Marketing Masters

It's only recently that a distinction has been made between replacement contractors —purveyors of replacement windows, siding, and roofing; gutters and gutter protection systems; and decks and sunrooms — and full-service remodelers. It's an apt differentiation, according to Charlie Gindele, president and owner of Dial One Window Replacement Specialists in Santa Ana, Calif. “The businesses are totally different,” he says, noting the discrepancies in volume and number of jobs completed. But those differences shouldn't create an unbridgeable gap between two industries that are in many ways similar. In this, the third of a four-article series, REMODELING talked to replacement contractors about what they do best.

The first thing that strikes you about good replacement contractors is how on top of their numbers they are. Their whole business, in fact, is an exercise in game theory. By studying data from several years back, they can determine — with a great degree of accuracy — what percentage of leads turn into appointments, and what percentage of appointments turn into sales. Factoring in their average job size, they can quickly calculate how many leads they need to reach their volume goals for the year.

Because leads are the lifeblood of any replacement contractor, marketing — the act of generating leads — is the most important task these companies undertake. It's so important that Dale Brenke, president of Schmidt Siding & Window Co. in Mankato, Minn., still oversees the company's marketing efforts, despite having delegated oversight of production and selling to his two vice presidents. “My job is to have leads for our salespeople,” Brenke says.

Schmidt's major marketing expense is television ads, and the company is fortunate to work in a market where airtime is relatively inexpensive. Brenke says the company ran 719 30-second spots last year, at a total cost of around $63,000. Marketing dollars don't stretch that far everywhere in the country, but you can take a lesson from Schmidt on how to make your time on the tube as productive as possible. Rather than serve as sole spokesman for the company, Brenke has his installers —the very people customers will see daily in their homes — appear on the commercials, saying who they are, what they do, and how long they've been doing it. Schmidt asks callers how they heard about the company, and Brenke says more than 20% respond with some variation of “I just know you.” The ads' impact on the bottom line is obvious: In an area of roughly 200,000 people and 44,000 homes, Schmidt installed $6.5 million worth of windows, siding, gutters, gutter protection systems, and sunrooms last year.

Most replacement contractors invest a higher percentage of their volume on marketing than full-service companies do. A survey conducted by REMODELING's sister publication, REPLACEMENT CONTRACTOR, found that the average marketing cost for the country's 100 largest specialty contractors was 10.4% in 2004. But Schmidt's marketing budget was a meager 3.5% of its total volume in 2005. The key is making the most of your marketing dollars.

That might mean taking a lesson from Swimme & Son, a window, siding, gutter, gutter protection, and sunroom company in Elizabeth City, N.C. Swimme & Son sends mailings to homeowners in neighborhoods adjoining their jobsites. There's nothing special about this; it's even standard practice for a fair number of full-service remodelers. But marketing director Theresa Swimme urges design/build companies to take better advantage of the time they spend in the neighborhood. “We're in and out of the house in a day,” she says. “We've got one shot to say we're coming, and one to say we're leaving.” Full-service remodelers, on the other hand, will spend weeks or months on a single jobsite. “They have the opportunity to mail neighbors [repeatedly] to tell them what's going on,” she says.

One way to keep marketing costs from getting out of hand is to pay close attention to where your leads are coming from. What's the point of spending an extra few hundred bucks to ensure that yours is the biggest ad in the Yellow Pages if most of your leads are coming from radio ads, home shows, or some other source? In such a situation, your money is better spent elsewhere.

Savvier full-service remodelers have a lead sheet that includes a list of sources from which the person handling the call can select the most appropriate for that particular lead. But many replacement contractors go further, and get right down to which particular advertisement caught their attention, or which past clients referred them.

Gindele uses a service that establishes a different toll-free number for each of his marketing pieces. He can go online and pull reports that tell him not only where his leads come from, but how many from each source turn into measuring appointments, sales appointments, sales, etc.

Home improvement contractors generally use one of a variety of software packages commercially available to aid in their lead tracking, and some have developed their own custom computer programs. Because most full-service remodelers are dealing with a relatively small number of leads, these products have many superfluous features and probably aren't worth the investment. However, that doesn't mean that some of the principles behind the software wouldn't be useful to a design/build remodeler.

Leads are so valuable and so expensive — $220 each according to the REPLACEMENT CONTRACTOR survey — that many specialty contractors don't give up on leads that don't pan out. They “rehash” them; that is, they set them aside for later contact, often by a different salesperson. Checking up on homeowners who didn't buy from you should be routine, but Swimme says “to do that kind of follow-up, you need an automatic trigger.” Home improvement contractors generally use commercially available software to rehash leads, but it's easy enough to do it manually by marking your calendar with reminders.

Home improvement salespeople are truly dedicated to their craft. They engage in role play, often daily, as a way to hone and sharpen their selling skills. They attend conferences to learn new techniques from sales teachers and trade tips with fellow salesmen. They listen to selling tapes and CDs in their cars on their way to and from each appointment.

