Business and proposal development: Quantity, quality or both

One of the surest signs you are heading down the path of failure in construction industry marketing is when you are chasing and pursuing leads and project ideas you have a faint chance of winning.

This often happens when you start getting desperate: You can see your order and project backlog is drying up and you want to get work started, fast, to prevent the crunch of idle workers, expensive capital equipment and (if you are the marketing manager, rather than the boss), the threat of losing your job when you know few other employers will rush to hire you.

Trouble is, of course, you run into the all-to-common situation where the harder you try and "work", the poorer results you achieve. Hours spent on public bid proposals will do your company little good if the competition has already been wired in favor of an incumbent, or at least a much smaller short-list group; worse, is if you make the short list as an outsider through sheer effort, then pour your heart and soul into the final presentation, again, only to discover that the incumbent or special friend of the bidding authority has already really made its decision.

On another level, what good do you gain by attracting a group of 500 "first degree contacts" or 1,000 "followers" on Twitter, when you know nothing about the people in your contact list, and your followers are just following you because you've induced them to sign on, somehow.

So what should you do?

Here, you run into another irony. If you've been "relying" on referrals or repeat business, or (even worse) if you have put all your eggs into a very small number of client relationships, and these businesses either have failed, or your individual relationships no longer are influential or control the picture, what do you do? You are in deep and serous trouble.

The answer to these challenges of course is effective marketing, and systems for lead and relationship qualification and development. Setting numeric goals is important, and following guidelines and rules for relationship and business development can be helpful. Sometimes it is wise to work with large numbers.

For example, I cited the example that it is folly to blindly seek connections within the new electronic or social media groups. But since individual connections require little effort, and could in some way help your business, it isn't necessarily a bad sign to have a large online network. Your challenge is to communicate and give enough value to your group so that you can earn some "reciprocation" points -- at the right time, members will, knowing your business and its priorities, share valuable insights, leads or projects with you. (This is why you are best posting useful information rather than self-promotional notes when participating in online discussions and forums.)

When it comes to public RFPs and competitions, once again, you need to be pragmatic and selective. Rarely is it wise to go all the way in a public presentation exercise with the hope that you can perhaps win a future job; you need to find some way to find and develop your relationships away from the "stand em up and shoot them down" approach to business development.

But information about public proposals and projects may provide you with key insights into what is planned for the future, who the key players are, and where their network exists. You can decide if you want to invest time and energy in developing these relationships perhaps through selective association involvement, seeking relationships through your existing network, or the like.

If you need a short-term fix, your answer is either to connect with your existing clients and look for ways you can enhance or add on to their business (or simply in some cases, ask for a little work), or to figure out innovative adaptations to solve problems and present/communicate directly with your prospective clients, perhaps after building a knowledge base of referrals and connections.

In other words, if you know you can save money or provide value before the prospective client even is thinking of putting it out to public bid, you can develop your relationships and often gain an audience for an unsolicited proposal. This can be a lot of work, and you risk your efforts being "stolen" by someone already on the inside, but your chances are much better in succeeding than when you heed the cattle call and rush, like a lemming, to follow the crowd into preparing a submission to an open RFP where dozens have already applied.

Lead generation services: Some further observations

Mark Paskell has posted this comment on a National Association for the Remodeling Industry (NARI) linkedin.com group thread, which is worthy of republishing here:

LinkedIn Groups Group: National Association of the Remodeling Industry (NARI)

Subject: New comment (140) on "Should NARI lead the charge to expose the unscrupulous tactics of lead generation companies to protect the rights of contractors?"

Hello Everyone

Thanks again for sharing. I think maybe its time to conclude this thread. I would like to share some observations.

I think most agree that the relationship between contractors and LGC's is seriously strained.

This thread did not receive any participation from the trade publications that sell their magazines to contractors. Maybe they don't want to risk their advertising revenue that they get from LGC's.

There were no happy contractors sharing their stories about how satisfied they are with services provided by LGC's. One would think that the LGC's would ask some of their happy clients to come and counter the comments made by so many contractors.

