Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
Profiting From Preferred Contracting Programs
Brand-name backing creates credibility and leads.
David Howard, of Lasting Exteriors, chose to become a Heartland Certified Remodeler because it gives his company the label of a quality contractor.
Photo: © Kelly LaDuke
David Howard's replacement siding and window company, Lasting Exteriors, is one of just two Heartland Certified Remodelers in the Jacksonville, Fla., metropolitan area, population 1 million-plus. Partnering with respected name brands gives his company "the labeling of a quality contractor," says Howard. His company already used Heartland for most of its siding jobs before joining the certification program. "I pay more for Heartland, but [the company is] going to be there, and I've never had a warranty claim on a Heartland product," Howard says.
Without lifting a finger, Terry Skilling rakes in eight to 10 leads a month for Rhino Builders, his full-service remodeling company in Kansas City, Kan. A good 50 percent of those leads, which come from several manufacturer Web sites, quickly turn into sales of exterior remodeling jobs.
Mike Dykeman, of the Dykeman Family Corp., an HVAC/plumbing/electrical company in Milwaukee, gets a lead a week - "good quality customers who are prepared to pay for good quality service" - from the Rheem Team Web site and many more through the Rheem Team ads that run in the local newspaper - at no out-of-pocket charge to him. Each year, a Rheem pro comes to the office to train his staff - also for free - in accounting, human resources, business management - whatever his company needs.
By participating in preferred contractor programs, these three contractors are tapping into the resources, market reach and business savvy of large manufacturers and distributors. At its best, a preferred contractor system is a win-win deal for everyone in the product pipeline: From manufacturer to installer, it primes the pump and generates a healthy flow of sales. The reason? Branding.
For contractors, backing by a name brand manufacturer creates instant credibility, a sense of endorsement, more leads and a sales advantage with customers. For manufacturers and distributors, the reward is brand loyalty from successful contractors.
Of course, not all preferred contractor programs are created equal; at less than its best, the system won't have much impact on a remodeling company. The program needs to be a good fit for your company. The five key decision-making factors are product and manufacturer, membership qualifications, market territory, program benefits, and service.
Products and manufacturer
As when choosing any product or service, it makes sense to start by focusing on companies and products that you already like and that fit your market niche. "Pick a good company that makes good products and has good service on the back end," advises Phil Callen of Callen Construction in Muskego, Wis. His company joined the CertainTeed program about 10 years ago, after selling the manufacturer's products since 1986. The company started selling Elk products about seven years ago and signed up as an Elk preferred contractor program four years later.
"These are products we believe in," Callen says. When picking a preferred contractor program, size is important, too. "The bigger [the manufacturer], the more credibility we bring to the sale."
Tom Seibert, manager of strategic sourcing for the Paul Davis Restoration and Remodeling franchise, is making Owens Corning's Preferred Contractor program available to all 225 franchisees around the country. The manufacturer has a good brand name, he explains, and comprehensive product lines that cover a lot of bases for the diversified Paul Davis companies. Plus, Owens Corning's wind-resistant shingle is important in the insurance repair business, which all Paul Davis franchisees handle.
In order for Lasting Exteriors to become a Heartland Building Products preferred contractor, they had to get a recommendation from a Heartland distributor and testing verification to Vinyl Siding Institute installation standards.
Photo: © Kelly LaDuke
The most basic programs provide sales literature, discounts or rebates, and use of the program logo. At the other end of the spectrum are packages that encompass extensive training and business management aids. Typically, participants in these more comprehensive preferred contractor programs get a certificate for their wall and their presentation books; use of the preferred contractor logo; advertising designs, slicks and/or allowances; a plethora of brochures and other marketing materials; ZIP code-prompted leads through the manufacturer Web site; discounts, rebates or rewards for product purchases; and training in product features, installation, and sales. Some programs are free, while others charge a registration fee, monthly "dues" and/or nominal fees for special marketing services.
Any program you choose should feature benefits that will make a real difference for your company. Rhino Builders is a preferred contractor for CertainTeed, Elk, Pella, Owens Corning and James Hardie. Skilling appreciates the rebates, training and product updates the programs entitle him to receive but says the top benefit for Rhino is the stream of leads that comes in from manufacturer Web sites, resulting in 10 percent of total annual sales. Skilling adds that 75 percent of his siding sales come from James Hardie leads. Though Rhino uses competitive products, as do many contractors, it sells those offered by the preferred contractor companies more aggressively.
For the Dykeman Family Corporation, key benefits of the Rheem Team include uniforms, booties to protect customers' floors, staff training in customer care, access to multimedia advertising and corporate training in a range of management disciplines. "It makes us stand out," says Mike Dykeman. "It helps our overall business and the quality of jobs we're getting."
