Seth Selesnow looks around, admiring all that he sees. And what he sees is a party in full swing. In one corner, an artist hired for the occasion draws caricatures of the guests. In another corner, a dozen or so people seeking a quick massage from the pair of masseuses hired for the occasion have formed yet another line. On stage a steel band is playing. And around the ballroom, about 150 guests are sipping wine and sampling shrimp, steak, and sushi.

Alure Home Improvements, the Long Island power-house that last year generated more than $40 million in sales of windows, siding, kitchens and baths, and basement finishing, throws its “Caribbean Party” every three months. The party is a key element in a reward system that Alure has set up; a system in which customers receive points for any new business they send to the company and which enables them to track those points on a Web site. The system ensures a steady flow of repeat and referral business to Alure. And in a market like Long Island, with some of the highest media costs in the country, that business — more than 50% of Alure Home Improvements' volume — means life or death for the company.

Most home improvement contractors recognize that existing customers are, potentially, an excellent source of future business. But most would concede that they could get a lot more of that business than they do. Now, with lead costs rising and leads from sources such as expensive media and overcrowded home shows harder than ever to come by, more home improvement contractors are developing marketing programs to mine this valuable resource, whether for repeat or referrals.

STRATEGIC ALTERNATIVE Done right, marketing to past customers results in more revenue with a lower marketing cost. It offers a strategic alternative to growing the business through geographic expansion. Targeting existing customers can help you manage your company's workflow by enabling you to generate jobs during off-months. It's also a boost for sales-force morale. So why don't more companies do it? Either because they're running from lead to lead or because they have no systems in place for generating business from past customers.

About five years ago, Weather Tight Corp., of Franklin, Wis., made its previous customers the target of company marketing with phone calls and a discount offer on new projects. The calls produced, “a really good response,” president Tod Colbert remembers. “When we did something like $300,000 in one December, which is typically a pretty slow month, we recognized that we were onto something,” he says.

Since then, Colbert has continued to refine the program. Now Weather Tight fires off a direct-mail piece, bracketed before and after by phone calls. The mail piece typically offers a discount on new work, plus a shot at a trip or airline tickets as a special premium.

When the program started, Weather Tight's sales to existing customers were 5% or less, Colbert estimates. By 2006, they were 13% of revenue and 19% of all sales contracts, he says, produced at a dramatically lower lead cost. “Our lead cost marketing to previous customers is less than 2% of sales, versus 15% overall,” Colbert says, “and the cost per lead issued is $37, as opposed to $272 overall.”

An additional benefit, Weather Tight's president points out, is the ability to “smoke out disgruntled customers, and take care of them before they go tell other people.”

LOYALTY You can reach out to past customers in many ways. Weather Tight, for instance, uses a combination of direct mail and warm-call telemarketing. Other methods work just as well, contractors report, depending on how creative and ambitious you want to get.

Alure Home Improvements, for instance, made an all-out effort to align itself with previous customers via “Partner Points,” a loyalty program with which other home improvement companies are now experimenting. The idea is simple. Customers can earn points three ways: one point for each dollar they spend with Alure; one point for each dollar their referrals spend on their first project (points for subsequent jobs are credited to the referral); and 10,000 points the first time they attend one of the company's Caribbean parties. They're welcome to as many parties as they like, Selesnow adds, but they don't earn additional points.