We learned that NARI is not a partner with SM and has allowed them to join as a national member.

We learned that many NARI members are concerned that some LGC's may be in conflict with the code of ethics. Specifically bait and switch tactics, misleading advertising and claims about the service provided by LGC's.

We also learned from SM that they can't provide qualified leads because they don't know the needs of their contractor clients. See the following quote from SM

"A lead generation company can't qualify your leads. They don't know enough about your business. A LGC provides an introduction, where a homeowner who wants some help leaves their contact information. While there is a place on the service request to list budget and timing, most homeowners don't know the answers to these questions. They want help and direction, and they go online to try and find that help.

"What LGC can do, however, is provide you with the contact information for homeowners in targeted areas that match the demographics of your best customers. You may not know their budget, their timing might be unrealistic, or they might just be window shopping. But you do collect their contact information so that you can follow-up in the future. If you can demonstrate that you are an expert in what you do, provide project pictures, and helpful tips and checklists, you have an opportunity to make them a customer.

As Robin said, a LGC is an add-on to a company's marketing program. Build a database of potential customers, and over time, some of that potential will convert into sales." (Dave Lupberger, Service Magic)

We learned that if someone wants to complain officially to NARI that they have to file a grievance in writing. Otherwise NARI cannot do anything officially. One would think from reading the posts that there is a preponderance of evidence to support a grievance. Maybe no one wants to be the bad guy.

Finally, we learned that the if you want good qualified leads you are probably better off generating leads yourself through methods not including LGC's.

The observation that lead generation services provide information that can be integrated into your own marketing and relationship-building strategies is probably the most important consideration in using Lead Generation Services. Too many contractors dream that the commercial, high volume services, will provide highly qualified leads that will convert into sales in one or two calls -- and many are disappointed with the results, especially contractors who have relied primarily on repeat and referral clients and are unfamiliar with effective marketing practices.

(There are exceptions, usually local services where the individual operating the LGS has an intimate understanding of the market and contractor clients. Here, fees are significantly higher -- sometimes upwards of 10 per cent of contract value -- but contractors report the leads are relevant and problems are quickly corrected, and often the leads service provider only expects commission payment when the lead converts to a meaningful order.)

I've applied to join the Linkedin.com Contractor Lead Generation Forum group.

Lead generation services: The controversy continues

Recently, Mark Paskell posted these remarks on the National Association of the Remodeling Industry (NARI) linkedin.com group. The group is officially open only to NARI members, but when I applied to join, I was admitted without hesitation. You need to be a member to read the entire forum thread.

Should NARI lead the charge to expose the unscrupulous tactics of lead generation companies to protect the rights of contractors?

A recent thread on lead generation companies is garnering a lot of conversation about the tactics of lead gen companies. If there were only a few comments every now and then it would be reasonable to dismiss them as insignificant. However the tone and amount of comments on contractor forums and in online groups shows that there is a major consensus that lead gen companies are disingenuous. The comments are on the venomous side and are indicative of a major clandestine business strategy from lead gen companies. Maybe it is time for organizations like NARI, JLC, Remodeling Magazine, Hanley Wood, Replacement Magazine, Qualifies Remodeler, Professional Remodeler and any other significant trade organization or publisher to come to the aid of their customer, the contracting industry, and expose the business tactics that bilk contractors out of millions of dollars.

I know this is asking a lot because many of these publications receive ad revenue from these lead gen companies. But I learned a long time ago instead of complaining at least offer a solution for consideration. Let me know what you think about contractor organizations and trade publications exposing the situation to help prevent contractors from harm.

I responded that, as a publisher, we would not tackle this investigation because of our policy never to write negative stories about individual businesses. (Readers should not imply that I have any anything negative to say any individual leads service business; but that we would not report on the results if we conducted the investigation and then found negative things about individual businesses -- meaning the investigation would effectively be useless.)

