Marketing, quality and value

Home Shows can be truly effective in supporting referrals and word-of-mouth. If you have a great reputation, people will 'rediscover' you at these events.

We all appreciate the power of positive word-of-mouth advertising.

In fact, the absolute power of word-of-mouth is so great that many generally successful businesses think that advertising, promotion and marketing is beneath their dignity. In good times, especially, they receive enough work through referrals and repeat businesses they have to turn away business they don't like.

Conversely, many people perceive a negative correlation between quality of services generally chosen by word-of-mouth, and advertising. Is the lawyer with the biggest ad the best? As a consumer, are you more likely to trust the renovation contractor who buys full page ads and attends all the home shows, than the work done by the contractor at your neighbour's home -- when your neighbour raves about the "find" of such good service?

My wife, for example, is using the services of a woman to help around the garden. She learned about the service provider from one of her good friends, who is really good at finding bargains and good value. Now that this person is working on our garden, two immediate neighbours have also signed up with her.

Finally, I have a (nearly) absolute rule about hiring. I will never hire anyone (outside of a sales rep), who uses "marketing and sales" techniques on me. And I don't really care about how good the resume looks (marketing) except to validate other impressions. In other words, if I feel potential employees are presenting themselves with assertiveness in looking for work, I offer them the opportunity to take the sales evaluation test, but I will never hire them to be writers, or designers, or administrative assistants.

The reason: I know the best employees and the ones who ultimately will be the least expensive, will be the ones who are passionate about their craft, not their sales or marketing ability. (Obviously these rules are somewhat inverted when I'm hiring sales representatives!)

But here is an irony, which you should consider carefully. If your business is so good at word-of-mouth in good times that you think you will never need to market or advertise, you will ultimately be much more successful if you build marketing and promotion into your mix.
The reason is that you can stabilize your business volume and usually raise your prices more than enough to pay the actual marketing costs. (Certainly you can provide repeat client discounts, of course.)

The challenge is that it is hard to make the switch to advertising and organized marketing. The reason: You need to spend time and money on this stuff, not your actual work, so you have a cost to pay.

Added to the challenge, some people, most likely in your immediate orbit of potential clients, may feel the same sense of disconnect between advertising/marketing and quality. You are fighting against your perceptions and those of the people closest to you.

Here are a couple of ways to get around these challenges.

Focus on media/publicity rather than conventional advertising

Great media publicity is almost like magnifying word of mouth. You will earn credibility and respect. You cannot of course control when and how the media reports on you, and you need to learn some basic public relations and communications skills.

Advertorials are often the soft-entry to media publicity

These are largely our business. You have much more control over the content and delivery time, and (at least as part of our service), we'll take some time to show you how to manage your media relationships.

Organized referral/thank-you and relationship building programs make sense

Instead of relying on word-of-mouth, encourage it through organized referral programs. These may simply be to provide your current clients with discounts on future work (and discounts for their friends) for referrals, or you might set up "Thank you" or networking events for your current and potential clients.

Finally, of course, you should not sacrifice the quality of your service and the word-of-mouth you've earned when moving into the advertising and marketing space. A high referral/repeat rate will still most likely be your best sign of business success.

How to connect your marketing pieces for success

Robb Graham and Jessica Rowan at the first SMPS Ontario T3 (Third Thursday) networking event in Toronto. How can SMPS chapters attract more participation at events? Tim Klabunde in Washington, DC offers some ideas in his Cofebuz Blog.

Three interesting posts on the blogs I monitor closely demonstrate the challenges and opportunities in construction marketing.

In the first, Tim Klabunde answers a question from a fellow SMPS chapter co-ordinator trying to get more people out to local chapter meetings. He says the most effective approaches are building on word of mouth, and "viral marketing". The latter approach worked for the Design and Construction Network, an initiative founded on online sources such as linkedin.com. "I have not yet been able to make it happen for our SMPS lunch programs," he writes. More effective, in this case, is encouraging and enhancing word-of-mouth promotion.

Instead of just sending out blast e-mails about an event (which you should still do) build a group of people that are responsible to invite people during the course of regular conversations. So, if you send an e-mail to a friend that might benefit from attending ask if they are going to be at the program and let them know that you are going to be there.

Meanwhile, Michael Stone reported that while attendance overall at the Journal of Light Construction conference held up well despite the recession-induced stress in the housing market, he says he was surprised that few younger contractors attended the event.