Of course, we're all familiar with the stereotypical roofing or siding salesman: A fast talker who pressures clients into signing a contract for a project they don't need, don't want, and can't afford. Indeed, contractors of all types battle this image every day, trying to earn their customers' trust. However, if you sit in on a specialty contractor's sales call, you're likely to notice that it differs quite a bit from the norm for full-service remodelers.

Some contractors work from a script, while others teach their salespeople a process. But the presentation is almost universal: A conversational feeling-out period, followed by a discussion of the company and goods being sold, usually accompanied by a demonstration of the product.

At the conclusion of the presentation, the home improvement salesman launches into the “close,” a variety of final tactics that ultimately ends with a very clear request that the homeowner do business with the company. Dial One's salespeople are trained to anticipate potential objections — “We need to get other estimates” and “We have to think it over” are two of the most common — and how to lead the customer through a logical thought process to dispel their fears.

“Asking for the sale,” as this technique is called, is extremely important. The presentation could be perfect, the demo could have the client excited about the product, but if the salesman doesn't ask for the business, then the opportunity goes begging.

Some full-service remodelers may protest that asking for a $10,000 window replacement job is different from asking for the sale of a $300,000 addition. True, but the principle still applies. How many of your leads are still open after a year or more because the prospective client wanted to “think it over” or didn't want to “make a rash decision”? Asking for the sale gets the homeowner off the fence and brings objections out into the open, where you can address them.

If you're still worried about the great difference in scale and cost, listen to what Joe Davis, tactical operations task leader for Chesapeake, Va.-based replacement contractor Mr. Rogers Windows, has to say. “Whatever product you're selling to customers, you're selling the sizzle, not the steak.” Mr. Rogers' salespeople are given strict procedures to follow when first contacting a customer, and selling their product is pretty far down the list. Step one: sell the appointment, to convince the homeowner that it's worth spending time with you. Step two: sell yourself, to develop a rapport with the potential customer. Step three: sell the company, by explaining why it's different from others and why it's been successful. Then, and only then, start to sell the product. “If you don't open and close those first three doors,” Davis says, “you have no chance of getting them to sign the contract — regardless of the price.”

As important as marketing and sales are, production is what makes or breaks a company. Although profit margins are larger for replacement contractors than for full-service remodelers, replacement jobs are usually much smaller, so the actual dollar figure for profit is quite a bit smaller. A 10% net profit on an $8,000 window job earns the contractor $800; a 5% net profit on a $100,000 remodel fetches $5,000. Replacement contractors make up for this discrepancy by doing many more jobs —Swimme says she knows full-service companies that complete 20 projects annually at the same volume garnered by her company's approximately 650 jobs.

Such a small dollar amount of profit means that there's no room for error. At Mr. Rogers Windows, they take that to heart. Once a sale has been made, one of the company's two tech measurers/ estimators visits the site and writes down — on one of several pre-printed forms designed to cover any situation they might run into —how much material will be needed for the job, how long it will take, if extra scaffolding will be needed, etc. He then passes that information off to the company's warehouse personnel who, at the beginning of each week, “pack” each job, meting out the precise number of screws and the exact amount of caulk needed for the job. When the crews arrive at the warehouse Monday morning, they simply pick up their package and head out to the jobsite.

At the center of it all is Kenny Lowe, Mr. Rogers' sole production manager. The process is so streamlined and so efficient that Lowe oversees, depending on season, weather, and backlog, 11 to 14 crews completing 22 to 25 projects per week, with a total weekly volume upwards of $225,000. Lowe says the key to running a production department that will preserve the bottom line is to plan in advance, anticipating problems and resolving them before they happen. “We've learned that if you're trying to fix it while the job is going on, you're never going to succeed.”

Mr. Rogers generally works with a backlog of anywhere between 10 and 14 weeks. Lowe and the company's scheduler plan jobs for Monday through Friday, leaving Saturday open in case foul weather wipes out a day of work. All projects are scheduled to be completed by the end of the week; if they have an eight-day project, they'll schedule one crew to work on it all week, with a second crew doubling up on the job on three of those days, effectively squeezing eight days worth of work into just five days. “I've been doing this for seven years,” Lowe says, “and there have been maybe 30 times when we've had to carry a job over to the following Monday” — a big storm at the end of the week being the culprit each time.

Inventory control is another way Mr. Rogers preserves its margins. Recall that the company's crews are given the exact amount they need at job start, no more and no less. However, each truck is outfitted with what Lowe calls an “overdraft box” full of extra materials, and if something gets lost, wasted, or broken, crew members may dig into that cache for whatever they need to keep the project moving. They are further responsible for keeping that box full, filing a form with the warehouse department when requesting fresh supplies.

“I don't think people realize the amount of money you can save” by tracking your inventory, Lowe says. “If you're paying 18 cents a screw, then five lost screws is one dollar” — and those dollars quickly add up.