The reason for this caution is pragmatic: Whether we are right or wrong, no one wants to endure the risk and cost of defending a libel action. It is simply far too expensive -- and when you read reports about lead services companies at contractortalk.com you can see there are many opinions, ranging from enthusiastic support to downright anger at the service these businesses provide (often with the same business loved and hated by different people.) Furthermore, as you read the threads, you'll see that many of the people most angered by the leads companies may have some responsibility for their own problems: Do they really expect by paying $30 to $40 for a lead that they have a sure thing (or something near that?)

Historically, leads service businesses are at the root of the construction publishing industry. McGraw-Hill Construction and Reed Construction Data, the two major media competitors within the non-residential industry, for example, evolved from commercial leads services (which are still a major part of their business). These services evolved because of the industry's non-marketing characteristics: Competitors would wait for jobs to be offered for bid either publicly or in controlled competitions, and then fight to win the work as low bidders. (Suppliers and allied services and industry professionals including architects and engineers, meanwhile, sought earlier information about planned future projects, RFP opportunities, and the like.)

Before the days of the Internet, this type of information was expensive and difficult to gather, so the leads services contracted with local reporters to file the data, which then could be distributed by mail and later electronically to businesses willing to pay the price.

With the Internet's advent, the rules changed somewhat. While some existing and new commercial leads services such McGraw-Hill's Dodge Reports began offering at least part of their services at much more reasonable costs (of course opening the door to many more bidders with the same information), new Internet services appeared inviting consumers to complete brief surveys to obtain quotes for their work. These services certainly took Search Engine Optimization seriously, and therefore "own" top keyword placement for many categories.

Initially these services offered local contractors a truly manageable and reasonably inexpensive source of leads. Pay the fee and you get the opportunity to connect with home owners and small businesses. But the temptation to sell poorly qualified leads to many competing businesses exists; this increases the service's profit at the expense of clients. There is a fine balance here -- and the reputable leads services know the breaking point where the majority of their clients won't pay. They still need to deal with many disgruntled contractors who expect to receive a lead, make a phone call, and then win the job. It (almost) never works that way.

Contractors who are successful with leads services have two things going for them: A really good follow-up and management (sales) system, and reasonably good relationships with the leads service provider, who knows their business is meaningful and important to them. Some smaller contractors also develop relationships with small, locally based leads services, who provide highly qualified leads for a relatively high commission (up to 10 per cent of selling price). These leads, of course are golden -- the challenge is to ensure your pricing allows for satisfactory profits.

On the non-residential side, leads services also are really useful for background knowledge and insights. You can learn who is providing work, what projects are planned, and which suppliers are winning most of the bids. This can be useful in competitive planning and developing your own marketing strategies.

Really successful marketers -- except the few that have truly systematized and set fast acting and highly measurable selling strategies in place -- avoid the leads services as a source of new business. They create their own leads through effective advertising and by encouraging referrals. Some are even able to "beat" the leads services for top placement on the Internet search engines -- outside of time and thinking about how to do this, they find their cost per lead drops to pennies; and the success in conversion is much higher than the commercial services.

Construction Marketing: Leads and sales

Why bother with learning about how to be an effective and successful construction industry marketer? The answer -- and measure of your marketing success -- is the quality of sales leads you are able to generate.

Quality leads convert to high-value business with little selling or pricing effort. In other words, if your marketing is successful, people will pay your price, without resistance, and will sign on the dotted line exactly when you wish them to make their commitments.

In many respects, lead quality is far more important than quantity. If you want lots of leads, I can give you the phone book, or you can call one of the commercial services who will send you dozens of somewhat qualified leads, of which a few will convert to real business. Maybe you have an efficient and resourceful (and maybe a high pressure) sales force, who can drum up business by cold calling or door-to-door canvassing. These methods work, but they are stressful or most of us, and unpleasant for virtually everyone.

Conversely, word-of-mouth referrals and repeat clients because of their satisfaction with your service are golden. You don't strain or struggle to serve them, you enjoy working with these prime clients, and some of them are incredibly helpful for your business, perhaps referring several other high quality clients.

These numbers are validated by our ongoing poll, where hundreds of people have now voted, and 73 per cent say they find most of their business through repeat and referral business.

With this information in hand, you now have a clue to how you should focus your marketing efforts.