JLC Shows have an interesting mix of attendees, with younger business owners (20’s and 30’s), as well as those in their 40’s, 50’s, 60’s and even beyond. This show had a serious lack of business owners in their 20’s and 30’s. I have been a speaker at JLC Live shows for many years now, and this was by far the oldest group of attendees that I have seen.

So the question begs to be asked, “Why?” Let me offer my theories, and I’d like to hear yours.

Many older business owners have been through one or more of the housing downturns that we are now experiencing. They even remember the last really tough market, the late 70’s and early 80’s, with mortgage rates in the teens and twenties. They know from experience that we always come out of these downturns and move on to better things, more business, a brighter future. When things are slow, they know that investing in their education will pay off in the long run.

For many young business owners, it is their first business setback or downturn. They have never experienced a lack of phone calls and business, especially when the market was so easy so recently. Many are pushing the panic button and giving their work away, and are working on the jobs themselves. They associate activity with accomplishment. They don’t have time to visit a trade show, they have too much to do.

Stone, of course, says this is unwise. When times get tough, you need to get out and learn how to run your business more effectively. He's right, to a degree. But when the wolf is at your door, and you don't have experience otherwise (and lack capital), you might find it strange to spend time away from clients and spend money on hotels and attendance fees for a conference.

Finally, look at Mel Lester's posting in his E-Quip blog:

As many of you know, I’ve long maintained that superior client service is the best differentiation strategy in our industry. Last week I stumbled across still more evidence to support my claim. The consulting firm Morrissey Goodale recently published the A/E Industry Customer Service Report Card which summarizes their survey of project owners.

Notable in the report is the paucity of high marks for several key service areas. Following are some highlights from the report:

Only 16% of clients gave their A/E service providers an A grade for overall satisfaction. A fourth of respondents gave firms they worked with a C. Sixty percent gave their firms a grade of B.

The lowest scores were largely related to the direct interaction with the client. Only 14% of firms got an A for communications. Project managers received the highest score only 12% of the time. Project management earned the lowest score of all--7%.

When you pull together the threads from these blogs, you can come up with some interesting observations and clues about how to be more successful with your construction industry marketing.

1. Nothing beats interaction and communication with your clients and prospects. You can do this at conferences and events (Stone, as a consultant, is right to be at the JLC conference, but if you are building business within your markets, I would advocate you attend conferences where your clients are attending, more than your peers.) You can also connect by email, or supplement emails and phone conversations, depending on the nature of your relationship and situation. (Someone who had communicated with us on Internet forums sent an email to me yesterday, I responded with a phone call, and obtained some valuable business from that conversation.)
2. Your biggest marketing "hits" and "wow" success stories have an aspect of unpredictability about them. Tim Klabunde could not have known ahead of time how the Design and Construction Network would catch on, online. I certainly didn't expect that the postings on "Change order boat" would result in more Google searches to this blog other than the obvious Construction Marketing topic.
3. However, in assessing the unpredictability of really successful marketing events, you can learn from others' experience and of course ride the wave when it happens. Media publicity, like viral marketing, can achieve dramatic and surprising results, but there are ways to encourage and manage them. While you have to be careful about budgeting for a hit, you certainly can respond effectively and if appropriate stoke the fires.
4. Finally, you are most likely to be successful if you apply several complementary approaches at the same time. The Design and Construction Network Happy Hour marketing in part achieved viral status because rarely can online interactions lead to face-to-face communication in short order. Likewise, this blog and other online resources allow me to maintain relationships with current, former, and future clients in an unobtrusive environment -- the key is to make closer, more personal and immediate connections when appropriate. (And of course the blog and reference to other bloggers enhances lateral relationships -- the fellow bloggers have their own networks, influence, and connections, so the circle grows wider even as marketing depth and effectiveness increases.)

How can you tie these thought threads together? Most importantly, connect with your clients. Use a variety of complementary resources and marketing methods. You'll achieve success, both slowly and incrementally, and then, suddenly, you may find you have a marketing hit on your hands.

Passion first, marketing second

New GOHBA Renovations Council president Jason Labelle, president of Dalton Corporation, after the monthly council meeting.

