Referrals, repeat business, speeches and presentations, then advertising: Your construction marketing priorities

In this weekly Google Plus Hangout (Friday 2 pm), I discuss how and when you should advertise.  If you think that someone who earns 97 per cent of his income from advertising would urge you to pay for advertising in our (or any) media, you will experience a surprise.  I suggest that advertising should be carefully considered and only used after you've fully accessed the "low hanging marketing fruit" of systematized repeat and referral programs, and effective public speaking and presentation initiatives.

When you are ready to advertise, you should also be aware that the cost-per-lead will (short term) be much higher than through the repeat/referral and public speaking options and you should be careful not to put all your eggs in one basket.  If you have a $2,000 marketing budget and use it all on one advertisement, you are likely to be extremely disappointed in the results.

Conversely, at a crucial stage in your business growth, you can experience a quantum jump in the amount you should spend on advertising, and the results you can expect to achieve.  This is because if you can afford enough advertising to be extremely visible to your potential clients, you'll benefit from the synergy of your advertising.  As well, while the acquisition costs of advertising-based leads are high, their lifetime value -- and their ability to generate repeat and referral business -- can also help your business.

Please feel free to join me at the 2 p.m. video broadcast/hangout.  You can find information about how to register for a Google Plus account to gain access in the sidebar at constructionmarketingideas.com, or you can email me at buckshon@constructionmarketingideas.com.

How to attract referrals

This morning, as I prepared the daily upload of the upcoming Construction Marketing Ideas book chapters on Twitter, I reached the vitally important chapter providing ideas and advice on how to increase your referral volume. Because of its importance (and because I welcome your feedback to improve the final published version), I'll post the link here as well as on Twitter.

How to ask for referrals

In reviewing the chapter, I referenced Bobby Darnell's system of finders fees, which he says has provided about 10 per cent of his business over the years. I first referenced this material last December, including a link to his Finders Fee document, which is also available at the Wordpress version of this blog (at http://www.constructionmarketingideas.com).

You may also find value in his latest blog posting at buildingnewbusiness.com.

His story shows the great danger of over (or more appropriately, inappropriately) qualifying your initial leads. Clearly, most businesses need a lead qualification system -- many readers of this blog, for example, request the free Art and Science of Publicity booklet (see the form on the right), but cannot directly benefit from our services (or we would be wrong in pushing people, especially owners of very small businesses, to pay for the service.) But this doesn't mean that we cannot treat all inquiries with respect and attention and I'll do my best to answer emails from everyone who inquires.

A fresh day

Every day is different.

If you have the responsibility for overseeing your own business, you know that your assumptions and plans and even specific tasks will not always go as planned. You start the day with some expectations, and end up with something very different.

Understanding this variability is important in your marketing. The challenge is to develop (through experience) enough control
mechanisms so that, if one element isn't quite working the way it should, you can develop an alternative.

This is where marketers with solid advertising strategies have a natural edge over business owners "relying" on referrals and word-of-mouth.

With an advertising and lead conversion strategy, you can quantify your results and if elements aren't quite adding up, add resources or change course to achieve the results you are seeking. If you are passively relying on referrals, if for any reason these dry up, you are in trouble.

Why does construction marketing (seem) to need to be difficult?

In several postings, I've observed the frustrating reality about construction industry marketing.

If you feel you have to market to find new business, you find it hard to do (and often frustratingly expensive).

Conversely, when you seem not to need to market, simply because your order book is full from repeat, referral and inbound inquiries, you are on the top of the world.

The problem is in part that no form of marketing success is easier to achieve than the natural success of your reputation bringing in inbound and repeat business. In fact, it gets even better if you are in this position, and so overwhelmed with business that you need to turn clients away or demand a long wait time to serve them. Because of your "scarcity" you are even more alluring -- and potential clients want to do business with you even more. (Marketers often fake scarcity to create this effect, but it really works, all the time, when the scarcity is real!)

This is fine enough in good times, but in a recession, when business drops off, you have two choices. You can shrink your business down to nothing, or you can start learning how to market.

The former choice isn't entirely irrational, especially if you have some control over your overhead and costs. If you can lay off most of your employees, and focus on maintenance and service for existing clients, you might just make it through. I know of some contractors who took long, enjoyable vacations in warm and sunny places during the last recession. Of course, this solution simply won't work if you can't curtail your overhead or you are burdened by debt obligations.

So, then, if you decide suddenly you need to "market" you are in trouble, because you now have to complete a rapid learning curve and you run into the problem that paid marketing and advertising is an incremental rather than magic, instant, solution.

This is why successful larger contractors, especially contractors serving consumers, never stop advertising, even in good times. They have enough experience and metrics to manage their advertising costs, media, and budgets, and can shift gears during hard times, perhaps altering their media mix or increasing their marketing budget even though they know it will produce less satisfactory results.

