The Merits of Marketing

ROI: Return on investment. It's an important metric when gauging what to spend on advertising and marketing your business. It can be measured in sales and margin; it can also be measured — though not easily — in brand awareness. Some remodelers do primarily repeat and referral business and avoid advertising.

March 31, 2005

NCP Design/Build Ltd.
McCollum & Associates

ROI: Return on investment. It's an important metric when gauging what to spend on advertising and marketing your business. It can be measured in sales and margin; it can also be measured — though not easily — in brand awareness. Some remodelers do primarily repeat and referral business and avoid advertising. Others take out ads in media including magazines, newspapers, TV, radio, Internet, Yellow Pages and more. Jud Motsenbocker, Clai Porter and Scott McCollum discuss the importance of marketing, if not advertising, even during good times.

Jud: What kind of marketing do you do?

N. Claiborne Porter Jr., President
NCP Design/Build Ltd.

Started in 1978, NCP Design/Build is located in Anchorage, Alaska. In 2005, says Porter, the firm will do $1.8 million in remodeling volume and also build two custom homes and a duplex. NCP employs four people in the office, including two architectural draftsmen, and seven carpenters. Porter’s 80 to 90 annual jobs range in size from $500 to $300,000.

Clai: We work real hard with our previous customers. About 50 to 55 percent of our work every year comes from previous customers. We try to serve them as best as possible. We're in the home show every year, and that started in 1978.

We have business cards, jobsite signs, clean trucks, clean jobsites — those things are all very important. We have a 3×10-inch card that we update. We give those out at the home show, and I give them out when I go to meet a customer.

We have a Yellow Pages ad, but that has actually gotten smaller over the years instead of larger. Also, we belong to different organizations like Rotary.

Scott: We sat down and wrote a marketing plan that was built around owning a particular geography in far north Dallas. We started with the simple things: collateral materials, vehicle signage, yard signage and a letter-writing campaign. At the introduction of the jobs, we would have the superintendent or the salesperson gather the 10 or 15 addresses affected by our construction. We sent them a letter letting them know we were there and to call if there were any issues or concerns. We followed that up at the end of the job with a letter thanking them for their patience and asking them for their business. We sent out a quarterly mailing to that particular subdivision.

We've expanded that to three additional territories where we send out a quarterly mailing. This is a high-quality, four-color, glossy postcard, speaking to the image we've tried to create as a premium provider of quality residential construction services.

The clean jobsite is the greatest advertisement that we've got in our business, so we're pretty meticulous about that, down to the point of the yard signs being square and level and clean as well.

We use association memberships to create a place for ourselves in the local market as somewhat of an expert. We're asked for comments for newspaper articles. We're asked to go on the radio; home improvement shows on the weekend. We do the Home Idea Pavilion at the Parade of Homes. With that, we're there to educate and inform the public.

We promote our business through different award competitions. It's been very effective in using the awards to get that third-party affirmation and really own some more of these territories.

We do a little bit of print advertising and branding in a high-quality, upscale magazine called D Home. We advertise every other issue. We've never had a piece of business that directly came from that, but we've certainly had people comment that they've seen our ads and our trucks, get our postcard mailings and read about us in the papers.

It all works to build a cumulative effect of being a much larger company than what we really are, and having a much greater degree of penetration than what we really have.

Jud: Scott, you talked about a marketing plan. Did you have some professional help or did you write it yourself?

Scott McCollum, Owner
McCollum & Associates

Located in far north Dallas, McCollum’s 7-year-old remodeling company grew to $6 million and 32 jobs in 2003. A former custom home builder, McCollumn employs one salesperson, one office person and a few field staff. The firm subcontracts most work.

Scott: My formal education and training is in business administration and marketing. In my previous life, I worked in marketing for a large national company. I had a well rounded exposure to marketing in the home-building business for the 10 or 12 years I was an active speculative home builder.

Essentially, I wrote the marketing plan. We have refined that over the last five or six years. We started out with a one-year, three-year, five-year business plan supported by a one-year, three-year, five-year marketing plan.