Yesterday, I attended the monthly meeting of the Greater Ottawa Home Builders' Association Renovations Council, in two roles -- as a journalist/writer for the association's newsletter, The GOHBA Impact! and to address the second item on the meeting's agenda -- providing a progress report on Ottawa Renovates!, the magazine project our consortium won through a wired bidding opportunity to promote renovation services in the region.

At meeting's end, newly-appointed council chairperson Jason Labelle, president of Dalton Corporation, outlined his business experience and effectively described the qualities that underlie most people who enjoy success in the construction business:

"As far as my company goes, I really believe in doing it right," Labelle said. "It's the artwork -- when we walk way at the end, it's the feeling, 'wow, we created this . . ... we built it.

"I truly believe in the renovation business, I think there's a big artsy side to me, and I get to do it -- to create it, build it, mould it, and share it."

His business, not surprisingly, relies on word of mouth and referrals, but there is some intelligent marketing as well. The annual Christmas greeting creates a 'keep in touch' with former clients, and he follows up six months to a year after each job, to ensure the client is satisfied and any follow-up maintenance is done.

And, like most successful business people, he has built a team of employees and sub-contractors who share the same values and passion for their work. "My foremen won't let me get away with 'just good enough' -- they'll catch me."

"In some places, we'll do a job and then someone across the street will contract with us, then down the block, all by word-of-mouth."

Do these attitudes describe you and your business? Then you've won more than half the battle when it comes to marketing.

Labelle, like other local renovators in Ottawa, has yet to feel the economic pinch of the current recession; despite some major layoffs and business consolidations (including the bankruptcy of former high tech high flier Nortel) this region has so far not felt much pain, in part because it is a government town. Renovators Council members are bracing however for an influx of new business start-ups, some under-the-table, as new home construction contracts and out-of-work tradespeople begin competing for available work.

Labelle says he would like to see the Renovators Council achieve greater recognition. "I would like to market us in such a way that it is a no-brainer -- if you want to renovate, you want to renovate with the professionals."

That's where the Ottawa Renovates! project fits in the picture. A few months ago, after sitting in on a meeting of the Renovators Council, I received word from former Council Chairperson Mike Martin (who now is responsible for the provincial Ontario Home Builders' Association Renovators Council) that he would welcome a proposal from my business for a new renovation publication. After initially hesitating -- we've only handled business-to-business marketing, not business-to-consumer projects -- I decided the best way to handle the situation would be to set up a consortium; and ultimately formed a partnership with designer Gordon Keith and publisher Brian Warren to get the job done. The new magazine is at the printers, to be ready for the annual Ottawa Home Renovations Show this weekend, and a related website will also be live soon, as well.

Does it surprise you that we won this bidding opportunity though our own reputation and relationships, and (underlying these) our passion and enjoyment of our own work?

Our challenge is to help and work with business owners who really care about doing their job well; who deeply enjoy what they do, and in normal conditions have customers eager to share and recommend their services, to adapt some basic marketing and sales techniques to support and enhance their already-successful business brand and reputation.

This is not the world of high-pressure sales; it is not an environment where you need to grind people down to get them to buy your services; rather, you take your existing relationships and reputation, and expand on the basics; building your reputation even further, while preserving your margin. Yes, you advertise, you market, you promote your business, but underneath everything, you will succeed because you love doing your work, and you are able to assemble around you employees and vendors who share the same inner passion. Of course, you are really lucky if you can work with marketing specialists who care about their work as much as you care about yours.

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.

The cornerstones of construction marketing success (2)

Today, several readers answered these three questions in a special online survey following up on the recent posting: The cornerstones of construction marketing success:

1. In you opinion, describe your greatest competency: That is, the element of your business/self where you truly are among the best in your field.
2. Now, describe your greatest enjoyment/passion: The interests or activities (either personal, business, or both, which give you the greatest pleasure and enjoyment.
3. Have you combined your competency and passion in reaching out to your potential market (previous, current and potential future clients)?

The responses are interesting -- only a small number answered conclusively "yes" to the third question. Your written observations need to be followed up with some phone conversations and interviews.

Still, is it true that only a few of you are actually combining your passions and interests with sincere and ongoing relationships with your clients and potential clients? Or, perhaps, you may take for granted your competencies and passions because they happen so easily and naturally you don't attach significance to them?

Can you manage or harness Word of Mouth marketing? Maybe . . .