1. Develop your service so well that clients want to do business with you by treating them right. Remember, two major client complaints are failure to return calls in a timely manner, and failure to clean up your job site. These are easy fixes.
2. Then, focus on communicating, responding, connecting, and building out relationships with your existing clients to induce and encourage more repeat and referral business.

Your next challenge is to figure out how to leverage beyond these two basic guidelines. Advertising, leads services, and cold calling and canvassing all have their places: They can be expensive, short term, but if you are able to attract the right type of clients who will fit into the referral/repeat matrix you will recoup your investment. But you can do these things intelligently.

I'm a firm believer in effective media publicity (we provide that to our clients in Ontario, North Carolina and the greater Washington DC area), coupled with resourceful association networking, both in the business-t0-business and community environments. Both forms of marketing can be inexpensive or virtually free in cash cost, but require commitments of time, energy and talent.

You don't need to spend a lot of money to be a truly effective construction industry market leader. Simply focus on your core -- your existing and previous clients -- and build out the relationships of trust and integrity to the wider community through their network.

(And what should you do when you are just starting out? I'll discuss your options in my next posting.)

The real value of (commercial) leads services

Bobby Darnell in Atlanta makes some interesting points in his blog posting: "Where will the economy 'lead' us?"

One of the profound incidences that led to me this business is when I was working at Construction Market Data (Now called Reed Construction Data) and would see companies paying up to hundreds of thousands of dollars for leads and using the information to just a small degree of their worth. My analogy is they were purchasing a new set of woods and irons (golf clubs for the non-golfers out there) and when it was time to play; they would grab just three clubs and leave the rest in the bag.

This is the time to review your sales and marketing strategies. How do you feed your pipeline? How do you process your contacts? How do you measure your results? How do you leverage each lead? What are you doing that your competitor is not?

With the days growing shorter, construction slowing down because of the season, now is the best time to review your sales processes and sharpen your ax.

A lead is not a contract or purchase order but merely the first step in that direction. What will you do differently that will give you the edge over the other hundreds of companies who have the same information?

There is no better time than now to refine the processes that fill your pipeline. I do not believe the economy will stay down but who knows when it will turn? In the mean time, use any time you have not fulfilling business to do all you can to build new business.

I think the point he is making is that the leads services provide indications of potential opportunity -- they rarely can lead you down the garden path to a sure thing.

Most projects, by the time they reach the RFP or bidding stage, are 'set' for one contractor or another -- or, if they are an open competition, will be commodity-priced opportunities only really valid to pursue if you are truly the lowest cost producer within the segment. (This happens, of course, if your expertise and specialized knowledge allow you to compete on these terms.)

But the contact information, project data, and other resources within the leads services ARE useful clues to set you on the path of building meaningful relationships and contacts, and deciphering what may appear to be hidden opportunities.

For example, if you are a sub-trade or supplier, and you see a project within the pipeline that might need your services, you can research and discern the likely 'winner' and then build your relationship with that business well in advance.

Or you may find indications of future projects within the pipeline, so you can allocate your marketing resources and energies to develop constructive relationships with these businesses.

Or you may find a rather different use of the leads service -- you may forward the lead to someone you know who can legitimately act on it, more than you, and your good-will here will generate further reciprocal business (of course I am not advocating you violate the copyright from the leads service -- you should adapt the information and interpret it from your own perspective.)

Darnell's point is that the 'leads' you receive actually have much more information than might be obvious at first glance; it is up to you to develop and learn how to apply them.

Which will give you better return?

Here are additional details about the ongoing Construction Marketing Ideas poll.

If you could allocate $10,000 with the goal of achieving a 10 per cent increase in results on a $1 million business, would you achieve better results by improving your client service/employee systems to attract more repeat and referral business, or should you advertise, telemarket/canvas or spend it on leads services?

The ongoing Construction Marketing Ideas poll shows that, at present, 76 per cent of businesses find most of their new business through repeat and referrals. This means, your $10,000 investment in increasing your repeat and referral volume would generate on average $76,000 in new business (assuming a 10 per cent gain.) Compare the results for a similar investment in telemarketing/canvassing -- your return would be $6,000.

