Marketing 101

Consultant Stephen Wilson thinks of it as the circus coming to town.

Paint a sign saying the circus is coming: That's advertising. Harness the sign to an elephant and march him downtown: That's promotion. The elephant walks through the mayor's flower bed? That's publicity. Got the mayor to laugh? That's public relations. And if you planned the elephant's walk: That's marketing.

Marketing is the mix of all those methods — it's everything a business does that touches prospects and clients, says Wilson, of Biz-comm Inc. It should be the heart of your business, from which all operational and management plans flow.

So why do so many small-business owners fail to market or to develop marketing plans?

For one thing, marketing takes time. Owners are busy getting jobs done and landing new ones. Who has time to brand trucks with logos, or whip up marketing campaigns, or build job signs?

Plus, marketing takes money. And what $500,000-a-year business owner has an excess of that?

But done right and efficiently, marketing doesn't have to take as much time or money as most expect. And by creating a brand, instilling top-of-mind awareness, forging new relationships, and rejuvenating old ones, you will build a healthy, long-term business.

Where are those elephants?

Bill Fannin had worked for about 15 years in the business without ever using any marketing. Fannin, of Post & Beam Design Build of Forest Hill, Md., finally turned to Ann Marie Mecera of Mecera Communications to develop a marketing plan. Fannin discovered which jobs made the most margin and ways to differentiate his business in a competitive Baltimore-area market.

“All it takes is a hiccup in the market,” he says, “and you're not going to be able to do the $1 million you did last year.”

Since rolling out his plan, he has had success and knew, as a result of his plan, that he was on track late last year to break $1.5 million, with six employees, spending $27,000 on marketing.

He says that if he could start all over again, he would have developed a marketing plan 15 years ago, right from the get-go.

“If someone wants to take a shorter road than we did, there's a more efficient way,” Fannin says. “Looking back, I might have even borrowed money for a marketing plan.

“I'd borrow money for a truck — why not borrow money to have more of an impact in the marketplace? It's a tool. Buy a tool to get the job done.”

A marketing plan can ignite business success.

Most experts suggest working with someone schooled in marketing to develop that plan. Keep an open mind about who could help you: If money's tight, it could be a graduate student, or a professional just getting his start. Look to the Chamber of Commerce for resources. Ask your colleagues. You can spend $25,000 for a marketing plan, but you don't have to.

Still, if you're doing it, there's no point in skimping. Make sure you pay enough to get what you're looking for. Your marketing plan will, at the bare minimum, assess strengths and weaknesses, including those of competitive firms. You can assess competitive firms through their promotional information, their Web site, and by checking permits to see what jobs they're getting.

Through these efforts, you'll find points of differentiation for branding and marketing. The plan will help determine the right marketing mix to attract your target customers. Your marketing plan will help develop a brand, which you will later convey through a logo and materials that prompt prospects to action.

A marketing plan asks questions; the answers help you find differentiation.

• What do clients earn each year?
• What is their average age?
• Do you have a client database? How do you use it?
• How do you track leads?

• What's your perception of your image?
• How do you know it's right? Have you surveyed clients?
• What do you want to change about that perception?

• Which jobs provide the most satisfaction at the best profit?
• What new products and services do you plan to offer?
• What products and services need better awareness? What are their strengths?

• What do you do better than the competition? What does your competition do better than you?
• What's your plan to improve weak areas?
• Which five competitors bid against you regularly and win, or own large market share?

• What are your busiest months?
• What media do you use to reach prospects? What advertising?
• What form of communication has proven most successful?
• Describe failed marketing efforts, and explain why they failed, if you know.

Once you're clear about what you produce, what you provide, what benefits you bring, and how you stack up against competitors, you need to figure out how to target your audience.

You have to know the pros and cons of the territory you serve, and know customers through profiling their ages, hobbies, occupations, number of children, etc.

Then you have to know what customers want, by asking clients and prospects about products or services like yours.

The marketing plan should suggest the tools you'll use to achieve your objectives. The list could include radio/TV, the Internet, billboards, direct mail, home shows, signs, print media, public relations, and so on. The mix is as important as the tools.

You're a $500,000 company and want to spend a conservative 3% of revenue on marketing. Where does that leave you?

When working within a tight budget, contractors need to think basics and grass roots, says Victoria Downing of Remodelers Advantage of Fulton, Md. Here's a rundown.

$2,000. Design a logo for business cards, letterhead, contracts, etc. The amount you spend on design should be dictated by your target client. If seeking high-end work, you need high-end design. Middle-class clients respond to less expensive materials.

$1,500. Jobsite signs and vehicle lettering. Signs, says Downing, should include tubes that hold company information, so passers-by can take something from the site.

$350. Write a letter. Then mail it to friends, family, and suppliers asking if they know anyone who needs remodeling work done. Consider a form to fill out and fax back, which will be entered into a drawing for a $100 gift certificate.

$2,500. Professional photography of your best projects. Hire a pro to take shots from many angles so photos can be used over and over.

