In the fall of 2003, the first time this magazine published its list of the home improvement industry's largest companies, a lead — defined for our purposes as an issued appointment — cost $178.29.
This year that cost is $234. Given 10 years of modest inflation, that's not really an increase. The average cost of marketing for the Replacement 100 companies, measured as a percentage of revenue, was 11.3% in 2003. That hasn't changed much either: In 2011, companies reported an 11.1% cost.
But there are things that have changed. Remember telemarketing? More than that, many of the players are different. The majority of the companies on the Replacement 100 list a decade ago aren't there today. Some shrank, some completely disappeared.
The pivotal factor was recession. Reduced demand squeezed out tepid companies or those not flexible enough to move with the times. For those that remain, average job size dropped — sometimes dramatically. The average job size for a Replacement 100 company today — $8,251 — is about 20% less than it was 10 years ago, when the figure was $10,130.
So it makes sense that in 2003 the average salesperson for a Replacement 100 company brought in more revenue — $614,890 — than was the case in 2011, when the number was $551,316. There are two big reasons for this: tight credit, and the products that these companies sell. Relatively expensive amenities such as sunrooms and basement finishing were popular in 2003, when many people could get them financed. They're less popular today, when home improvement is all about need. (Just ask the window replacement executives who swore up and down that they'd never get into the messy, low-margin roofing business and who today thrive in it.)
But the business model remains unchanged. This was “a leads business” and remains that. Leads are fewer today for many companies. That will change as the housing market and the economy begin to lift, as all evidence indicates they are doing or are about to do.
But that won't mean leads will be easier to get. As more prospects come into the market, or think about doing so, the companies that can generate a big portion of their business by finding and engaging them online will have a powerful advantage, especially in major markets. In selling them, the advantage will consist of the level of attention paid, a lesson that recession taught to the industry's most successful competitors.