Jud: Clai, you try to satisfy the customer, and your marketing plan is word of mouth. Is that a fair statement?

Clai: Yes. My wife is my partner, and we've been in this business together for 28 years. She is a real-estate broker and has a master's in marketing and business administration. We wrote a plan once several years ago, but it has been very intuitive since then for both of us.

I've often defined this business as "retail construction" because we deal with the consumer much in the same manner as a retail operation would. The customer is always right. We may not agree with that, but we'll do whatever it takes, within reason, and sometimes not within reason. We have one client where we've done 17 jobs on the same house, and we have yet to repeat any job on that house.

Scott talked about the awards — we've found the opposite with the awards. That's probably due more to geography than anything else. I get more out of being in the local newspaper than I do with a design award.

Jud: I think we all work on the branding idea. Image, in our community, is as important as anything.

Clai: That funny little handout card that I have started out years ago as beige and brown. It's now white with blue printing, which are the company colors. People come back to me holding that card five years down the road saying, "We got this at the home show and we're ready to start now."

Scott: I've had that same experience with our postcard mailings. At one house a woman went to her desk drawer and she had every postcard I ever mailed every quarter for the past four or five years.

I don't want to discount the value of existing customers. I've only been in business for seven years, but we have a number of customers for whom we have already done multiple projects of significant size.

Jud: Scott, you've got a disadvantage because you've only got seven years in the business. Why do you do media advertising, if you want to call it that: print, radio or broadcast advertising?

Scott: I do print. That's what I call the image advertising. It's almost subliminal in terms of saying, "We're here, you know who we are, and we're going to be here down the road." That's said over and over again in my given geography, my demographic.

The radio advertising in the remodeling business in Dallas tends to be the big national brands, or a company that specializes in windows and siding. I don't hear any advertising on the radio and certainly don't see anything on TV from custom remodelers like myself. I just don't know how that really plays in our marketplace.

Clai: We haven't really bought print advertising. We thought about it, but we haven't. As far as TV — again, we've thought about it. The people that have done it never seem to last in business here in town.

Jud: I've just done a year of advertising on TV. Are you saying that broadcast advertising is too broad?

Clai: The only thing we did that was really interesting, and I would do again, was some advertising on PBS. They asked me to do some inspection work on their facility here. They said, "Instead of paying you, we'll give you a year's worth of advertising." It was in their early morning slots. It did have an impact, but not a huge impact. It was just more exposure to a market for people who listen to PBS. PBS is a huge force in our market because of the bush communities and because it is the only non-commercial radio station here.

Scott: I will say this: I don't pay for my print advertising. I have people — such as a Pella or a James Hardie — who are more than happy to pay for my advertising in a number of ways to support my company's growth and their future growth through my company. People say, "How do you get them to do that?" and I say, "Well, you ask!"

Jud: That's a good point. A lot of remodelers don't ask.

Scott: I have to be careful. I'm trying to make sure that the message is delivered consistently. I can't have these advo-mailers go out, and I can't have people sticking stuff on the door with a rubber band. It's not because it's who I am, but it's because that's who my clientele is.

If we've got a feature in a builder/remodeler magazine, I will spend the money to run reprints. This is a monthly publication, it has editorial content in it, it has lots of other things in it — there's that third-party affirmation again.

People have thousands of options. When you get down to the reality of it, I have only a handful of true competitors. But the perception in the marketplace is that there are thousands of competitors for me.

I will not pay money for anything that is not going to my demographic, to my potential clientele. So, I'm not going to do The Dallas Morning News. I'd be more likely to do one of the little local newspapers.

Clai: I would agree. You'd just focus on your geographic area. We're focused because we're surrounded by wilderness. If you don't focus, you will not be successful in that market.

Jud: Realistically, do you get leads from advertising?

Clai: I get some direct leads, and they'll tell me that. I always ask, "How did you get our name?" But referral, far and above, is the most common answer. Or, "You did this addition for Sam, and they love it, and we're down the street and we like what you did there."

Scott: I get my business from three primary sources. I get it from my existing customer base, from my direct mail, and from an architect. My office is next door to the architect who got me started in the remodeling business. He and I essentially are a team.