$2,000. Radius mailings. Four-color postcards are an effective way to let those within a predetermined distance of the job you're working on know you're in the neighborhood. Mecera suggests attention-grabbing photos and catchy messages so readers read and see your logo, creating top-of-mind awareness.

$3,500. Web site. Experts differ on whether this is a must-do for a startup, because cheap Web sites aren't effective. But done well, even on a budget, they project a professional image.Your customer profile should dictate if you need one and how sophisticated it should be. If you opt for a starter site, it must be clean and include plans to notch up quality. Professional photos and well-written copy are musts.

$2,000. Direct mail postcard to 500 contacts, four times a year. Once you have a client and prospect database, consider regular mailings. Many online resources offer these services cheaply, but photos should be professional. Prime mailing times, says Mecera, are January and the end of August.

$500. Saturation mailing of 1,000 letters in envelopes. Pinpoint key neighborhoods to match your ideal customer profile. Take that list to a company specializing in mass mailings.

$625. Memberships in local organizations or ads in bulletins, shoppers, and Little League booklets — whatever suits your target market. Grass-roots efforts, such as Chamber of Commerce networking, can be more effective than advertisements.

$25. Public relations. Send press releases to newspapers, magazines, and key media to alert them to something that your company or your employees have done. To build your reputation, include architects, interior designers, suppliers, and others.

To avoid throwing money into the wind, you'll need to track what's working and what's not in your marketing mix.

Joaquin Erazo, marketing and public relations vice president for Case Design/ Remodeling and Handyman Services, in Bethesda, Md., consults with 65 franchisees, 75% of which fall between $500,000 and $1 million in sales, so he's familiar with marketing issues of small firms. He suggests using multiple marketing sources. Media sources include direct mail, print ads, flyers, church bulletins, radius mailings, coupon magazines or decks, and home shows. Non-media sources include past clients, referrals, word of mouth, job signs, and vehicle signs.

Using a spreadsheet (Erazo uses The Ultimate Marketing Calculator, an Excel plug-in), track the volume of leads and lead sources weekly, nailing down first-time callers on how they learned of your company. If prospects cite multiple sources, ask what most convinced them to call.

Next, calculate the cost per lead. Say you have a marketing budget of $25,000 and receive 240 calls each year. Divide the budget by the number of calls. In this case, cost per lead is $104.

It's also helpful to break down lead numbers by marketing expense. Say a home show cost $2,500 and generated 60 leads. Cost per lead would be $42. That's not bad, according to Erazo, so long as a good number of leads turn into jobs. (Case Handyman's average cost per lead is $35 on job sizes that average $4,500.)

To determine which leads are the most effective, however, you need to know the lead cost per sale. Say the 60 home show leads turned into three sales. That's just a 5% close rate and a cost of $833 per lead. Erazo, in that case, would rethink the home show. He recommends at least a 10% to 15% lead-to-sale close rate and a cost-per-sale in the $600 to $800 range (for a company doing jobs averaging $25,000 in size).

To continue with our example, a company closing 36 (15%) of its overall 240 leads, average cost-per-sale would be $694 —within the range.

By watching out for which marketing methods generate the most leads — and then, the best jobs — you can adjust the marketing mix.

David Alpert of Continuum Marketing Group of Great Falls, Va., cautions contractors that when considering marketing costs, factor in time, benefits, commissions, and overhead expense associated with fielding phone calls, qualifying and meeting homeowners, and preparing proposals.

Alpert says these costs refine where you invest marketing dollars. Most remodelers don't account for the largest expense —labor and labor-related overhead, plus missed opportunities — that is, marketing you could have done that might have been more effective than what you actually did.

His point is it pays to invest time and money in effective marketing that allows more time to sell. A well-developed plan lowers marketing cost as a percentage of sales because of additional business. It allows you to spread marketing costs over more income.

After 23 years of relying on referrals, about two years ago “the phones stopped ringing,” says Ron Trull, of Trull Building Co., in Philadelphia's western suburbs. “That's a panic situation.”

Trull Building logged about $800,000 each year with little growth. Six employees were completing 20 jobs a year (additions, kitchens, baths) with no job signs or truck lettering. Trull wasn't “a big ego guy,” and job signs and lettering were ego, in his opinion.

Trull weathered downturns, including Sept. 11, but then his business “fell off a cliff.” Bridging the gap from one job to the next became increasingly difficult, and he was consciously shaving margin off bids. He turned to a Blue Bell, Pa., business consultant, GGN Group.

Ron Trull, once “marketing phobic,” puts his company name everywhere, including the hard hats his employees wear, which he also gives to clients. A postcard mailing campaign was particularly effective.

Photo Credit: Compoa

Studying his market, they discovered a neighborhood where he was building additions for growing families — a ripe territory for a marketing campaign. He learned typical customers earned household incomes of $125,000 and owned $450,000-plus homes. He learned clients who contracted for his $80,000 basement remodels were in the top 3% of his market. He discovered points of differentiation: He and his crew were personable; they did what they promised, on time and on budget; and Trull was available, personally, anytime.