In my previous posting, I contended: " I don't think you can manage or harness your word of mouth marketing." Perhaps this is not 100 per cent correct. Organizations such as BzzAgent Inc. offer a service to consumer marketers to spread the word through organized word-of-mouth seeding. Dave Balter's book: Grapevine: Why Buzz Was a Fad but Word of Mouth is Forever explains the concept -- the BzzAgents receive product samples and guidance, he says, but are encouraged to be transparent about their objectives, and file reports on their word-of-mouth spreading activities. I signed up to be an Agent last night. (Agents are paid in rewards points and with free samples, but most participate for the chance to be ahead of the curve in new product introductions and for the ego satisfaction in spreading the word.)

I doubt most construction industry businesses could benefit from this type of consumer-market service; just as they would probably not have sufficient sample size and market diversity to benefit from organized consumer feedback surveys conducted passively (that is, by relying on online invitations rather than someone going out and directly asking the survey questions, which can be both intrusive and irritating to the person receiving the survey questions.)

But there are ways, I believe, to engage clients and 'manage' word-of-mouth, and in the previous posting, I suggested a simple approach -- find ways to go with your most satisfied clients to association/community events and network with them among peers and other potential clients.

I also think if your business culture internally is respectful, engaging, and rewarding, your employees will naturally spread the word among their peers and connect in the community with potential clients in ways that can only help attract new business for you. Of course, encouraging non sales/marketing employees to help out with referrals and recommendations (and leads) is sometimes easier said than done -- but will probably be a whole lot more profitable than engaging external marketers to drum up new business.

Can you manage or harness Word of Mouth marketing?

This ad is from the home page of the Word of Mouth Marketing Association, which publishes a blog, The Womma Word. I first learned about this association from the late Sonny Lykos.

Undoubtedly the most effective -- or damaging - market force affecting your business is word of mouth. What people say about your business behind your back, including current and former clients, employees, suppliers, and in some cases complete strangers, will determine your marketing success or failure. The slickest, most expensive, and best executed advertising strategy will (with few exceptions) go to waste if your community sees your business in a less-than-positive light; conversely, if you are well regarded, your phone will ring or email will ping, and you'll have plenty of business to keep you going.

The answer to the question "Can you manage or harness Word of Mouth marketing?" is two pronged.

If you have a great reputation -- your word of mouth is truly positive -- you can, indeed, capture and use it in your marketing to boost your effectiveness and results. This is great news for many excellent contractors, who in good times, didn't need to look for business -- it came to them without any effort -- but now are facing some challenges as the phone has stopped ringing on its own.

If you have a not-so-great reputation, you need to fix the underlying problems before you begin assertive marketing. The best solution to this issue, I've found from hard experience, is deeply engaging yourself with your business and your clients. You need to clear away the muck of desperate employees, and find first-hand what is wrong and then fix things before you begin worrying about your external marketing.

Finally, of course, if you are new or a start-up, you need to set habits and business practices to create the positive word of mouth setting, and build it from there.

These may be obvious truths, but here is an example of what I mean in practice. Yesterday morning, I received a call from a Chicago-area roofer. He wanted to know what I could do for him. "Do you have blast faxes, or mass email services?" he asked.

"Well, no," I replied. "In the U.S. advertising faxing will land you in trouble with the FCC (Federal Communications Commission) and I'm not really into spam."

I made it clear that in fact, I have nothing at all to sell to him -- we don't have a publication serving his market, and even our regional websites are in most areas still hidden under a generic cover page. But as you may notice from the blog's sidebar, I've gone out on a limb and offered free suggestions and advice for marketing, so proceeded to help him as much as I could.
Without an axe to grind (or any benefit in mind for my own business), I asked him if he has a good business reputation. He said, "Yes, our customers really appreciate our service and honesty." Since I am not in Chicago, I have no way of knowing this for sure, but I found this one clue about his business, Wayne's Roofing, at phone number 800-300-5910. ("Great phone number," I told him.)

In his listing on yellowpages.com you'll notice this positive comment, posted on March 17:

Great Value; Very honest guys with quick work turnaround. Great pricing, quality materials. I was very pleased with the job they did. I would definitely recommend!

Cool -- as far as I can tell, even with one example, Wayne's Roofing is getting it right.

Now I'm not rushing to suggest that this company spend more (or anything, at all, for that matter) on Yellow Pages listings, and certainly the business owner shouldn't spend money on blast faxes or spam! But I'll take him at his word, he delivers "Great Value".