In previous posts, I've advocated that you get to know your current clients really well, to understand which media they read and what interests them, and then build out your marketing strategies from this information (while of course enhancing your referral and repeat business processes).

Long term, I believe the best way to market your business is to combine your passions and interests with those of your clients and potential clients, and build relationships through the process. For example, I am always most successful at marketing when I practice journalism, like writing this blog, but you may be better by sponsoring association golf tournaments -- if you enjoy playing the game, and your potential clients are there, as well.

The important caveat with this passion-centered approach is to remember that you must not focus on your passions at the expense of direct relationships with current and potential clients.

If you really enjoy doing stuff that has no relevance to your business, go ahead. You may be able to cross fertilize some ideas you can apply in your own enterprise. But don't get lost in the side-track. I've done that in the past, at great cost!

Reader's Question: High-end residential construction: How to even out the troughs and increase potential deal flow

Although David Markham, president of C.A. Peletz Co. in San Fransisco, said his company focuses on high-end residential work, the contractor also handles commercial projects such as the conversion of an old automotive garage into the Sierra Club headquarters. This information led me to one of my suggestions below.

Readers questions are invited. You can email me at buckshon@cnrgp.com.

Hi Mark, I am enjoying the blog as a new reader. I own a construction company that focuses on the very high end residential market in the San Francisco Bay Area of California. We are an older company founded in the 50’s when the principal built schools and bridges. Over the decades we have built commercial, medical office and always luxury multi-family and single family.

Since I took over in 2002, most of our success has come from the boom in extremely high-end single family ($800 - $1,200 per square foot) due to the dot.com and housing booms. Things have obviously slowed, but not stopped. We have quite a few repeat clients that are constantly upgrading, maintaining and adding to what they have.

I would like to even out the troughs and increase potential deal flow. We generally market to high-end architecture firms and maintain good contact with existing and past clients. Do you have any further suggestions?

Best - David A. Markham, President C.M. Peletz Co.

David:

First, obviously you should take the thoughts of someone at a distance who does not know your specific business or market conditions with a good degree of caution. But here are my initial thoughts.

1. The main frame of business of course is repeat and referral. You probably already encourage this but you may wish to extend your outreach and programs to thank existing clients and encourage referrals. Consider the story of Peter Danis in Toronto as an example.
2. Media publicity can be very helpful, especially in the publications and websites read by your clients. If you don't (yet) know what publications/broadcast outlets and websites your current clients read/use, you can ask a few of them. With permission stories of successful building projects are always helpful. Specialist PR services and agencies may be helpful. Community service may be helpful.
   
3. If most of your current referrals are coming from architects, you have two choices. You can build relationships with them by (a) referring clients to them and (b) offering cost savings/technical/practical seminars and lunch and learn-type programs/ The former is obviously the most effective but the latter is probably the most controllable
4. You may wish to explore an enhanced web presence through the new tools like twitter, online networking, blogging and the like. This stuff can be time consuming and results are often mixed but your market area may be a leading force in the area.
5. Affinity arrangements can be powerful. I noticed you did work for the Sierra Club. Can you connect with relevant community associations, clubs, and associations -- the ones which your current clients are most connected with?

Thank you very much Mark. This is extremely helpful in addressing my blank spots. Let me know if I can be of any help to you in the future. Best - Dave

Construction Marketing: Under or out of your control

You can't control the overall economy. Nor can you control how individual clients will respond to your marketing strategies.

You can control your attitude, your personal and business finances, and your overall business strategies and individual business decisions.

Your marketing challenge is to ensure the qualities you can control have enough power and effectiveness to overcome (or at least manage) the things you can't control.

Say, for example, that in good times you "relied" on referrals. You never had to go looking for new business, "I never had to market or advertise", because you always had an abundance of clients, in fact a backlog.

Now things have slowed down for reasons over which you have no control. You can survive in business by taking charge of the things you can control. You can cut costs and staff, live on less, and manage.

Or you can understand that if you were doing things well enough in good times that you had a backlog of work, you probably have an overall excellent reputation, and you can work to capture the referral and repeat business through systematic marketing and advertising now.

Remember, as well, that you don't want to be in the position where you are relying on one (or just a few) potential clients to say 'yes' to bring in your new business. If you are desperately hoping for something to work out, it often doesn't -- the potential client can almost sense your anxiety. Even if that isn't the case, you simply don't have that much power to ensure everyone behaves just the way you want, no matter how much you try. You need to have several possible clients wishing to do with you at the same time to be comfortable, so you need to use your talents under your control to ensure you have enough future business in the pipeline.

Take charge of the things you can control, and the things you can't control won't defeat you.

Recognition and referrals: The renovator's $749,000 success story

Toronto-area renovator Peter Danis at the summer dinner/cocktail party where he turned a $4,800 marketing expense into $749,000 in sales.