When Tom Seibert was shopping for preferred contractor programs for Paul Davis, Owens Corning's promotion allowance - equal to 2 percent of a contractor's product purchases - caught his eye. Four years ago, the money could be used only for co-op advertising, says Bo Jackson, Owens Corning contractor marketing manager for the exterior systems business. But feedback from program members led Owens Corning to broaden the spending criteria. Now a preferred contractor can use the funds for new computers, bookkeeping training, trade show admissions, truck leasing - anything that "helps build his business," Jackson says.
Some programs offer more customized assistance. For example, Heartland Certified Remodelers can request a market analysis, personalized postcards to 75 residences around a job site, lists of local new home construction permits and a personalized Web site. "We try to add something new each year," says Allen Duck, advertising and promotions manager for Heartland Building Products.
Until now, one of the key benefits of Elk Roofing's 3-year-old Peak Performance Contractor Program has been an extended product warranty. Next year Elk will beef up the program's marketing component, too. "In a customer's home, contractors sell themselves. The key is to get them more people. We'll help them do that," says Matt Ellis, re-roof market manager.
The most effective preferred contractor programs are the ones that are hardest to get into, say members. According to Phil Callen, if there are too many certified contractors, the designation has "no value" in setting contractors apart. Besides, if a program is too easy to join, quality contractors may find themselves sharing the preferred contractor title with companies that do sub-par work. When that happens, the trustworthiness conveyed by certification is destroyed.
As a result, manufacturers are raising the bar for admission. For example, requirements for joining Owens Corning's Preferred Contractor Program include three years in the contracting business under one name, a clean Better Business Bureau record, clean credit and legal reports, local business references and documentation of workers' compensation and liability insurance. "Only 60 percent of applicants make it in," says Bo Jackson. Since Owens Corning's Preferred Contractor Program for roofing products installers started seven years ago in 1997, it has grown to include 3,400 participants nationwide.
Heartland Building Products also has stiff requirements for participation in its preferred contractor program, including recommendation from a Heartland distributor and testing verification to Vinyl Siding Institute installation standards. Since the Heartland program started three years ago, about 200 contractors nationwide have signed up.
Elk's Peak Performance Contractor program has two tiers. To qualify for the Rainier level, contractors have to meet insurance, licensing and clean business standards, pass a written test and submit 15 recent roofing jobs for verification. To move up to the Everest level, they must have been Rainier members for at least a year and have been in business at least five years.
James Hardie Building Products is reinventing its preferred contractor program this year to make it more selective. "You can't have everyone because then it doesn't mean anything," says Greg Kelly, Hardie's repair and remodel segment manager. In July the company launched a six-month process of closing down the program region by region, replacing it with a more selective one with 20 percent fewer members. To qualify for the new James Hardie Replacement Contractor Program, contractors need a clean business report, customer references, insurance and state licensing where required. The Alliance has three membership levels based on sales volume and commitment to Hardie; the higher the level, the more customized the sales tools Hardie provides.
Most preferred contractor programs limit the number of members in a sales territory: The idea is to support the market without pitting preferred contractors against each other.
"We base the number of contractors on the number of laminated squares that are in a market or state," says Matt Ellis of Elk Roofing.
Rheem also distributes preferred contractors strategically. Dykeman says there are six Rheem Team members in the greater Milwaukee area, so "we don't run into each other that much."
Of course, the best deal of all is to have a territory exclusive. As the only Custom-Bilt Preferred Contractor in south central Texas, Southwest Metal Roofing Systems has exclusive sales of residential roofing products distributed by Custom-Bilt Metals within a 100-mile radius of San Antonio, Texas.
This is the go/no-go factor in choosing a preferred contractor program. Without good service, a preferred contractor's elite standing doesn't mean much. Before registering as a preferred contractor, check out the availability of the manufacturer's product in your area, the turnaround time on orders, and the company's responsiveness to service requests from all contractors - especially preferred contractors.
As an Owens Corning preferred contractor, "I know who to contact, and I can get my questions answered quickly," says Bill Holz, sales manager at Paul Davis Restoration and Remodeling of Southeastern Wisconsin, Milwaukee. "And the installation training we get puts us in a better position to be an authority when communicating with our customers."
Tommy Kincaid, owner of Southwest Metal Roofing Systems, gets two or three leads a week through Custom-Bilt's Web site, and if he wants a Custom-Bilt representative to join him on a sales call, he has only to say the word.
David Howard says the Heartland rep in the Jacksonville area is "always available to me," and warehouse is "also accessible." According to Howard, service and problem-solving assistance are just "a phone call away."