Many design/build or general contractors attending this year's Remodeling Show in Baltimore have seen business fall off as word of mouth referrals dry up. But home improvement companies specializing in one, two or a handful of products lines—windows, siding, roofing, sunrooms—face a different set of challenges. Such companies depend on a steady flow of leads, typically from a variety of sources. Many have seen leads and sales drop as fewer consumers respond to television, radio and newspaper advertising. "Our biggest challenges right now," says Ken Moeslein, owner of Legacy Remodeling, a window, siding and basement finishing company in Pittsburgh, "is controlling general and administrative costs and getting our marketing expense back to a reasonable number."
Indeed, for many home improvement companies attending this year's show, lead acquisition—always at the top of their list of concerns—has become critical. The solution for some like Ken Greene of St. Clair Home Improvement in St. Louis has been to put more resources into developing and optimizing the company Web site. "We'd like to see 20% to 25% of our business coming from the site," he says, and is working with other companies to achieve that.
Many companies have adjusted by shifting marketing expenditures from radio, television and newspapers into face-to-face marketing. "The more you spend on media, the less (leads) you get," says Mitchell Spector, of Woodbridge Home Exteriors, a window, siding and door replacement company in Dallas. Within the past year Woodbridge Home Exteriors committed itself to a canvassing program, Spector says. Where the company once made occasional canvassing forays into Dallas-area neighborhoods, it now operates four vans. Canvassing generates 15% of leads and that number, Spector says, is growing.
Changing marketing techniques has forced many company owners to confront a separate challenge: the need to change a sales culture shaped by abundant qualified leads. Sales reps now need to do more work to close the deal, or—as companies add less expensive products to their menu—be willing to accept average ticket sales (and commissions) that are smaller. With fewer customers to go around, says Tom Capizzi, attention to all the details involved in rendering complete service has never been more important. Capizzi Home Improvement, in Cotuit, Mass., divides its business between full-service projects and specialty installations such as roofing and siding. In boom times, prospects with a long wish list—including projects like driveway paving or landscaping—would go off on their own to find suitable contractors for those jobs. Now, Capizzi says, "you can't just say 'we don't do those things." Instead the sales representative researches what's available to give homeowners a complete estimate for all the work they want done and draws on "alliances" with other area contractors to get those estimates.
Like other companies, Capizzi has turned to previous customers, in this case with a warranty inspection program on past jobs which generated an additional $800,000 in sales. Capizzi Home Improvement also launched a promotion offering homeowners a free gutter cleaning in return for allowing a company representative to present the company's products in the home.
Unlike many full service remodeling companies, companies selling home improvement products rely on financing to get jobs sold. In the immediate past, secured lending was often the vehicle of choice for homeowners with substantial equity in the home. Such lending has largely gone away on a national level. And as home equity values have declined, companies have turned to unsecured lending, only to find that gaining the approval of lenders is more difficult than it was. Credit rejects at some sunroom and basement finishing companies were running anywhere from 25% to as much as 50% of jobs sold, because of tighter credit standards.
"The challenge is getting new lending sources, but we're working on that," says Gary Delia, President/CEO of Tropical Roofing, in Clearwater, Florida, who, a year and a half ago, entered the window market as Duramade Windows & Doors. "We saw an opportunity with new building codes, and the demand for impact windows," Delia says. Now the challenge in a state especially hard hit by foreclosures is to "find people who have the means" to afford a job that averages $15,000. Duramade's way to do that is by canvassing neighborhoods where the company's already done work, such as roofing jobs.
Other companies have redirected their marketing toward the upper end homeowner who hasn't been affected by the deflation in home values. That homeowner, says Pam Faerber, co-owner of Bee Windows, in Indianapolis, a Renewal by Andersen affiliate where window sales are up 15% this year, is the "prospect who does research" and is buying on quality rather than price after having checked out window companies on the Internet.
She and husband/co-owner George Faeber were both hoping and predicting that the enactment of energy tax credits similar to those offered by the federal government in the 70s would be "a huge incentive for the industry."