The REMODELING benchmark for marketing expenditures is 3% of annual revenue (August 1998), but the fact is most residential remodeling companies don't do any deliberate marketing at all. They let their work speak for itself, relying on the "accidental marketing" of word-of-mouth referrals to keep them busy. This arrangement works for a while, and a small, young company can grow at a pretty good clip with never a second thought as to where the next job is coming from. In other words, most remodelers don't market because they don't think they need to.
What always happens, of course, is that work runs out and no one sees it coming. To complete the vicious cycle, the ambushed remodeler executes a half-baked emergency marketing scheme, which achieves marginal success at best, reinforcing the conviction that marketing is a waste of time and money.
This scenario, or something like it, is played not just among one-man operations but among companies with annual revenue well over $1 million. It keeps most remodelers busy working for whoever comes along doing whatever work is required.
The problem is that no remodeling company works equally well with all customers or generates revenue at the same rate on all kinds of jobs. So in addition to maintaining a steady flow of qualified leads, a marketing plan -- even a rudimentary one -- helps identify the customers and projects that are best for your business.
What to measure
Long-term success in the remodeling business rarely happens by accident. Keeping track of a few key marketing indicators can not only ensure job security but improve profitability.
Number of leads. This is not a simple count of people who dial the company phone number. A lead should be "qualified" by job size, type, and budget, as well as by schedule requirements, job location, and other factors.
Source of referral. This information tells you which marketing tactics are working and which are not. If all you have are word-of-mouth referrals, try to determine which customers and which types of projects generate the most referrals. Then decide if those referrals are beneficial.
Size of project. It's sometimes difficult to predict what kind of projects marketing campaigns will attract. If most prospects call with projects that are too big or too small, it's time to adjust your message. Word-of-mouth referrals are particularly tricky in this respect because people tend to refer friends who are contemplating a project similar to the one they just completed.
Type of project. Ditto, only this time it's the kind of project you're attracting that may need adjustment. Word-of-mouth referral data is still important because it tells you what your reputation is.
Location. Some areas will respond better to your marketing message than others. Tracking leads by location will tell you which neighborhoods are most fruitful.
Year-over-year comparisons. Knowing how this month's lead count compares to the same period last year or knowing the trend over the past few quarters helps you manage your resources better. You'll see a slowdown or an upturn before it's too late to react.
Using the numbers
The primary goal of marketing is to bring work in the door, which solves the "Surprise, we're out of work" problem. But measuring the effects of marketing over time can accomplish at least two other important changes. First, there will be more than enough leads, so you can stop taking every job that comes along. You'll end up working with the right kinds of customers, building projects that draw on your company's strengths. The result is less risk and higher margins.
Second, you'll be able to predict changes in your local market and plan ahead instead of reacting after it's too late. Changes in the number or quality of leads signal changes in your market that affect pricing, personnel, schedule, and a host of other factors over which word-of-mouth remodelers have little or no control.