Following one of GGN's first recommendations to hire a marketing firm, Trull contracted Miller Designworks in Phoenixville, Pa. Using professional photography, he rolled out a postcard campaign at a cost of $7,000, with immediate results. To date, the campaign has won more than $300,000 in business. “It saved my company,” Trull says, adding that, had he not done the campaign, he would have had to let employees go.

The year 2004 was the first time Trull broke $1 million, a success he attributes to his $30,000 marketing investment.

“I'm evolving, realizing how important marketing is,” Trull says. “It's not really ego. It's being known in your community.”

Three years ago (and a year before they married) Robin Burrill, an interior designer, joined Rob Mathews in his Fort Worth, Texas, company, Curb Appeal Renovations. They began home-grown marketing efforts because Mathews was running ragged, doing 250 jobs a year with three employees, from door installs to additions. The company's $750,000 in revenues came from referrals and yellow pages ads. Basic job signs and lettered trailers brought in some business too.

In 2003, having reduced job number to 50 while increasing job size, the couple started looking at their true customer and what work they wanted (more architectural and interior design work in addition to construction). At the time, they spent 1.5% of revenues on marketing.

After joining Remodelers Advantage in July 2003, they began tracking lead sources and targeted more clients interested in design work. They also hired a local firm to redesign their corporate identification package and pull together a marketing plan. When a proposed $50,000 contract surprised them, they scaled back plans and contracted for a 10-month retainer, at $2,000 a month. Including direct mail, advertising, and other printed materials, the couple boosted their marketing budget to about 8% of revenue.

After joining a peer review group, Robin Burrill and Rob Mathews began tracking their leads and targeting their best customers. They also increased their marketing budget.

Photo Credit: Danny Turner

Everything started well. The consultant developed ads with a consistent theme. To develop leads, she suggested teaching a class on how to hire a remodeler. But then marketing materials required many revisions and other materials had erroneous or missing information. Burrill and Mathews decided to terminate the consultant's contract. They paid $13,000 of the retainer.

Nonetheless, they learned some valuable lessons:

• Choose an industry-experienced expert. Specify what happens when deadlines aren't met.
• Don't hire on retainer. Specify jobs and tasks, and contract per piece.
• Specify how revisions will be made and who's responsible for repeated mistakes.
• If contracting for printed items, specify pages, colors, sizes, number of revisions.
• Ask who owns files and artwork. Make sure files are formatted to allow editing by others.

Burrill also tapped the U.S. Census Bureau Web site (www.census.gov) for demographic information, including home values, age of homes, how much homeowners earn, and how often they moved. She also suggests hiring a good graphic artist who understands marketing.

Be Your Own Brand: A Breakthrough Formula for Standing Out from the Crowd, by David McNally, Karl Speak. A brand is a relationship, not a statement, authors say. Successful brand-building principles can spark enduring relationships that drive success.

Guerrilla Marketing, by Jay Levinson. Levinson published his first in this series in 1983. The revised edition, Guerrilla Marketing: Secrets for Making Big Profits From Your Small Business, includes strategies for Internet marketing.

Marketing 101 Workbook, by Clay Nelson, Consulting Services Network (download from www.cjenterprises.com), offers a fun, yet no-nonsense, approach to writing a marketing plan.

Positioning: The Battle for Your Mind, by Al Ries, Jack Trout. Examines communication problems in an “overcommunicated” society. Shows how to “position” a company in the mind of prospective buyers and find an area not filled by a “leader.”

The Remodeler's Marketing PowerPak: How to Develop A Powerful, Cost-Effective Lead Generation Program, by Linda Case, Victoria Downing (www.remodelers advantage.com), offers examples of marketing that works and tips for setting goals, budgets, and marketing campaigns.

Selling the Invisible: A Field Guide to Modern Marketing, by Harry Beckwith. Beckwith argues consumers are primarily interested not in features but relationships.

ACT! and BetterACT! contact management software is useful for lead tracking, with BetterACT! tailored to remodelers (buy ACT! at www.act.com; BetterACT! at www.9dots.com).

InfoUSA.com provides sales/marketing support for all industries.

ModernPostcard.com offers postcard development, mailing and list services.

PremiumPostcard.com offers reasonable design and affordable direct mail services.

QuantumMail.com provides inexpensive, high-quality direct-mail services.

The Ultimate Marketing Calculator, (CompUSA.com), an Excel plug-in, offers calculations and templates for forecasting and budgeting, direct marketing, and more.

WeNailIt.com's contractor services aid customer prospecting and retention. The firm develops signs, promotional items, and homeowner databases.

Web Sites

RemodelToday.org. NARI's bigger chapters' marketing committees allow meeting attendees to learn what works in marketing.

NAHB.com. The Remodelors Council offers sales and marketing courses, among other resources.

BuildingBrands.com's newsletters focus on specific branding topics, with articles from marketing pros.

WebProNews.com's many articles address such topics as search engine optimization, e-commerce tactics, and Internet marketing trends.

The American Marketing Association, at www.marketingpower.com, offers a directory of 38,000 marketing professionals, articles, and other resources.