I asked Wayne some additional questions. He said he is looking for commercial rather than residential work. This led me to suggest:

1. He work on getting a proper website set up; nothing fancy, just good enough to be an introduction to his business;
2. He plan some targeted Google Adwords advertising in his market, and take advantage of the free Google Local service; and
3. He find out which trade associations and groups his most satisfied clients belong to, join these organizations, and then go to association meetings one-on-one with his satisfied clients.

I think Options 1. and 2. went over his head -- he isn't really interested in the Internet, technology, blogging and things like that, and there is no way it makes sense to run a business against its grain. But he liked and thought he could implement Option 3. easily enough. "I enjoy being with my clients," he said. Clearly, if he attends meetings and events with satisfied clients, he will pump the prime for word-of-mouth recommendations.

For example, he could invite a client to attend BOMA (Building Owners and Managers Association) Chicago chapter meetings. He sits at the lunch table next to one of his most satisfied clients, a local property manager. Just imagine the dynamics of the table, the spontaneous observations, and the behind-the-scenes information he can share/receive in this environment. He is setting the stage for referral and recommendation business, and insights into upcoming work and opportunities. He'll also learn through the grapevine about who to avoid -- the slime balls and dishonest businesses or those who can't pay their bills. This only works, of course, if his clients are truly enthusiastic about his service and value.

You may find other clues about 'harnessing word of mouth' in this example. Some companies have found setting up feedback forums and services and publicly encouraging client comments (negative as well as positive) facilitates the expanding impact of Web-based word of mouth advertising. The Apple ads with the bloated (and nerdy) Microsoft Vista user are effective because (alas for Microsoft) they reflect truth -- and what is happening in the word of mouth community; certainly the community I inhabit.

Finally, a word of warning. You may be tempted to fake your word of mouth reputation. If you want to play these games, (which I don't recommend) proceed with caution. Sure, you can seed Internet forums and public listing services with positive comments from your friends and employees, but if these comments don't reflect what is really happening, the backlash will haunt you. You can also pay for artificial and phony surveys to obtain the result you are seeking. But wouldn't it be more helpful for you to know what your clients really think about your business -- and then do something about the underlying problems.

In conclusion, I don't think you can manage or harness your word of mouth marketing. But you can solve the underlying issues to create an environment where positive word of mouth is earned and deserved -- and you can certainly foster and encourage this good-will through your marketing strategies.

The good, the bad and the ugly

Chevrolet gave the 'tools' to the public to create web-based viral ad campaigns for their Tahoe SUV. If they were expecting warm and fuzzy conventional commercial messages, they were doomed -- instead, creators used the opportunity to reflect their own values, not quite what GM had hoped!

First, the good. From The Womma Word, a resource I first discovered from the late Sonny Lykos, this list of the "Top 100 Advertising, Media and PR blogs." Alas, Construction Marketing Ideas isn't on the list, but you know about this blog anyways, so it doesn't really need to be there.
Now the bad. The same Womma Word e-letter has stuff that shows you just how bad marketing can really be. Like inviting young, environmentally sensitive Youtube viewers to "make their own commercials" about a gas guzzling and expensive SUV. Duh....
Oh, the ugly. My bad. Not looking around my own business close enough for signs of stress and overwork among our employees. As I traveled to Denver for the SMPS Conference and observed sales reports at our regular meetings, something in my mind didn't catch the (should be obvious) signal that things were getting awfully busy. Why is this ugly? Because there comes a point when hard working and dedicated employees get overloaded -- too busy to seek out assistance but far too stressed for fairness and reasonable workload. And since our hiring process must be thorough, careful and thoughtful, the solution isn't as simple as picking up the phone, hiring a temp, and saying "we're done."
I constantly observe that great marketing involves great relationships between our employees and our clients; here, even though the indicators were right under my nose, I failed to see this in a timely manner. Fortunately, this problem can be fixed, and will be, as I learn from my mistakes.

Balancing your marketing priorities

This image is from illustrator Derek Mueller. "I specialize in Advertising, Americana, People, Product, Packaging, Food, Adults, Children, Humor, Editorial, Book Illustration, and Rockwell Style," he says on his website derekmueller.com.

If 69 per cent of new business originates from existing clients, referrals and word of mouth, how do you apply this focus in relationship to the other 31 per cent of new business -- resources such as advertising, RFP/Tenders and in-your-face (or ear) canvassing or telemarketing? Where do the minority marketing options assume special significance?