Toronto-area renovator Peter Danis has found a magic formula to build repeat and referral business. His business Kara Construction/The SPC Group Inc. turned a dinner and cocktail evening last summer that cost less than $5,000 into almost three quarters of a million dollars in revenue. The story is inspiring because you can replicate it quite easily IF you have a track record of excellent service to your clients.

"You need to under promise and overproduce," Danis says. ""I want to please my customer so when I finish (their project), they have reason to acknowledge an invitation or phone call just to say hello or touch base."

Danis developed a simple Referral Rewards Program. He visits each client after the job is completed with a bottle of wine and a flower bouquet to explain the program.

Clients can receive either a three per cent credit (of the value of the referral) for their next project, or take two percent of the value of the new project in gift certificates to use at any store they want.

"In the end, it truly pays off," he says. "I've had to do it three, four or five times for clients."

Danis took things a step further with some inspiration last summer, when he sent out invitations to 145 of his former clients to invite them to a dinner at the Keg Restaurant. He also invited them to bring friends to a cocktail reception after the dinner.

"I received 85 RSVPs out of 145 invitations confirming they were coming," Danis said. These former clients signed up for $285,000 worth of work. The meals cost him $3,600 (he prearranged the cost with the restaurant).

But things got even more interesting because of the cocktail reception after the dinner. He paid an additional $700 for the drinks, bringing the evening's total cost to $4,800 including tips.

"To my surprise, out of the 32 friends that came in for cocktails, 26 of them signed a total of $464,000 worth of work."

Danis says after reviewing the results, he will schedule another similar event, but is moving the time to October. Summer is inconvenient for many clients -- kids are out of school, families are on vacation, and the like, and he figures that they will appreciate the evening out even more in the fall.

Danis told his story to marketing guru Jon Goldman after we both attended Goldman's presentation at Construct Canada in December. He won a $2,500 marketing package from Goldman.

Can you do the same kind of thing?

Sure. If you have a great reputation, if you are achieving referral and repeat business without prodding, you can systematize the process -- and still retain the human touch. By spending just a little money and time (the planning and co-ordination for the summer event required only a few hours), you can attract and enhance profitable business.

The big construction marketing idea picture, simply explained

You try something with construction marketing. It doesn't work. So you think the thing you tried is a waste of time or (worse), you think the whole thing about marketing is a waste, too.

You are right to think your construction marketing efforts will fail, if you think that way.

For example, if you are like most construction businesses which have enjoyed success in relatively good times, you relied on word of mouth and repeat business. Since this seems to be drying up -- people aren't calling you and asking, sometimes pleading with you, to work on their projects, you try advertising. You place your ad and expect the phone to ring. Instead, after spending several hundred dollars, someone calls, only to let you know he is calling five other contractors for the lowest under-the-table price possible (and might do the work himself, anyways.)

You can make three choices in this circumstance. Give up, try something else, or learn what you need to do to get it right.

Giving up isn't such a bad option if you are ready to shrink your business down to the level it needs to do to survive with whatever repeat and referral business you can 'rely' on. (You should always be ready to do the shrinking in the recession, anyways, you really have problems surviving if you put your head in the sand as you deplete all your assets and run up debts.)

The second option, trying something else, may also be right, but if you are just blindly going from one expensive marketing idea to another, you will soon find you are running around in circles, frustrated and failing.

So that takes you to the third option -- learning what you need to do to get it right. You are here, so this is a good sign. You will find other resources, both through your network of friends and colleagues, your industry associations, and often your current clients.

When you read earlier posts here (and the sidebar poll on this blog), you will see that your repeat and referral business is -- and should be -- vitally important to you. Your success in retaining clients and attracting referrals is a sign you have a healthy brand and solid business practices -- real assets. Repeat and referral business, for most of you, should continue to be your primary source of new clients. (The exceptions of course are brand new businesses and very large organizations meeting occasional needs -- you will simply not have enough business in the pipeline, in this case, unless you are aggressive about your outbound new client marketing.)

The difference is my advice about the importance of repeat and referral business is that you not rely on these important assets, but develop them. Your previous clients, after all, can provide you with strong clues about where you should look to advertise and promote your business in the future.

This leads to the best triple play approach you can find to develop and restore your business.

By talking with your former clients, by listening to them, you may find they have immediate needs you can solve (fresh business) or you may uncover new directions to take your business (different direction, same client base), or you may learn which publications they read, which associations they support, and which Internet searches they conduct -- all leading you to media and marketing resources likely to appeal to future clients in the same demographic space.

In other words, to find new business, call, meet, and listen to your current and previous clients.

One approach is to offer them a free check-up or maintenance service; your hour or two with them fixing things they need tended (without billing them) will give you plenty of ideas and insights about where and how to allocate your marketing resources -- and probably bring in some solid paid business, too. In other words, with one step, you'll conduct important market research, build good-will and referrals, and probably sell some of your services to people who really respect and trust you.

