Meet John’s Remodeling, Anytown, U.S.A. Last year sales at the company were $2 million. This year John has budgeted for $2.2 million. John’s does everything from handyman work to the occasional whole-house remodel, but the company’s forte is popular remodels — kitchens, baths, basements, additions — at midrange prices. Average job size: $50,000, with 40 jobs sold in 2012.

To generate $2.2 million in revenue, John’s Remodeling has to sell 44 jobs this year.

Leads are generally scaled to job size. The bigger the average job, the fewer leads you need. Since John and his salesperson, between them, close on 20% of appointments, to get the $2.2 million, and 44 jobs, they will need to meet with 220 homeowners — a little more than four appointments a week.

Depending on where those leads come from, they may need to speak to two or three times as many homeowners to get those appointments.

A Lead Is ...

Before you can build a lead machine, you need to be clear about what a lead is. Leads are not appointments any more than appointments are sales.

In simplest terms, a lead is a customer contact; someone has expressed interest in what you sell. For example, the phone rings: A neighbor across the street from one of your jobs wants to talk about remodeling her kitchen. To take it to the next level, qualify by questioning: What’s the project? When would she like to begin? Does she have a budget in mind?

Some companies — Normandy Design/Remodelers, in Hinsdale, Ill., for example — immediately set the appointment with minimum qualification. “If they’re on the phone, asking, they’re interested and let’s get it on the books,” owner Andy Wells says.

Some qualification is important in remodeling because of the nature of the product — a one-of-a-kind creation costing, typically, five figures. Can prospects afford it and are they willing to spend the time and money to proceed? Patty Gray, co-owner of DreamMaker Bath & Kitchen of Bakersfield, in California, asks first-time callers to come to the showroom for an initial conversation, since she’s interested in homeowners ready to move forward.

Lead Flow

DreamMaker generates many of its inquiries from print ads in local papers and magazines. Gray tracks incoming leads to know if lead flow from one source drops below an acceptable level, in which case she can invest marketing dollars elsewhere.

Tracking via Excel spreadsheet or software programs such as MarketSharp uses seven key metrics that calculate the contribution of each lead source to sales. The cost per lead is what you paid to buy it — say $50 — and the cost per sale is how much it took to get a signed contract.

Big home improvement companies — selling windows or siding, say — typically use 20 or more lead sources and track lead flow daily. They need to, since their job size is smaller their demand for leads is greater. If one source fails to perform, others are in place to take up the slack.

Companies like John’s Remodeling have more leeway. If your company needs four appointments a week, a half-dozen lead sources would probably work well. In today’s market, suggests Michigan marketing consultant Dennis Schaefer, the fundamentals for a full-service remodeling company are referral and the Internet. “A lot of the traditional marketing you do is now about driving prospects to your website,” Schaefer says.

Five years ago, those traditional lead sources — print, company signage, home shows, direct-mail letters or postcards — were about getting people to call. Now many prospects will come to you via your website.

Lead Needs

John’s Remodeling doesn’t need 20 lead sources, but John may need more than the 2% he budgeted on marketing five years ago. “That was the sweet spot,” says David Alpert, president of Continuum Marketing, in Virginia. Twice that, Alpert suggests, is appropriate today.

Typically, a remodeling company with a solid reputation can count on a third to a half of its sales coming from past customers as repeat business or referrals if it consistently markets for those leads. Doubling John’s budget from $40,000 to $80,000 allows him to intensify his efforts to stimulate past-customer business — via postcards, email nurturing campaigns, targeted letters with special offers, or invitations to events in the company showroom — while also concentrating on creating the leads that become new customers.

Since leads from past customers often close at 60% or more, John might be tempted to make them the exclusive focus. During the recession, many companies had little choice. Concentrating its marketing efforts on past-customer business sustained Dial One Windows, in Orange County, Calif., from 2008 through 2010.

But at the beginning of 2011 owner Charles Gindele set out to double monthly sales of $300,000 — most from past customers or referrals — by investing in a comprehensive marketing campaign. That included pay-per-click advertising, targeted postcard mailings, a magazine cover ad, and a reinvented website including best practices videos on YouTube.

It lifted Dial One’s Internet leads from 9% in 2007 to 24% today and resulted in a 26% sales increase. “You can stay with the ones that work,” says Gindele, who presents Marketing Mastermind sessions for Certified Contractors Network. “But if you’re standing still, you’re going backward.”

That’s true, he says, because a company’s database of past customers is finite and ever-diminishing. Marketing expert Brian Kaskavalciyan, of G4 Marketing Group, says a system that creates a job from every job is essential, especially a letter from the client recommending the remodeler to neighbors.

Fresh Mix

For John’s Remodeling to get new leads from new customers he has to know who and where those homeowners are and be willing to experiment with lead sources.

Jeb Design/Build in Shreveport, La., rented billboards. That worked for a while. Then, taking signage — which can account for as much as a quarter of a remodeling company’s leads — to the next level, Jeb Breithaupt hit on the idea of a sign contest: for agreeing to post the company’s yard signs for a month, past customers were entered into a drawing for a flat-screen TV.

Most remodelers, Schaefer says, “want leads right away” and find that traditional marketing can cost too much for the few leads they get. Today’s Internet-centric marketing landscape means a website like the one for John’s Remodeling needs “little things” — say an offer for a free design consultation — to engage visitors. What you say there “creates the opportunity for a conversation,” Schaefer says. Or kills it.

—Jim Cory is the editor of Replacement Contractor, a sister publication to REMODELING.