The answers to these questions of course depend on the nature and stage of your business. My recent poll is not a formal, scientifically valid survey (though I doubt the validity of virtually all formal marketing surveys -- I've reported before on the problems of survey fatigue, and the irritation many people (including myself) feel about intrusive inbound survey calls -- I now treat them with courteous avoidance, like telemarketers.) Yet, my sense through several years in the business is that the poll is accurate; reflecting the real world, and providing a useful reminder of what we need to do to succeed in construction industry marketing

To reiterate the essential points:

• Most of your new business will come from existing clients and word of mouth -- so your marketing -- and brand development -- must focus on the actual interactions you have with existing and new clients equally; with 'every thing you do counts' energy.


• Wherever possible, you will want to connect and enhance this word-of-mouth process and relationships; and you should use the other marketing options to facilitate these connections.

So, when and how should you use the other tools in your potential marketing arsenal?

When you are starting out, and don't have any clients, you need something fast-acting and inexpensive. Conventional paid advertising is likely to be relatively ineffective, with the exception of some web-based options such as paid keyword search, or free Craig's List ads. Your best results, if you can find a way to achieve this, is through powerful media publicity, harnessing your existing friendships and relationships, and the like, to make effective use of new business word of mouth publicity. Often, you can find opportunities through your network as a sub-trade or junior supplier (note there is a danger here of living in someone else's shadow; and your margins may be hammered).

Then, there is canvassing and telemarketing. I hate both and hope you never do either on me, but the fact is they force consciousness on you and, if you have very little business, bring you closer to your market, and in connection with potential clients. They are easily measurable and because you are reaching out -- rather than waiting for bargain hunters to call you -- may avoid the 'lowest price loses by winning the job' trap.

I'm less excited by RFPs and tenders, though possibly, especially in the ICI sector, public tenders may help you get started -- the problem is that the bidding is either structured to favour existing relationships with incumbent or 'wired' businesses (subjective qualification criteria are now built into most RFP processes) or the sheer volume of competition makes it unlikely you will win unlesss you are practically giving away your services.

These criteria also apply if your business is more established and especially if recession is blowing away your market, and you are worried, and want to find new business. First, if this is the case, I would redouble my marketing efforts with existing and previous clients; here some 'keep in touch' calls will probably pay real dividends (assuming you did your work excellently in good times). Certainly, chasing blind RFPs and tender calls is a recipe for disaster. You need to use your network to see if these are 'wired' to avoid wasting time -- unless, of course they are wired in your favour! The time you spend preparing for these opportunities could better be spent on the phone searching out new business where you don't have as much head-to-head competition.

5 most successful marketing techniques?

This contractortalk.com thread starts with this question: "Can you all let me know what the five best marketing techniques you are using are? In other words...the five best ways that you get business."

Lots of interesting suggestions and observations; not surprisingly word of mouth and effective use of the web (with Search Engine Optimization) dominate -- but there are certainly differing opinions.

The "marketing budget"

Tom Lykos receiving the Renovator of the Year award at the Florida Home Builders' Association. Tom, president of the Lykos Group in Naples, Florida, is Sonny Lykos' son

Recently, in response to my posting quoting the contractortalk.com thread reporting on participants' advertising budgets, Sonny Lykos filed this comment. It is important enough to be worth republishing here:

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 six per cent 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 two hours and you arrive at $150. Multiply that three 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 three months, then again nine 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 two hours are allocated including travel time. On large projects four 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!

Now, Lykos also reported to me in an email that he disagrees with one of my other favorite gurus, Michael Stone, about advertising budgets. Stone recently visited Lykos' son in Naples, FL to provide consulting services and help the local business grow with solid business management principals.

However, my philosophy on that subject is 100 per cent the opposite of Michael Stone's. It's the one thing he and I disagree about. Actually one of two things. He thinks no company should depend upon referrals. When he was here, hired by my son Tom, (about 4-5 weeks ago) he told Tom he should budget 4 per cent or more for marketing. At $6M for last year in sales, that's about $240K. In my opinion, ridiculous! Besides, if Tom did that and generated an additional 20 per cent or more in sales, could have been catastrophic if Tom did not have the "systems" in place (he didn't) to service those additional sales. Exceptional grown that's not prepared for can be just as devastating to a company is not having good cash flow.
That's why I suggested to Michael, as Tom did, to concentrate on helping Tom create those systems (Tom will not accept advice from me) so he would be better prepared to sustain his current growth rate.

