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Thursday, January 10, 2008

How much?

This thread, Marketing and Advertising budget . . . gives some ideas about the percentage of gross revenue that construction businesses (mostly in the residential/renovation sector here) are allocating -- with some other interesting gems.


Sonny Lykos said...

I found the discussion on contractortalk about budgets for advertising and marketing (A/M) a little off the track. Let's say one has $300K in annual sales. If budgeting 6% of sales for A/M, the dollar amount would be $18K. For sales of $600K it would be $36K.

I wonder if any or these business owners ever considered that every dime of that A/M budget could be eliminated if they would just do something different, like taking care of the past and current customers. In other words, "Brand" their company in a manner that would eliminate the necessity to find and sell new customers.

How about doing things for their customers that would be not only different from our industry, but literally WOW their customers. One idea I've suggested a couple of times in various construction forums but never got any interest, typifies the mindset of most contractors. And my idea would not even cost the contractors a dime.

Calculate the labor charged labor rate of a field person. Say it's $75/hr. Multiply that by 2 hours and you arrive at $150. Multiply that 3 times to get $450. Say you're about to sell a kitchen remodel for $40K. Increase it's sales price by that $450. If it's a large remodel, say about $200K, or a house for $500K, increase it by $900 ($75/hr x 4 = $300 times three = $900).

If a job is sold at $40K, it can certainly be sold at $40,450, and the same for selling a house or large remodel at $200,900 vs. $200,000.

Here's the prepaid marketing part of it. This cost is part of the selling price, and costs the contractor nothing. Not a dime! At 3 months, then again 9 months, and again, 18 months, an appointment is made with the customer for a field technician (with great personal skills) to stop by to inspect the completed work. On small projects 2 hours are allocated including travel time. On large projects 4 hours. And at every appointment something is looked for, and corrected on the spot, whether it's just some caulking, adjusting cabinet doors, anything.

WOW! Name me just one customer anywhere who has ever been serviced in that manner. Yep the above is just one more part of the "branding" process, and one part totally alien to our industry. This idea can be expand even further, but that's another rant.

So I have no sympathy for contractors who find the need to spend thousands or tens of thousands of dollars to just market, when other options are available to them should they decided that indeed, they are in business to "serve". And when "serving" in a manner we all which to be served, A/M budgets are eliminated while margins rise. Understand, that obtaining net profits is not goal #1 - serving is. And "how" one serves, determines the size of the net profits, or a lack of them.

Yet a tradesman mentality, and even many with a business owner mentality, will never understand that basis aspect of marketing.

Stop now, being mediocre. Think WOW! No. think double WOW!

Construction Marketing Ideas said...

Sonny, a wonderful and inspring comment -- one that is worthy of a posting, or more accurately, a full article, or even book. You are right, just taking a little of the 'advertising budget' and applying it to some exceptional client service will generate so much referral and repeat business you won't need to search for customers -- or fight for people seeking the lowest price.