Your decision to reconnect with current and previous clients, indeed, is the simple solution to your big construction marketing challenges.

Referral and finders' fee systems -- Bobby Darnell's approach

In a previous posting, you've read how Feazel Roofing in Columbus, OH, offers a $50 finder's fee for consumer referrals. Do finder's fees work for more advanced stuff, especially for advanced commercial or consulting assignments?

Bobby Darnell of Construction Marketing Consultants in Atlanta GA says that, in seven years of business, he has obtained about 10 per cent of his business volume through finders fee referrals. He offers a sliding scale of incentives, based on (1) the amount of work you do to provide the lead and the strength of the direct referral and (2) the value of the business you help generate for him.

He has granted me permission to make his lead finding system available, which you can download here.

Darnell says most people using his lead rewards program have contributed a single lead. The only potential conflict he had occurred when someone submitted a lead for a contact Darnell had already been working with -- in this case, he simply provided documentation proving the prior relationship.

Lead finders or 'bird dogs' are common in many industries, and good salespeople cultivate them. Obviously, if you are sharing leads for compensation, you should conduct yourself with integrity -- if you are working for a business, I think your boss should know about this sideline, especially if it relates in any way to your day job!

A good question when an organization has salespeople is whether the lead compensation system should operate in place or adjacent to your regular sales compensation systems. If the lead compensation is modest (for example the $50 to $100 'cost' at Feazel Roofing) this isn't a problem -- but if you go the full scale with a major lead for a big project as outlined in Bobby Darnell's system, clearly the lead cost has to come out of sales compensation, or you will blow your sales and marketing budgets.

Should your salespeople be able to set up their own bird dog and lead-finding systems without company involvement or approval (paying their leads suppliers directly out of their own pockets)? I'm not sure this is such a good idea -- it invites ethical and co-ordination challenges.

On the other hand, if the relationships are there, and the sales representatives openly discuss the process with their management, presumably everyone is well served by these arrangements.

Do you have any thoughts and experiences about bird dog or lead compensation systems?

The $50 offer

The $50 referral form from Feazel Roofing in Columbus, Ohio.

Look at this referral form from Feazel Roofing in Columbus, Ohio. Nothing fancy; the person providing the referral can receive a $50 cash payment and the person receiving the referral receives a $50 discount.

The really intriguing thing about this form, however, is the provision to allow individuals making the referral to sign over their $50 cash rebate to the person receiving the referral -- thus turning a hard cost into a soft incentive! Clearly, this reduces the referral program costs while inducing a sense of sharing and self-sacrifice/respect from the referring person: great for relationships, and for enhancing the referral's influence.

Repeat and Referrals: 74 per cent holds steady

The numbers here are holding steady, despite several additional responses through newsletter and this blog's publicity.

At present, 74 per cent of readers say they find most of their business either from referrals, or from their existing clients.

The poll isn't scientific, of course, but I expect even if you asked a fully qualified survey the results, they would be in the same range.

Where should you direct your marketing energies and expenses, then? The Yellow Pages? Internet lead services? Or maybe, just maybe, you should focus on creating an atmosphere for your existing clients so appealing they'll spread the word about your brand and call you when they know something interesting they would like you to do.

And you can be systematic about this, and plan it, and build it into your marketing budgets rather than leave it to chance.

Editor's note: In case you are wondering why the numbers don't add up to 74 per cent; this is a live poll -- so as you and others respond, the numbers can change. As I write this note, the referral/repeat share is now 75 per cent.

Marketing, the simple way

Marc Villeneuve (right) and assistant Michel Lizotte at Viltec Masonry take care of our long-standing home masonry project. Villeneuve won the work through references from his masonry supplier, and showing up when he said he would show up.

This posting won't help you if you are a large multi-national corporation, but could be your vital survival solution if you are a small or start-up trade contractor in the residential environment.
Last week, after a years' frustration finding someone to do the job, Marc Villeneuve of Viltec Masonry completed a simple $750 job repairing the masonry at our home's rear deck window.

Hardly an earth-shattering contract, but, in context, the story can tell you about the marketing reality (and opportunities) within the construction industry.

We noticed the problem in the home exterior a couple of years ago. Perhaps unfairly, my wife takes the lead role in dealing with household issues (I am most definitely not 'handy'). But this one had her stumped. She didn't know who to call or ask, and when she called contractors they either failed to return the calls or when they showed up to inspect the project, failed to provide a quote, or return any communications. One contractor finally committed to do the work, but, again, failed to show.

Frustrated, she turned to me for advice. I didn't know anyone, but, surely, I could help. After all, I publish construction industry newspapers -- including Ottawa Construction News in our home city -- and this blog. So I thought: Longstanding advertising Merkley Supply, a masonry supplier for the industry, must know good masonry contractors willing to handle the work and maybe Robert Merkley could help. So I took a digital photo of the problem, and sent it to him.
Merkley passed the request on to an employee who provided three contractors' names for quotes.