We send out about 1,200 to 1,500 of our postcards. I know that within 2 weeks we'll receive about 12 to 15 phone calls from that postcard. Did they call because my sign is down the street from them, because they see the truck drive past their house every day, or because of the direct mail piece?

Jud: OK, so the name of the game is keep my name in front of them in several different ways.

Scott: Surround them with your presence.

Clai: Yes, surround them with the presence in a very positive manner. You have to work very hard for no negative things to occur. Your employees have to be polite. We had a sub-contractor last year who had an employee who took stuff from the house that was not his. The backlash from that was incredible.

Scott: It's a scary deal when we have to be perfect every minute of every day. That's the standard we're held to.

Jud: Let's add to that marketing plan if you will. When is your first contact with the client? I say the answer is every day when they see you.

Clai: Any place in the community. One of my carpenters was a pretty rapid driver. He suddenly found out that once the company sign was on the vehicle, people remembered everything he did.

Jud: Is advertising only worthwhile for companies of certain sizes or doing a certain number of jobs?

Scott: I think it matters to everyone, whether they do one or two jobs a year or 100 jobs a year. The dollars that you're going to spend as a percentage of your gross sales is going to be a different issue for every company. But, can advertising — effectively done — benefit every company? It absolutely can. It can drive their margins. It can refine their business to where they are only doing the most profitable kinds of jobs in the most profitable locations.

Clai: I agree with that.

Scott: I know guys who have been remodeling for a long time. They've got one or two projects and don't have a clue what they're going to do when those one or two projects are done. I can see the stress and the pressure and the worry on their faces when they're a month away from finishing their job and they don't have another job. It doesn't have to be that way.

Jud: I've often said that the thing I enjoy most is discussing with my office manager how much money we're going to put in the savings account this week. That's a lot better than figuring out where you're going to get a check to pay for the next payroll. Has advertising increased your sales?

Clai: It increases sales, but it's an overall strategy and direction. If you go on vacation for two months and come back and no one's followed up with anything, you can feel that effect quite rapidly and directly.

Scott: One, it evens out your business. Effectively done, it will make your business more predictable. Two, if you want to grow your business, advertising has to be a critical component of that.

Jud: That's a good point we need to make. Too many of us just try to do advertising and not do an overall marketing plan.

Scott: That's where so many dollars get misspent and so many people are disappointed with the results. They think, "Well, I'm not going to do that again!" You think that the whole idea was a bad idea. That's not the case at all. It's that it wasn't consistent with your long-range plans for your business, and wasn't something that was thought through in terms of the strategies, tactics and dollars involved. It was an emotional reaction: "Yeah, that sounds like a good idea. Let's throw some money at this and see what happens."

Jud: We in the remodeling business think that a client should call a professional to get their house worked on. Would we not agree that as remodelers, we need to call on the professional marketer to help us?

Scott: If you don't have the expertise to do it yourself, like Clai's wife, this should be professionally orchestrated. A professional marketing plan, done the right way, will match your business's ability to fund it. You're not going to do it all in one big chunk. You're going to break it off, identify the things that will work for you most effectively, most immediately, for a reasonable amount of money that you can afford to spend out of your business.

Clai: Taking it one step further. We have done this deliberately. We have actually looked at warranty work as a marketing opportunity. Whenever we have any warranty work that we have to do, I've told everybody on the staff that yes, there is this problem. But if we go in and take care of it and resolve the issue, sometimes it isn't really warranty; sometimes it's beyond that limit. If it's approached from the marketing point of view that as you're marketing, that's your customer service.

Jud: The warranty work becomes part of that marketing plan?

Scott: Well, sure it is. I mean, it's an opportunity, as Clai said, to show up with a smile on your face, to say "Thank you!" again to a customer, and to take care of whatever the issue is and ask once again for their repeat business or for their referrals. Everything that we do, every single contact that we have from everyone in our organization is a sales opportunity.