Of course these numbers are misleading for two important reasons:

First, if you have built our business around advertising, telemarketing and leads services, you are undoubtedly using these resources effectively and profitably, or you would stop.

And, secondly, if you are using these resources, if you convert the new clients into long-term customers who speak highly about your business, you'll garner years and years of valuable business from each lead you convert through the resources among the 24 per cent.

Nevertheless, it makes sense for you to consider improving your processes and systems to encourage repeat and referral business before you spend significant sums of money on other forms of marketing.

Getting started

Construction at the University of Central Florida in Orlando appears to have a a bright future with rising enrollment, even in the current housing slump. This image is of the new recreational centre under construction. Trouble is, for local contractors seeking work, is that price competition is intense and brutal.

Here is another question received in response to: "What is your number one construction marketing concern?"

Q. We are a young company and have just really gotten started in the last four months (we’ve existed on paper for two years). Our focus is commercial construction, specifically retail construction in Central Florida. Our largest challenge is getting clients and jobs. The jobs we learn of are generally from reporting agencies like McGraw Hill, Construction Data, etc, so we always have a fair amount of competition when submitting a bid. It’s a rough in the hard bid world. Any ideas?

We’ve been trying to grow relationships with one on one office visits, lunches, and cold calls with prospective clients too. We’ve had some success with this approach, but we just can’t seem land jobs with such heavy price competition. How do we overcome this?

Clearly, when you are responding to public projects, openly advertised (and available to the commercial leads services), you are going to be facing intense price competition -- especially in a depressed market. The problem is that the only way around the price competition is either exceptional specialization or exceptional branding, or both -- and the branding I am talking about is reputational, not superficial.

You know you have achieved success when clients call you back for more, and/or refer colleagues to you. So the first place I would go looking for business is among people you really know and who truly respect you from previous projects, perhaps at your former employers (however of course you must not do this if you would violate contractural agreements or the like).

Another approach to consider is to define your niche -- you must be quite specific here -- and then look at ways you can focus your marketing message upstream within that niche. Say, you are confident you can build schools well -- you would want to join the relevant associations/chapters for your sector. The wider and bigger the sector/market, the less this approach will 'work' simply because your entrenched competitors are likely to already be there.

This gets into the Unique Selling Proposition concept of marketing. If you are not number one (or number two) in your segment, you are not going to command attention -- so, again, you will be among the crowd bidding work on price! If you really are first in the space, you can 'own' it. In business, an excessively narrow niche may not be viable to support your entire enterprise, but it may give you some power and identification and draw out useful business.

In other words, from a marketing perspective, if you cannot draw on your existing relationships/reputation, you will need to dare to be different, to be focused, and to specialize in a visibly unique area -- and then you can command higher prices, which will be augmented as your reputation grows. Remember, your unique area can be geographically defined, by sector or specialization, or by something else. It simply has to be unique and relevant to your business (and your potential clients' real interests and emotions.)

How severe is the recession?

The Grapes of Wrath is a classic novel published in 1939 and written by John Steinbeck,which emphasizes the need for cooperative, as opposed to individualistic, solutions to social problems brought about by the mechanization of agriculture and the Dust Bowl drought Many people have also seen the 1940 Hollywood movie adaptation starring Henry Fonda.

Friday afternoon, Derek Peterson from Constructionwork.com called me to explore some ideas. He traded news about the recession's severity in parts of the South. I felt the pain as he described examples of businesses failing -- and business owners about to lose everything -- just a year after they had been booming and so busy they had to ration and manage their work.

I am at a loss to offer answers to people caught in situations which evoke images in my mind of the Grapes of Wrath.

My earlier article on recession survival seems too simplistic and really inadequate when the business volume in some areas has declined by what appears to be 90 per cent or more. How do you plan for this kind of eventuality? I think that anyone waving the magic wand of a quick solution is either a miracle worker or, more likely, a con-artist.