Vivian called two of them, who showed up, and offered quotes. One said he would come back and do the job, but then, again, nothing. She handed the list back to me.

I called Marc Villeneuve. He apologized, saying, sheepishly, he had lost our phone number. He asked me to call a residential phone number (he was on a job site) with our number and he would get back and complete the work the next week.

On schedule, as promised, he showed up, took the time to do the work properly, and invoiced us.
As he prepared to pack up his truck (and I prepared to head to Vancouver), I took his picture and asked him about his business.

"I get all the work I can handle through referrals and through Merkley," he said. "I felt bad about not returning your call," he acknowledged. His problem is not finding enough work -- it is finding qualified employees who will stick. This restricts him to smaller residential projects, but he has plenty enough of these to keep him busy. He handed me his home-made business card with one border missing: "Bricklayer * Stonework * Repairs", the card says. "Quality One Brick at a Time!"

No website, no fancy marketing packages or brochures, an invitation to leave messages at a residential phone number . . . and more than enough business to keep him and an assistant busy, consistently. And he solved a problem that we couldn't resolve in more than a year of searching. Did we worry about his price? "His quote was a little higher than the other person who bid the job," my wife said, but we are happy to pay.

Listening to Marc, I sense he could grow his business through some advanced marketing systematization, first in the recruiting of employees, and then, in co-ordinating job processes. But he doesn't need to do any of that to earn a satisfactory living. He simply needs to do his work well and (at least on second try) return his calls and show up at the time specified. "Merkley won't give my name out unless I do the job really well," he said. "So I keep doing the work properly." Of course, he purchases his brick and supplies from Merkley Supplies so that relationship is healthy as well.

Consider these elements if you are not the largest in the business and wish to succeed or get started properly:

• Make sure you do your work to the highest standards;
• Return your calls;
• Check with your major suppliers and see if they can refer some business your way. If you are new, this may be your important break. Do the work with exemplary quality, and then provide feedback to your suppliers. Encourage your clients to do the same. This will result in more referrals and word of mouth.
• Remember, there may be good opportunities in handling smaller jobs -- these may keep food on your table in slow times; if you are working large projects, work out a schedule that allows you to handle the smaller jobs and revisits (without jeopardizing your relationships for the major projects.

Marc Villeneuve at Viltec Masonry can be reached at (613) 325-8542

How should a builder market to designers and architects (2)

Yesterday, Jeremy Hartje of James Hartje Construction Inc. in Santa Cruz, CA, received several answers to his question about how he could effectively market his general contracting services to local designers. Here are some additional thoughtful observations on this topic from Society for Marketing Professional Services members and a well-regarded Canadian architect.

Daniel J. Caldwell, Principal at Stout & Caldwell Consulting Engineers & Surveyors (www.stoutcaldwell.com) in Cinaminson, NJ, wrote:

• With six field workers and three office employees, I think that you/they have already established a reputation. What you need to find out is if that reputation is a good one or not a good one (and be 100 per cent honest with yourself)
• Once you have that established, it's easy
• If the reputation is not a good one, you need to fix that first by addressing whatever issues may be causing it, i.e. problem employees, poorly maintained equipment, cost overruns etc.
• If the reputation is a good one, invite some of your best clients to the program and have them showcase the project you did for them. Let them sing your praises, you really shouldn't have to. You just be there to answer questions that may come up
• People, by nature, love referrals and love to hire people who are referred to them.

Rose Walsh, Business Development at Nolte Associates, Inc. (www.nolte.com) in Sacramento, wrote:

To misquote the real estate business: Benefits, benefits, benefits!

We have had a variety of subconsultants provide similar presentations over lunch/breakfast. It's a great initial networking tool (everyone likes free food) and much easier to learn about a new firm/service. However, if you don't have work/leads for us, why should we send work your way instead of someone else (prior relationship)? Have you thought about your follow up plan?

Pamela Rigling Caffrey, Director of Marketing, John Poe Architects, Inc., in Dayton, OH, adds:

If a general contractor ever gave me a lead that I didn't know about or opened the door for my firm into a project, I would FOREVER inform said contractor about any project opportunities I could offer them. Forever. And ever. The same would be true for engineering consultants.

Please consider that an open offer...

Finally, Canadian architect John Davies, in Ottawa, offers these thoughts (which will have special relevance to Canadian contractors):

With regard to your residential contractor inquiry:

1. there are two major construction sectors at this level - residential and Industrial, Commercial and Institutional (ICI)
2. the ICI sector predominantly secures contracts through the formal bidding process.
3. the residential sector predominantly secures contracts by way of negotiation or less formal bidding procedures
4. the best way to get the attention of architects is to convince them that the contractor:

1. Is skilled
2. Exhibits impeccable craftsmanship
3. Is financially secure (even bonded) and pays his trades promptly
4. Has a catalog of good references relating to successfully completed work (both Owners and Trade Contractors).
5. Can illustrate that all his projects have been completed on time and on budget - again with references.
6. Is properly insured with appropriate levels of coverage ... Worker's Comp.; General Liability; Property and Boiler; Owned and Non-Owned Vehicles; Equipment; Errors and Omissions (if a design component is included in the product - also possesses a MMA license number)
7. Is registered with the Ontario New Homes Warranty Plan
8. Has worked with architects on previous occasions and can give references.
9. Has no outstanding claims or lawsuits pending ... and
10. Takes his shoes off when entering peoples homes and in all areas of the work that are not under construction.