In a further email, Lykos added:

I think Michael's marketing percentage is fine for start ups, and could be good here and elsewhere for certain seasons. For example, Tom gets a lot of jobs while the snow birds are here, and schedules most of the major jobs for while the owners are up north. If he had less sales, not enough to keep everyone busy during the summer, he could market specifically for full time residents for that summer time slot."

So, what can we discern from all of this?

Lykos' point that if you took some of the 'marketing budget' and put it into really WOW client service and follow up makes a lot of sense, but Michael Stone is also right in warning about a passive approach to referral and word-of-mouth marketing. One good reason, as noted in Lykos' second email, is that this is a seasonal business -- you need to adapt to different market conditions/environments, and the referrals won't necessary 'carry you' consistently through all market conditions, both seasonal and (as we are experiencing now) a major economic slowdown. This creates balancing challenges -- as to maintain your work-force with steady employment (a real important marketing advantage, because secure and happy employees represent your relationship with your clients) you need to be able to manage the work flow volume and create a steadier cash inflow.
However, of course I would advocate that you would do better developing a systematic client follow up and communication system coupled perhaps with strategic advertising/marketing for seasonal variations rather than blindly repeating your Yellow Pages ad (of course repeat it if works). And I also agree that your marketing needs to be thought through and budgeted, and planned, not seat of the pants (though it probably doesn't hurt to allow a little 'slush fund' for last minute ideas, inspirations, or that really resourceful media salesperson with a great idea to test.)

Non-marketing brilliance

Inside the Pro Hockey Life store in Vaughan, Ontario, the world's largest hockey store.

Jeff Goldberg doesn't have a website nor carry business cards for his tenant fit-up and retail design/contracting service. He doesn't have any employees, working from his home. Yet his business does more than $8 million in contract volume a year, from some of the smartest and most market-savvy Canadian retailers.

In fact, he told me today in the presence of one of his most enthusiastic clients that the upcoming feature about his business in Ontario Construction Report will be virtually his first marketing activity since he started his business about a decade ago. (And this initiative is because our GTA-area co-ordinator Chase's work in encouraging him to have the feature written.)

Goldberg, who started doing work for Chapters, still has Chapters/Indigo as a major account. Keith Hunt, senior vice-president at Pro Hockey Life, knew Goldberg from when he worked at Chapters, and invited Goldberg to handle the interior fit up of the new, and rapidly expanding, group of hockey super-stores. Hunt offered one of the most enthusiastic testimonials for a supplier I've ever heard.

"I have no idea of how he (Goldberg) does it," Hunt said. "He is incredibly detailed and organized . . has tab in his binder for everything, he is just the most organized guy I’ve ever met."

Pro Hockey Life is expanding from its Montreal base; the Vaughan Mills store is its first in Ontario and is the largest hockey-only store in the world.

This is a 34,000 sq. ft. store where you can find virtually anything and everything associated with hockey. My eyes lit up as I walked past rows of skates, sticks, goalie pads -- even a sizable area dedicated exclusively to referee gear.

We also had some fun in the store when I mentioned that my 10-year-old son Eric is a serious hockey fan -- I found a hockey shirt for him, and Hunt introduced me to an employee who is a dead-on lookalike for Ottawa Senators captain Daniel Alfredsson. So we set up a posed shot with the employee dressed in a Senators' uniform.


When I returned home this afternoon, I said: "Eric, do you recognize who is in this picture" and showed him the image of the look-alike employee. Eric let out a whelp, before I came clean, and gave him the hockey shirt I had purchased at the store. (Hunt graciously sold the shirt at the employee discount rate.)

OK, really talented retailers with rapidly growing businesses who need to market effectively to attract and retain clients use a designer/contractor who doesn't advertise, doesn't have a website, doesn't have any employees, and doesn't even have a business card. I had a 'wow' reaction in the hockey store, and an even greater 'wow' reaction when I heard this story.

Of course there is a reason why Goldberg is successful and doesn't need to market assertively. He is super-talented at his craft; he provides undeniable value to his clients, and (in part because his clients are also successful in business) he has no shortage of repeat business.