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Where Contractors Should Spend Their Marketing Budgets

Sometimes Trying To Figure Out WHERE To Spend Your Money Is The Hardest Part of Marketing…

Sometimes Trying To Figure Out WHERE To Spend Your Money Is The Hardest Part of Marketing…

Sometimes Trying To Figure Out WHERE To Spend Your Money Is The Hardest Part of Home Improvement Marketing…

Marketing Quick Tips: Budgeting

By Rich Harshaw

Note: This article is part of Monopolize Your Marketplace’s ongoing “Marketing Quick Tips” series. This information is not meant to be comprehensive; it’s simply meant to give you some quick ideas on the topic.

New year, new opportunities.

From an advertising and marketing perspective, it’s a good idea to check your budget every January to make sure you’ve got a good plan going into the new year. Here are some quick pointers to help make sure you’re putting your money in the right buckets:

Tip 1: Buying Your Leads: The most fundamental and important budgeting principle is actually a mindset—the mindset that you must spend money to buy your home improvement, plumbing, or roofing leads.

I learned this the hard way several years ago when working with an $8 million home improvement company that had about a $100,000 a month marketing budget. My job was to work with the owner to allocate the money and make many of the various media buys. After a couple of months, the owner got me on a call and was mad—he was reviewing his numbers and saw that his leads were down and sales were down… and the reason was simple: I hadn’t spent all his budget. The money I thought I was “saving” him in advertising was actually COSTING him big time. He not-so-patiently explained to me that he has to BUY EVERY SINGLE HOME IMPROVEMENT LEAD HE GETS.

So what about you? Do you look forward to spending money on advertising and marketing so that you can buy the leads you need to grow your business? Naturally, you want to spend your money smart and get as big of a return as possible. But don’t forget rule number 1: you have to spend the money to get the leads.

I recommend spending a bare minimum of 10% of your top-line revenue on marketing, and 15% is even better. That number—15%—will give many of you a heart attack. But seriously, just raise your prices. It’s the easiest way to give yourself more leeway to spend more on marketing so you can buy more leads. Don’t worry that you’ll price yourself out of the market. The biggest problem with high prices is in between your own two ears (and your salesmen’s ears), not with your prospects. You have got to spend the money.

Tip 2: Hunting vs. Farming: Marketing has changed in the home improvement industry since 2007. Direct response advertising simply does not work nearly as well as it used to for a variety of reasons that I detailed in a blog posting last year. The result is that you have got to start allocating a portion of your contractor marketing budget to long-term “farming” activities instead of strictly immediate return “hunting” activities.

You can read this post where I detail the difference.

One company I worked with in 2012 has been farming their local marketplace on TV for over twenty-five years. Every month, they continue to pump out new commercials on the same stations they’ve been advertising for as long as anyone can remember. I asked the owner if there was a correlation between when his spots aired and when they get phone calls—direct response. He said absolutely not—they get a steady stream of calls all day long every day. That’s what happens when you plant, nurture, and wait. Crops grow. Really nice crops.

I suggest you shift at least 10% of your marketing budget to FARMING activities right now, and aim for as much as 60% to 70% over time as your business grows. If you are trying to get BIG, then you should aim to be on every TV and radio station that makes sense for your target market (more on that, below).

Tip 3: Buying Clicks: But there is still a place for direct marketing—it’s just not on the TV, radio, newspaper, or in the mailbox anymore. Now the “now buyers” are looking online… and it’s up to you to capture these people. Obviously SEO (search engine optimization) should be a key part of any remodeler’s marketing budget, but the fact is, there are many factors associated with SEO that are very difficult to control… namely, the number of competitors you have and how long they’ve been actively working their SEO.

Pay-per-click (PPC) advertising, however, is a whole other ball game. These are the little text ads you can bid on that appear next to the search results on Google (and other search engines). The advantage is that you can start showing up in the search results RIGHT AWAY for the price of the click. The point of this post is not to educate you on HOW to effectively run a PPC campaign—it’s more complicated than you might think, and you should probably leave it to professionals. But the point here is to convince you that you SHOULD be using PPC advertising as a mainstay of your lead generation activities.

Here’s the most important question about PPC budgeting: How much should I spend? The short answer is AS MUCH AS POSSIBLE! That is correct—as much as possible. The reason is simple: the people clicking on those ads are very likely to be the hottest prospects, and you want to make sure they come to your site so you can have a chance to sell them. DO NOT artificially limit your PPC budget. Don’t set it to an arbitrary number like $1,000 a month… or $5,000 a month… or any other number of dollars per month. Instead, find a formula for advertising that works (it’s all measurable), and then buy every last click you can.

I know large construction companies that spend $60,000 to $80,000 a MONTH on PPC advertising during certain times of the year. That’s because every dollar spend on PPC is bringing back immediate home improvement leads, sales, and revenue. It’s a no brainer, yet less than 25% of remodeling companies actually participate. No excuses—you have to budget as much as possible to PPC. Start small, find a formula that works, then open the budget floodgates.

Tip 4: Beyond Repeat & Referral Business: I’ve written extensively about this in the past as well… but it bears repeating: If your company relies heavily on repeat and referral business, it could be hurting your chances of growing. I’ve seen it dozens of times… usually really old companies run by older generation people who have a 2% or 3% total marketing cost and would never dream of spending any more than that. Problem is that you can never truly GROW a business on 2% to 3% marketing spending. You can’t afford the PPC ads, the farming advertising, or anything else. So while your business may indeed grow slowly over time, you’ll never make the jump to the next level. Funny thing, most of these kinds of companies hover around $2 million to $3 million a year in sales. Take it up a notch—see rule #1 above and spend the money! Even if you have to raise your prices to find the money—DO IT.

Tip 5: Television & Radio: Radio and TV are where the big get bigger… and on the other side of the coin, lack of radio and TV is what causes the small to stay small. At some point, you’ve got to get your name and Identity in front of a large number of people who will then ALREADY KNOW TO CALL YOU when they have a need for remodeling. Sure, per above, you can capture a lot of now buyers with contractor-related PPC advertising. But what if you could condition a large chunk of the local population to just know to buy from you? Radio and television offer the lowest cost way to reach large audiences…. And they also offer the most credibility.

Last year I wrote a detailed blog posting comparing radio vs all other media, and built a compelling case for why you should be putting your money there. Read that article again and start thinking in terms of growing your business.

There you have it—the fundamentals of budgeting market costs for contractors. Please send me any question via the comments below.


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© 2015 – 2016, Rich Harshaw. All rights reserved.

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