"Mark ... if he follows the above he won't go far wrong - with me anyway!", Davies wrote

What can you learn from these observations: No direct marketing piece will substitute for personal contact and relationships; and nothing works better in relationship development than the expression of your reputation/referrals, and your spirit of generosity and sharing. And I wouldn't under-rate John Davies' light hearted final remark about taking your shoes off! Courtesy, respect and sensitivity to the ultimate clients are undoubtedly important in this business. These are basic principals and underlie most successful marketing within the industry.

What lead sources are working? (2)

I sent an email to Marc Sylvain upon posting the previous reference. Here is his response:

10 years ago my business was 100% referral. Once we passed the $500,000 mark it started to go down. We still do quite a bit of referral and past customer business though. It's down this year so far but last year we did $1,390,000 in past customer business and referrals.

Quite frankly if you want to do more than 2 or 3 million it won't be done with referrals alone.

As for past customers.......unless they move we don't side or replace the windows in their homes more than once. Surprisingly we do have a few customers with more than one sun room on their home.

Marc Sylvain
Sylvain Contracting
http://www.sylvaincontracting.com/

An interesting question, which I have asked Marc, is whether strategic product line extensions or additional offerings might be co-ordinated to create more repeat/referral business opportunities.

What lead sources are working?

An image from the Sylvain Contracting website. Marc Sylvain says he gets 7.7 per cent of his business from the website -- but why is his referral/repeat business so much lower than industry norms?

Marc Sylvain of Sylvain Contracting in Salem, New Hampshire, has started a Contractortalk.com thread, "What lead sources are working?" with a frank report on his six month stats.

Home Shows $290,569 (38.1%)
Referrals $111,257 (14.6%)
Internet Lead providers $97,861 (12.8%)
Direct Mail $88,714 (11.6%)
Past Customers $59,813 (7.8%)
Our Website $58,920 (7.7%)
Site Signs $28,376 (3.7%)
Newspapers $23,717 (3.1%)

Sylvain's business focuses on vinyl siding, replacement windows and three and four season sun rooms.

Several other contractors responded; some surprised how much his business depends on home shows. Others may be surprised by the extremely open disclosure of business information -- you can quickly calculate, for example, his total business volume over the past six months from these numbers (something some business owners would prefer to keep under wraps). As well, notably this open posting in a contractors' forum on the surface has little 'value' in reaching the end user/home consumer market in New England.

Of course, the numbers show other things -- Sylvain knows his business and has solid measuring and tracking systems; he truly can calculate where his leads are originating and (significantly, though it doesn't show up here) his true cost per lead. With his numbers, he can manage his marketing a whole lot more effectively than others. And of course, he doesn't lose any business by sharing with others in the industry -- even if his direct competitors read and analyzed the numbers, they would be several steps behind him in business development and strategies.

You may also notice a couple of other interesting points here:

• One contributor expressed surprise that referrals and repeat clients generate surprisingly low lead volume.

"Marc, how can you increase your referrals and past clients? I would think this could be easy for you with a special program. Do you have a newsletter? e-mail address?

Home shows are a lot of work and time yes you do show they work but I think with a little polish you could come up with some boost on the other 2.
Just some thoughts. Good luck."

• Another thread contributor explained how he is reaching beyond networking to find business:

"OK, I did only networking to date. Starting two weeks ago I installed a kitchen display in a local bank.

Friday I am buying a 14' cube van and will put a nice kitchen in it, with an espresso maker built in. All the choices I can fit will be in the van, catalogues, quartz, fixture books plus cabinet doors ect.The van will be my billboard and will be parked at busy intersections all over the Twin Cities.

I will bring many choices to the homeowner for kitchen and bath remodeling. I am partnered with a bank for loans, an interior designer, a local appliance dealer and an architect and painter. I have my own line of cabinets for semi-custom and I'm a dealer for the same cabinets.

Either I'm a genius, or I'm an idiot, time will tell. What do you think of that?"

My sense is that Marc is having to work awfully hard to feed the dragon; he has systems and processes in place which result in a steady volume of business and he knows his stuff, so he can maintain a reliable and effective business in hard times as well as good. But I'll share my concern of the other successful contractor puzzled by the relatively low ratio of repeat and referral business. My own ongoing poll (admittedly it isn't scientific, but it certainly 'feels right' from the subjective measuring I do every day), says that contractors overall receive a whopping 77 per cent of their business from repeat and referral sources, compared to Marc's 22.4 per cent.