I am confident that services such as Derek's are worth every cent of their cost, even in these circumstances. If you can obtain unlimited project leads for $39 a month (without any long term commitment), you should be able to find something of value in the leads service -- either directly through the leads, or indirectly through the contact information within the leads reports. If nothing else, for the flat fee, you'll be able to look at the markets nation-wide and possibly hit the road for better opportunities. But the depression-era images evoked from my conversation with Derek scar my mind. I pray that things will improve soon.

Cold calling architects?

The original poster on this contractortalk.com thread posts a useful question. The response from another contractor surprised me.

Folks, I've been struggling to get things going for 2-3 years now. My past experience has shown the contractors I've worked for had work coming in from architects and designers. I have hung on to S.M. (Service Magic) lead service for the 1 or 2 real jobs I land and the dozen or so tire-kickers and bad leads I process monthly.

While I approach all of them honestly, I can smell the bad leads for the 1st sentence of the e-mail. My feeling is simple: There has to be a better way!

I have mailed flyers and cards to 150 architects listed within 20 miles of my area. Now if you allow for 15 per cent bad addresses, 25 per cent for commercial and maybe 15 per cent for firms that aren't looking for additional contractors to work with, that still leaves 45 per cent that I should have some chance to look at their work.

Anyone with thoughts or suggestions on methods to get these firms attention? I'm
looking for jobs that are in the $25k to $250k arena. Yeah, its a crowded field but until we get a little more foundation (ehm), I don't feel too comfortable (yet) with the liabilities involved in $ 1mil+. work.

Here is the response that surprised me:

Lumpy, the answer to your question is cold call.

I am a road warrior for a commercial builder and my job is to cold call on architects, door to door. It seems to be the only way I've been successful with getting an appointment with architects, and I'll tell you, it works.

It's all in the approach. I walk in the door and ask the receptionist or whoever is there if I could drop off some info about my company for so and so architect. They always say yes. Then I ask if so and so architect is in the office. If they say no, I tell them thanks, drop off the info and tell them I'll follow up by email or phone sometime soon. If the architect is there, I extend my hand out to give a shake and introduce myself and just be honest about why I'm there. I'm trying to build our business and add new architects to our network, could we schedule a short meeting to discuss our services.

I've been able to book several meeting this way. Persistence is key. Some may be hesitant to invite a stranger to do business with since they are probably happy with who they currently have. I have never been thrown out of a firm, or been yelled at EVER, for stopping by and dropping of a brochure about my company. You never know when you may come across that one architect who had a run in with his contractor and is out there looking for new ones.

Mailings virtually never work in the architectural market. Even if you have one hell of a crazy creative high quality piece you're mailing, you can expect to get little if any response. I've tried.

I wish you luck and if you want business, you HAVE to get out there face to face. It's scary, but keep telling yourself, it's going to happen and just be yourself. People remember a face and will also remember that you were the guy that was out there during the worst economy trying to shake up your business while everyone else was sitting on there ass complaining, or milking public bids just to stay alive (not that that's a bad thing, I'm sure we've all been there.)

Remember, you're not selling a widget or something, you're selling yourself and your services which can help them. Don't forget that. Hope this helps.

OK, maybe cold calling and canvassing at architects' offices is effective but I think most of us would have real problems stomaching that type of approach. I prefer this response from another poster.

Most of my contacts have come from trade show networking, not mailing, if you have local builders organization, join it, we have a few in Long Island, New York.

But, then again, if few are doing it, and you can handle the discomfort, the canvassing approach may make sense -- at least until you build a file sufficiently solid based on healthy relationships and networking through enhanced word-of-mouth approaches.

A wake up call

This contractortalk.com thread is an eye-opener. A contractor gets his license -- and his phone starts ringing, not from customers, of course, but from people trying to sell leads services, advertising and other stuff. He faces the very real problem of a new business with visible contact information -- he is subject to inbound solicitation calls; promising far more than delivering.

Before I even knew that I was issued my contractors license my phone blew up!

All the yellow books had my number and they all wanted my business yet none of them wanted my services just my money.... all of them promised to give me more leads that I could handle a couple of them had good sniper tactics but when I asked them to give me references of the gc that used them to the conversation quickly changed.

