New Frugality
It makes sense that home improvement companies would see less business in 2008. The U.S. economy is in the middle of a recession that formally began in 2008 and has continued through the first two quarters of this year. In September, The New York Times reported that new-home sales in 2008 were off by 70% from their peak four years ago. And overall remodeling is down from its peak of $327 billion in 2007 to what is projected to be $279 billion this year, a 15% drop, according to the Joint Center for Housing Studies of Harvard University. But in lean times, dollars spent by homeowners tend to move away from what the Census Bureau (up until 2007) classified as “Improvements” ? traditional remodeling projects such as kitchens or additions ? toward “Maintenance and Repairs,” a category, for instance, that would include roofing, siding, or window replacement. That should favor Replacement 100 companies, since this is the work that they do (see chart [PDF]).
And in a different kind of recession, perhaps home improvement companies would have seen barely a blip in sales. For many, though, the events of a year ago moved sales into reverse. The equity situation was a leading cause. Many homeowners desiring to replace their windows or roof could not get financing for such projects. The consumer appeal of large-ticket items that were a major profit center for many Replacement 100 companies ? sunrooms for instance ? faded along with the ready availability of credit.
As the market value of a property declines, so does the likelihood of renovation. And the homeowners with cash, credit, equity, or all three feel that they deserve the best deal. “People are more value-conscious,” notes Scott Barr, general manager of Southwest Exteriors, a San Antonio window and siding company, which this year actually increased its sales. During 2008, Southwest Exteriors saw fewer leads generated by its warm-call marketing ? which includes innovative radio ads scripted and read by Barr ? so the company added a small-scale canvassing program to its marketing efforts.
The new frugality evident among consumers has had its counterpart in how home improvement companies are currently managing their operations. Sales managers and owners who hadn’t run leads in years now cheerfully go on appointments. At Euro-Tech, service and human resources personnel were running leads. Even now, with the company’s salesforce back at pre-recession levels, “we’re taking a much more frugal approach to managing,” John Cudden, Euro-Tech’s sales manager says. “We learned how to cut corners … to ride through anything.”
Canvassers Come Calling
Moeslein’s foray into canvassing was prompted by need. Though Legacy Remodeling, previously known as Swingline Windows, has done business in the Pittsburgh market for more than 20 years, and though Moeslein has his own home improvement radio show, the company’s traditional warm-call marketing met with scant response. It took the company two tries to get a successful canvassing effort rolling, and that’s actually the industry average. Moeslein says that the key to canvassing success is paying canvassers well. At the moment, canvassing is generating 70% of Legacy Remodeling leads.
And Moeslein is far from alone. In 2007, 55% of Replacement 100 companies reported that they did some canvassing. Two years later, it’s 61%. More companies today market through events and home shows. “No direct response is working,” reports Brad Pompilli, co-owner of Tri-State of Branford, a Connecticut home improvement company. “You need to go sell the appointment to the customer.”
Companies unused to that concept can find themselves stymied by consumer indifference to their advertising messages. And the companies that are good at canvassing, such as Pinnacle Energy, in Maryland, where canvassing has always been the biggest lead source, have a leg up on those just getting started.
“The cost per lead of media leads is way up,” says Pinnacle Energy owner Carlo Pinto. “People aren’t so quick to pick up the phone for windows or siding. Roofing can’t wait. But there’s a lot of trepidation about making commitments. They’re holding off on having a window or siding estimate.”
Penguin Windows, one of the largest U.S. home improvement companies, had the advantage, going into the recession, of operating a marketing program that drew leads from many sources, including canvassing and events. “One of the things we know is that you’ve got to do a whole lot of everything,” says director of operations Vaughn McCourt. “You’ve got to keep the lead sources diversified. We went from a big cold-call house to a canvassing house, and now we’re doing a lot of business from retail vendors. We kept face-to-face out there when it was headed in a downward direction. We stayed strong with it. We were already in the shows. It’s not that easy to start canvassing and doing a significant amount of business.”
More players are crowding the stage at shows and events, eager to have a conversation with consumers still in the market for home improvements, especially roofing or window jobs, which many say have held their own. Even the companies that were once big spenders when it comes to media have found that, in this economy, the ability to rapidly adapt and launch new marketing efforts is critical.
A year ago Charles Gindele, owner of Dial One Window Replacement Specialists, in Orange County, Calif., was approached by a salesperson seeking a job. The aspiring rep offered to generate his own leads if Gindele would allow him to work the company’s database of customers sold by salespeople who had since left Dial One. That kind of ingenuity helped generate an extra six figures a month for the company at a time when its media and direct-mail efforts were yielding few leads.