Could it be the cultural 'push' of selling aggressively at home shows and the like is actually turning off clients; or they aren't 100 per cent satisfied with the value they are receiving? Is Sylvain's product line suited to one-time clients who don't network or communicate with their peers and neighbours? Are there process improvements he can make to achieve more "Wow, this is great" responses among his current clients to attract more referrals and repeat orders? And, finally, is he working on the alliances and unconventional/creative marketing approaches to transcend the obvious and expand/build on relationships, like the other contractor with his fit-up van and banker's relationship?

Advertising, publicity and marketing

You may have noticed the poll aside the blog. Not surprisingly, the early responses show that most new business originates from existing clients or referral/recommendations. I'm sure eventually someone will click 'advertising' as a source of business and maybe a few determined people (you can find some of them over at contractortalk.com) will swear by canvassing or telemarketing. But if you follow the 80/20 rule, clearly the most effective place to build your business is close to home, with your current clients and referrals.

Now, my business earns more than 95 per cent of its revenue from advertising sales. Since we've been in business for close to 20 years, do we know something about effective advertising that belies the poll results?

Not really. In fact, we frame our advertising sales to respect, support and encourage the primary and most effective marketing methods -- we facilitate the client relationships and word of mouth marketing, while treating our clients with sufficient respect that they return for more.

To clarify this further, say someone approaches us who is new in business, or new to marketing to the construction sector, with a wish to advertise to get the phone to ring, and potential clients to call. We of course will not turn away the business, but we also make clear that results are not likely to be instantaneous and the greatest value of our relationship may well be the supporting services we provide to facilitate relationships. I will often recommend the potential advertisers use their limited budgets to join relevant associations and will consult with them on other effective strategies, perhaps effectively integrating their business within the supply chain, or connecting with key centres of influence, or (and here we can really help) generating positive publicity in appropriate news media.

Publicity, undoubtedly, is effective -- and if you don't need to pay for it -- truly cost effective. Here, we link some strategic supply chain relationships with the publicity process to earn about 80 per cent of our advertising revenue. We write editorial profiles about interesting companies and projects, and sell supporting advertising to these businesses' suppliers. Yes, we are connecting to the supply chain and touching the hot button of respecting your clients, so these advertisements carry much 'bang for the buck'. We also respect our advertisers who support their clients by providing supporting consulting and advisory services at no additional charge -- this blog is of course part of that set of services.

But what about the remaining 20 per cent of advertisers who contract with us to advertise month after month? What value do they achieve? The answers to these questions are more subtle, but still truly significant.

First, we work with our contract advertisers to reduce costs and increase value. Often, their suppliers have co-op advertising programs to help pay the costs, and our ongoing advertisers never need to pay extra for the feature project and client support advertisers that the other one-time advertisers pay. In fact, contract advertisers have sometimes received two, three or four free ads in each issue.

But there is another important, but subtle, benefit to ongoing advertising. It relates to brand -- the establishment and reminder of your presence in the community -- of your leadership role, and traditional and historical importance among current and potential clients. By the time this type of advertising makes sense, you are solidly entrenched within the market and the actual cost of advertising is a tiny part of your overall operating budget. You simply want everyone to know who you are, what you stand for, and that you are 'there', regardless of the comings and goings of competitors.

I'm sure that other forms of advertising are effective -- especially in the direct-to-retail market -- and some professional services have found that creative and extensive advertising attracts worthwhile new business.

But take a look at the poll (and if you wish, give your own response) . . . advertising should support, not replace, additional business from current clients and solid word-of-mouth recommendations. And, if you choose to advertise with us, we'll help guide you in the best processes to follow to achieve these standards.

A little (smart) marketing can go a long way

How could canvassing with this handwritten note generate $10,000 in sales in a matter of hours? Perhaps one answer is you don't need to be truly sophisticated to succeed in marketing within the construction industry -- perhaps you simply need to go out and do something!

One thing I've noticed in selling advertising services for the construction industry is its lack of marketing sophistication. Many businesses simply play it by 'gut' or by what one media sales rep or another suggests.

I validated this by evaluating the source of advertising in poorly produced and ineffectively distributed "police journals". These magazines are sold by telemarketers purportedly representing local police associations. Perhaps the telemarketers contribute a small amount of money (or even worse, some free magazines) to the police associations, but little really is achieved otherwise -- the publications have poor overall distribution, editorial content, or value. And the ads in them are not inexpensive.

Notably, the largest percentage of advertisers in these publications -- by far -- are from the construction community. You certainly don't see retailers, banks, phone companies, and the like using these publications. Notably, few businesses selling products or services specifically relevant to police or law enforcement, or with a true relevance for working police officers, use them either. In other words, the telemarketers are able to convince construction businesses there is some value in this advertising, when there is none.

