Warm Calls Every day home improvement companies are faced with the need to get leads into the hands of an eager salesforce. For many, that task is getting more difficult and increasingly expensive. Marketing costs as a percentage of revenue among the Replacement 100 range from 1% to 22%, with average marketing costs for the Replacement 100 companies at 10.5%, and an average lead costing in excess of $200 for all companies and all products.
In 2005, marketing costs rose for 55% of Replacement 100 companies, remained the same for 19%, and dropped for 16%.
As media costs ratchet up, marketing managers scratch their heads seeking creative new ways to attract customers.
For the moment, 25% of Replacement 100 companies list repeat/referral/reputation as their most productive lead source, followed by telemarketing (12%), television (9%), and canvassing (9%). Canvassing is something 55% of replacement companies now do, with some just getting their feet wet.
Marketing costs are up, for instance, at Weathertite Windows in Youngstown, Ohio. Owner Merv Hollander says that’s because when it comes to certain ad campaigns, he should sometimes fold, but doesn’t. “This year,” however, “I’m strictly on a budget,” he says.
When Hollander started his company in 1991, a lead cost $68. Today it’s just less than $200. To stretch those leads, the company offers partials — a great way to build repeat sales, but something few window replacement companies are willing to do. Weathertite just moved into a 9,000-square-foot building that includes a 1,300-square-foot showroom. Today, almost all the company’s marketing is media-driven. So where once there was cold calling, all calls now are warm ones — a situation similar to that at many home improvement companies, and one that brings its own challenges. “We want to make sure that whoever picks up the phone is full of honey,” Hollander says.
Web Brings Costs Down One of the relatively few Replacement 100 companies for which lead costs dropped was Garden State Brickface, in Roselle, N.J. (2005 sales: $26.2 million), an operation that offers Renewal by Andersen windows, as well as sunrooms, stucco, and brick-face siding. What caused the drop? The Internet. Web leads — counted as every lead coming through the Internet, whether or not they originated with the company’s TV, radio, or direct-mail ads — now account for 28% of Garden State’s total.
No longer simply an electronic brochure taking up server space, 91% of Replacement 100 firms list the company Web site as a lead source, making it a more widely used lead source than, say, event marketing (60%), radio (54%), or marriage mail (24%). The Web may not be producing leads on the order of canvassing or television — consumers have to find you first — but many Replacement 100 companies are banking on the idea that it will in due time. Right now, 36% of Replacement 100 companies use pay-per-click advertising, a highly productive medium for those who have been busy building their brand.
“We got involved with the Web relatively early, and that has really driven down the cost of our leads,” says Joe Hely, Garden State Brickface’s director of marketing. Building on brand recognition, Garden State made a decision last year to “pursue the Web in a bigger way,” Hely says. For instance, prospects can now set their own appointments on the company’s site. Garden State follows those up with a phone call. Low-cost Web leads helped hold marketing expenses to 9% for this company operating in metropolitan New York — an expensive media market.
Build the Pipeline The approach that home improvement companies have traditionally taken to marketing has been to cast a wide net and count the catch. Rising marketing costs are forcing many, however, to attach a different value to once-discarded leads and to more aggressively seek business from past or current customers. For instance, when it comes to marketing, Todd Schulz and Tod Colbert, co-owners of Weather Tight Corp., in Franklin, Wis., have one major ambition for 2007. “Our strategy,” Schulz says, “is to take a really hard look at rehash, add-on, and referral. Right now it’s 20% [of sales]. I think we can get it to 40%.” The idea is to drive new growth without incurring significant additional marketing expense.
Today’s more farsighted company owners recognize that not every customer is ready to buy tonight, but that many potential future buyers exist, in some form or other, many already in the database. “You have to build that pipeline and nurture that pipeline,” Kramer says. And building the pipeline means collecting the names, getting permission to stay in touch, and letting no unsold lead fall by the wayside. Stanek does it by sending out a buyers guide and DVD to every prospect prior to setting an appointment. If the deal goes unsold, the company follows up, waiting for that customer who’s finally ready to talk, which usually means they are ready to buy. “I’ve had people come to an open house with flyers we sent out two years ago,” Kramer says.