I also thought about a online lead service and thank god I found this site!

Unfortunately I filled out a few app for some of them and my phone won't stop ringing. I knew that the construction industry was slow but I think the advertising sales must be hurting really bad.

They won't give up. I don't want to answer the phone anymore to someone trying to sell me their services -- I want someone to hire me for mine.

I found this site not a second to late (as) I almost signed up for (a leads service). Thanks to the info that's here I was able to ask all the right questions that otherwise I wouldn't have asked am as green as they come and thanks to y'all I believe I just saved my self some cash and a hellish headache! Thanks a million............

If you are just starting out and lucked onto this blog, take a deep breath and read the entries here and the hyperlinked forums. Oh yes, we sell advertising in some markets but do our best to ensure the advertising is appropriate and coupled with enough service to ensure true value.

Image from "Construction Deal" a leads service? I had never heard about until I searched for an image for this story

Thoughts about leads services

I'm intrigued by this agreement between http://contractors.com (also owning the URL contractor.com) and Canada.com, the online media portal of the CanWest group, which owns newspapers and broadcast outlets in most major Canadian cities. Contractors.com combines a localized online directory with a lead development/referral service and has packaged a variety of other programs, including a pixel-based "trade show" offer for industry suppliers. (You pay $1.00 per pixel, minimum 100 pixels) to advertise on the site. I might just spend $100 to list here and see what happens -- though it looks like, if the company paid cash for the deal, a supply business based in Toronto paid several thousands of dollars for its space.

Obviously, the challenge with all of this is measuring results and whether the package offered by contractors.com is worthy, compared to other offers on the Internet. Generally, posters to the forums on contractortalk.com are very skeptical of these services -- in fact they are downright hostile about their business practices; but on the other hand, the valid complaints from contractors (saying they are required to pay for 'bad leads') are offset to some extent if you look at things from the lead service operator's perspective -- not establishing strict rules regarding the business relationship invites much gamesmanship as contractors weasel out of paying for any leads that are not 'perfect' (that is, lead to a highly profitable sale with virtually no work or effort.)

The construction business has always been unusual in that much marketing is developed through leads services rather than the individual effort of the contractor. I don't know of too many industries that support so many services generating and sending leads to businesses -- these have been around for decades, of course, for example, you can trace the beginnings of McGraw-Hill's success in the construction market with the long-established F.W. Dodge service.

The interesting thing here is that leads services should, in theory, make this business very simple. You sign up for the various services, tailor your requirements and criteria as much a s possible, set up a tracking and follow-through program, and then go about converting the leads to profitable business. If the leads service(s) don't work, you either change, or stop using them. Your marketing budget then becomes largely a leads services budget.

There are two big weaknesses with this argument.

First, the best and most profitable jobs never find their way to the leads services (or worse, as I will explain soon). the prospective client through previous business relationships or direct referral trusts in your ability to get the job done, and is happy f or you to do it. But informed consumers and businesses still like to have additional feedback, so they go to the leads service, post the project, and review -- without seriously considering -- the competitive quotes. The information these quotes allows the client to negotiate with you, perhaps get a price reduction or some additional service. The one thing the client is NOT going to do is give business to anyone from the leads service who took t he time and effort (and paid for the lead) to steal your business.

The second is you are abrogating control of a very important element of your business to outside organizations, who set the rules, and force you to pay for an intermediary when, with some resourcefulness, common sense and management, you can get the results you are seeking yourself.

Nevertheless, I won't argue against the intelligent use of leads services. The reason is they allow you to systematize your processes, measure and track your results, and (within the competitive framework of the different services) establish your own benchmarks and cost-per-leads.

I would like to conduct an effective survey to measure the value/effectiveness and utility of the different services, and build a reader feedback/response and measuring tool to allow contractors to compare the services' effectiveness. This however, is a project that won't happen quickly. In the meantime, if you have comments or observations about leads services, please email me or use the comment function on this blog (anonymous comments are accepted subject to moderation).