Jud: In some of the seminars that I do, I talk about our internal customers: If your internal customer service isn't good, your external customer service will never be good. In other words, if you're not getting along in your company, how can you go out and represent that company? Any comments?

Clai: I completely agree. It's almost so basic that you forget to discuss it. We constantly look at how we treat the staff and where we go with that. If that isn't a cohesive unit, anything beyond that will reflect whatever flaw that has.

Scott: I'll say two things. One, I'm going to rewrite my marketing plan, and it's going to have a section about internal customers in it. Two, I think that's absolutely right. We subcontract essentially 100 percent of our work. If we've got a glitch, a breakdown, a money issue or a quality issue with a subcontractor, or we've got a construction manager or sales guy that isn't happy, then that problem has a ripple effect. In some way, less than what you really want delivered to your customer is what's being delivered.

Jud: Are the results you get from advertising worth the expense?

Scott: Absolutely. You put the marketing plan together and have all of these different things that you want to accomplish. If in the real world you're not delivering profitable projects, you don't have the money to spend on your marketing plan, then it all falls apart.

The first thing that goes away during tough times is the marketing effort, and I think that's self-defeating. My belief is that should be the last thing that goes away. People need to redouble their efforts in terms of marketing when the economy's down or when times are slow. The monies that you're going to spend in advertising or marketing your business are absolutely essential to either sustain or to grow your business, whichever one you're trying to do.

Jud: Give me your total marketing plan as a percentage of your gross sales. Where do you want it to fall?

Clai: I'm probably about 1 percent or slightly less.

Scott: I'm at about 1.5 percent of dollar volume.

Jud: That's lower than what surveys put out: 3 to 4 percent. But when you get to specialty items such as siding or windows, marketing runs up to 8 to 10 percent.

Scott: I'm doing bigger projects. If people look at what I'm spending in gross dollars, they just shake their heads. Percentage-wise, it is lower than the average.

Jud: Is one kind of ad — newspaper, magazine, TV, Internet, billboards, etc. — better than another? If you're going to advertise, which way are you going to go?

Scott: I'm going to do my direct mail first. Greatest return for me. Then I'm going to do my branding through D Home because it is so consistent with my demographic in terms of how they distribute their magazine.

Clai: I would just prepare the handouts that I have to give to people in the places I go. That's always been the most successful for us.

Jud: Do you have a Web page?

Clai: No. We've thought about it, but we don't. We are told that the Internet and Web pages are important. I don't know if they are or aren't.

Scott: In our marketplace the Internet is hugely important. We have a very sophisticated, on-the-go, travel-a-lot type of clientele. You've got to be able to communicate with them via the Internet, e-mail, digital photographs and all those things. We are in the process of completely redoing our Web site. It will be a lot more sophisticated and interactive. We get business referrals through the Internet in a number of different ways.

Clai: I do use e-mail and digital photos and all that with our clients. In fact, I've got three e-mail messages this morning from three different clients at three different stages.

Jud: What should you include in an ad to help you increase sales?

Scott: It has to be totally consistent. It has to speak to your clientele in terms of the quality of service you're trying to deliver. We try to make sure there is an element of third-party affirmation.

I'll give you a good example of what you don't do. I have a friend who is one of my subcontractors, and their company colors are blue and white. They've got vehicles running all over town with blue and white logos. He walked into my office one day and had on a red and white jacket. It is not consistent.

Clai: One of our largest competitors does the same thing. His company shirts consistently change.

Jud: The point being, you're driving down the road, you don't need to see the word McDonald's. All you need to see is the arches!


NCP Design/Build Ltd.

Started in 1978, NCP Design/Build is located in Anchorage, Alaska. In 2005, says Porter, the firm will do $1.8 million in remodeling volume and also build two custom homes and a duplex. NCP employs four people in the office, including two architectural draftsmen, and seven carpenters. Porter's 80 to 90 annual jobs range in size from $500 to $300,000.

McCollum & Associates

Located in far north Dallas, McCollum's 7-year-old remodeling company grew to $6 million and 32 jobs in 2003. A former custom home builder, McCollumn employs one salesperson, one office person and a few field staff. The firm subcontracts most work.

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