Jeff Pattison's excited. This year the company he co-owns, Renaissance Exteriors, in the Twin Cities suburb of Maple Grove, Minn., expects to generate a 22% increase in sales. At this date — mid-August — Renaissance is only slightly off track as it pushes toward that goal.
Many other companies included in the Replacement 100, our annual listing of U.S. home improvement firms ranked by volume, are not projecting sizeable sales gains this year. Many report weakening sales, attributed to a tightening credit market and consumer wariness brought on by general economic uncertainty. Josh Schneider, vice president of Full Spectrum Remodeling in Eddystone, Pa., which is projecting a healthy sales uptick for 2007, says that many homeowners are having a harder time borrowing the $40,000 or $50,000 they would need to buy the sunrooms the company designs and installs. Schneider says Full Spectrum is testing 10 different lead generating sources to reach that elusive demographic so far unaffected by tightening credit.
Other companies projecting increases were similarly forced to change tactics. American Design and Build, in Maryland, had projected an ambitious 18% increase in sales this year but found midyear that it wasn't quite making that number. The problem, marketing manager Kevin Carmen points out, is — again — slower sunroom sales. “But where sunroom sales are a bit soft,” he says, “we've been able to make it up with increased window and door sales.”
COST PER CONTACT: UP Many companies this year note that marketing costs are up. Sixty-three percent say their average lead cost rose in 2006. Cost of an average lead last year: $240.32, compared with $212.65 in 2005. Marketing costs as a percentage of revenue for the group are 12.3%, noticeably higher than the 10.5% costs recorded for 2005. “The cost per contact has gone up dramatically in the last year and a half,” says Schneider, “and it might get worse before it gets better.”
Lead sources that generate the most revenue for Replacement 100 companies are little changed. Repeat/referral is the major lead generator for 30% of respondents, followed by SFI/in-store marketing (16%), television and radio advertising (10%), canvassing (9%), and telemarketing (8%).
It isn't only Full Spectrum Remodeling that's looking at new lead sources. Marketing managers at many companies find themselves challenged to come up with innovative ways to reach new customers, and old ones. Those reporting use of print ads are down — 61% in 2006, compared with 67% in 2005. Many prefer marketing — in-store/SFI or shows and events — that puts them face to face with prospects.
HOW'S YOUR WEB SITE? In 2006, 94% of companies list their own Web site as a lead source. That ties with referrals. Even though company sites don't show up among top lead generators — and probably won't for a while — their widespread use reflects the fact that many home improvement operators are scrambling to turn their Internet presence into a solid lead source.
More home improvement companies are investing in redesigned and updated sites that take advantage of expanded bandwidth to offer interactive features such as streaming video. Many now redirect some portion of their marketing budget into search engine optimization (SEO) and pay-per-click (PPC) technology. Fully half of this year's Replacement 100 companies cited PPC as a lead source, up from 36% the year before.
Mid-Atlantic Waterproofing, a company that sells waterproofing and foundation repair services, generates 13% of its leads from the company Web site. The reasons, says national operations director Eric Tullio, include a revamped home page, an investment in SEO, and a huge amount of precipitation in New Jersey — one of its five markets — that brought a barrage of Web hits. “The Internet is the Yellow Pages of the future,” Tullio observes.
Yellow Pages remains a lead source for 80% of Replacement 100 companies. Some, though, have jettisoned it altogether. Earlier this year Renaissance Exteriors dumped its Yellow Pages advertising and turned to a Web marketing firm called Three Deep to re-engineer what had been a cluttered and difficult-to-navigate site. Three Deep streamlined the site, creating landing pages featuring streaming video for each of the company's products. Three Deep also reworked the site's PPC and SEO strategy, with the result that 35% of Renaissance Exteriors' leads now come off www.homebetterment.com. The site offers customers lots of information about products and installation, and asks, in return, for their contact information.