are the only ones who can provide consumers with the quality and service they expect.
“In this industry,” he says, “the bigger you are, the more expensive you have to be. Mom-and-pop shops can always do it cheaper. [Consumers] want companies to stay around forever, but do they really want to pay for it?”
Get the Leads Out
Which lead source generates the most revenue?In the past year, has your average lead cost gone up, gone down, or stayed the same?Has your No. 1 lead source changed in the last three years?What source do you use for leads?What does an issued lead cost your company today? $219.77