Lets look at another example, my earlier blog posting revealing how a sloppy handwritten note, combined with door-to-door canvassing, brings in significant business for a local contractor. What kind of business (other than construction) could claim success with this type of marketing piece?

Now, the bad news is that the ineffective, sloppy and often inept marketing that 'works' or is tried in the construction industry tends to degrade its reputation -- causing mindless expectations of "free estimates" and destroying trust from the general public.

But the good news is you don't need to do much to succeed by doing things right (in fact, I suppose you could argue you can succeed by doing almost anything!) In other words, just a little intelligent thinking and resourcefulness will produce returns far in excess of your cost -- and you can easily manage the risks to achieve satisfactory results. The reason: You are not up against much competition, and these days, resources are available to reduce your costs and risks and enhance your results.

These include:

Effective associations

In the ICI sector, and if you are an architect or engineer, you should join the Society for Marketing Professional Services (SMPS). If you are a home builder, consider your local Home Builders' Association, affiliated with the National Association of Home Builders (U.S.) or the Canadian Home Builders Association. You should also review resources available from appropriate specialty trade or general contracting associations. Almost all have resources to give you basic guidance in marketing -- and your membership, itself, will serve a marketing purpose.

Free Internet resources

See the links to Contractortalk.com and the Journal of Light Construction Online from this blog; you'll find a wealth of useful ideas and excellent peer support in these services.

Speciality (reputable) marketing services and consultants

I like Michael Stone (residential and sub trades, primarily) and Bernie Siben (AEC), but there are others you may find through networking through the consultants. Some heavily marketed and well promoted consulting services are overpriced and deliver commodity-style service. Stay away from them.

Inexpensive (effective) web and Internet design services

You'll see these referenced on the forums; Footbridge Media appears to have a very good reputation, for example.

Your existing clients

I cannot overemphasise the importance of connecting, relating, and listing to your existing clients. They can lead to powerful repeat business and referrals -- and provide you the perfect opportunity to asses your success and marketing effectiveness.

Notably, these marketing strategies will cost far less than the amount you waste on purchasing ads in overpriced police journals; or simply require the modest redirection of resources either of time or limited overhead budget allocations.

Simply put, you don't need to be brilliant at marketing in the construction sector -- you simply need to do a few things right and avoid some simple pitfalls to achieve success far beyond your competition -- and that is great news if you are wondering how you will survive the recession.

Donuts for GCs

Michael Stone's excellent Markup and Profit newsletter is one reason I put him on the higher level of recommended construction industry consultants. (He is also smart -- he saves his 'best' free advice for people who actually sign up for the newsletter, no charge, you generally won't receive the information unless you at least provide your identity to him.)

His latest newsletter contains some of the best and most practical advice I've seen in a long time on how to get "advertising" right, both in the definition I use of paid media promotion, and in the broader lead generating marketing approach he explained in his email to me yesterday.

Since I am not selling consulting services and this site now is generating enough traffic to produce several outbound links to his site each week, I expect he won't mind me sharing with you some of his newsletter content. So here is one gem:

If you are a specialty contractor looking for referrals from either general contractors or suppliers, take doughnuts or cookies to your supplier or GC's sales or production meetings. Let them know who you are, what you do and that you want their business. Don't be bashful or shy. Get out there and let these folks know you want the jobs. Schmooze!
A friend of mine who does HVAC duct cleaning gets three to five new leads each week by simply dropping off a dozen doughnuts every Friday between 7 and 8 am. He normally works for between 16 and 18 different HVAC contractors, and he visits two each week. He buys Krispy Kreme doughnuts using a discount card that provides a buy one dozen, get one dozen free. Use your imagination and deliver the goods.

I should note that I advocate your linking your marketing/selling approach both to your clients' needs and orientation, and your own personality and temperament. Many of us (certainly myself!) hate schmoozing! If you are to be really successful you will need to work around this limitation, possibly by taking public speaking courses, participating in appropriate networking activities or the like. Or you can find other approaches such as properly planned paid advertising, or a really good website/Internet strategy, that will work for you. Also, as Stone suggests,you can set realistic targets that you can simply force yourself to do. Even the poorest 'schmoozers' can do it once a week or so, if the reward for effort is high enough.

References vs. referrrals

This intriguing blog entry on Bnet.com (a useful collection of general sales and marketing resources), Reference accounts can be headaches, clarifies that references are much less useful and valuable than referrals in the selling process. With references, things can go very wrong, at the very last minute, the writer notes.


Of course the converse can be said on the buying -- or hiring -- side. Reference checking is an important resource, both in negotiating purchases, and hiring employees and contractors. As the poster notes, sometimes the reference will point out discounts or deals available to you that you may not have known about, and of course, you can often (if you listen carefully) discern potential problems if you listen carefully.