Also take a look at these articles:
Building Your Own Lead-Generating System
Remodelers Gripe, ServiceMagic Responds
Credit: James Yang
A year and a half ago, Michael Gervais, owner of Prime Renovation Group, in Burlington, Vt., decided to perform an experiment. Gervais had been considering using a lead-generation company, or several, to augment referrals to his full-service remodeling company.
First he typed “lead-generation companies” into Google search. Then he contacted all the companies that came up and asked each for three sample leads. The leads, he says, were “poor, to say the least” — a diplomatic way to characterize what many remodelers dismiss as “garbage,” “junk,” or, often, “bogus.”
Next, he created a fictitious client for a fictitious addition, and that fictitious client requested a contractor from the five biggest lead-generation services. Gervais, 70% of whose business is generated by referral, says that he was less than impressed with the speed and qualification process. In the end, he decided not to use any of the services.
Pennsylvania remodeler Greg Harth had an altogether different experience. In 2008, a local lead-generation service recommended two companies to a couple who planned multiple projects for their recently purchased Bucks County farmhouse. One of those companies was Harth Builders, which turned the lead into a $700,000-plus whole-house remodel. The lead cost Harth Builders 3% of the job price — but that one job was a third of the company’s volume for the year.
Credit: James Yang
Protecting the Brand
Many full-service and design/build remodelers are inclined to try lead providers — once. That’s for many reasons, such as project size, complexity, need for multiple visits, and, often, design agreements as conditions of proceeding. “The more complex the job, the harder the sale,” acknowledges David Lupberger, a former contractor who is now ServiceMagic’s spokesperson.
Many remodelers also seek to avoid a bidding war. “We don’t need to be out there with 10 other people and look like fools,” Gervais says.
Most full-service remodeling contractors feel that personal referrals, and repeat business, are their best means of finding clients who meet their profile. They also believe that their image as a high-service organization delivering a high-quality product is their strongest asset, and jealously guard the way that that’s communicated.
In 2005 and 2006, for instance, Strite Design + Remodel, of Boise, Idaho, received 18 leads from ServiceMagic. No appointments resulted, since the jobs were “under $15,000 and generally very price-driven,” says owner Jim Strite. His company’s average job size is $85,000, and its business comes from referrals, repeats, and, increasingly, home shows. Home shows have the advantage of bringing Strite Design + Remodel in contact with people the company can qualify beforehand.
Patty McDaniel, owner of Boardwalk Builders, in Rehoboth Beach, Del., bought 15 leads from ServiceMagic between 2001 and 2003. That resulted in seven calls and one sale. “I would characterize their leads as Yellow Pages leads,” she says. That is, the type of lead that involves people looking for a price from companies they know little or nothing about.
Moreover, design-intensive remodelers tend to be less concerned with a lead’s price as its quality. It’s their brand that’s for sale. “How do you generate real leads for me if it’s not me out there generating the lead?” McDaniel asks. Yes, she says, she’s certain there are homeowners in her market who are looking for “quality, capability, and experience, as well as price”; homeowners who may not know her or her company. But are they going through the paid-leads process? “If I buy 20 leads at $150 each,” she asks, “can’t I better spend that $3,000 sponsoring Little League teams?”
Not Tonight, Honey
Credit: James Yang
Generally, the more complex the job, the less likely it is to come directly via the Internet. That’s why many full-service remodelers feel that lead-gen companies are better suited to single-line and specialty firms, preferably with aggressive sales systems, and, at the opposite end of the spectrum, to very small handyman shops. ServiceMagic CEO Craig Smith says that the company’s strength is in sole proprietor companies that don’t do much marketing.
Speed is also critical. Internet searchers want, and expect, an immediate response, says George Faerber, owner of Bee Window, in Indianapolis, a window and sunroom company that generates 30% of its sales from Internet marketing both through its own site and leads purchased from three lead providers.
CalFinder.com, a two-year-old Web-based lead-gen company in Oakland, Calif., capitalizes on both these realities by specializing in window replacement and kitchen/bath remodeling.
Window companies often close on purchased leads, says Kyle Ferraro, CalFinder’s national director of window and solar, because they have a phone room and someone assigned to call. “They can do the key follow-up you need to do with these leads,” he says. Not only that, but these companies usually put prospects’ information into a contact management system and continue to market to them.
Ferraro says CalFinder.com found that window replacement contractors were willing to drive as far as 50 miles for a job, whereas kitchen and bath contractors were willing to go just 10 or 12 miles. Homeowners turn to the company for kitchen and bath contractors, he says, because “it’s hard for them to find a contractor.”
Some lead-gen company executives say that full-service contractors put themselves at a disadvantage with purchased leads by failing to contact prospects immediately. “We tell them: The second you get this lead in, call them,” Ferraro says. But delays of six or eight hours, even a day, are rule of thumb, especially with full-service customers. “They figure: Oh, I’ll call tonight when I get back to the office.”
The problem with that scenario is that Internet marketing is increasingly moving the sale of home improvement projects into real time. “Any lead off the Internet is a gotta-be-done-now lead,” says Matt LeFaivre, president of LeFaivre Construction, in Taneytown, Md. “The [prospect] want[s] instant gratification or they feel like they’ve been gypped.”
LeFaivre, who has used lead-gen services from time to time, is considering doing so again. What holds him back, he says, is “I want them to guarantee to me that their clients are professional contractors with a similar business structure, so I’m not trying to compete with one or two guys and a pickup.”
Make Me a Match
Credit: James Yang
Two trends are moving full-service contractors and lead-gen companies closer together. On the one hand, full-service companies whose reputation alone used to fill their backlogs now must market. On the other hand, lead providers are seeking to find ways to make their service more targeted demographically and by ZIP code, and to ensure that homeowners receive not just a phone call from a contractor but information about that contractor’s projects and practices.
ServiceMagic, for instance, will now furnish contact management software to its contractor customers so they can remain in touch with, and market to, leads that don’t pan out. (“But it’s like leading a horse to water,” Lupberger says. “You have to use it.”) In September, Contractors.com switched from a lead-fee model to a win-fee model. You don’t pay for the lead unless you get the job.
Steve Adler, owner of HomeNet Solutions, which steered Greg Harth to a whole-house job, says that his is a very personalized service, with just 1,500 pre-screened contractors in a three-state area. “We pre-sell the contractor to the homeowner, which makes it much easier for the contractor to get better-quality work and a higher close percentage. We don’t want to give you five names, we want to give you one name of someone we know you will like and have a great experience with.”
Unlike most national lead-gen companies, HomeNet Solutions works on a win-fee basis: get the job, and you pay for the lead on a sliding scale that ranges from 3% of a big job to 10% of a job $500 or less. The service steers contractors to large jobs — there are far fewer of them now, Adler notes — and small, in-and-out service jobs.
It’s always been in those smaller, service jobs where lead providers have excelled. But as marketing shifts inevitably to the Internet, contractors specializing in large-scale jobs may find that they have to deal with lead providers, since that’s where homeowners often land when they do Web searches. Such leads are an opportunity to get in front of people when there are fewer people to get in front of.
Small jobs, Lupberger is at pains to remind, can become big ones down the road, or right around the corner. He cites a recent instance of a countertop replacement lead that, after a contractor visit, became a $50,000 kitchen.
“Whether you like or dislike online leads is almost irrelevant,” he points out. “Because your customers are there. They’re people somewhere in that buying process, and we have the ability to connect with them at some point in the selling cycle. They wouldn’t have contacted us if they weren’t somewhat serious.”
Credit: James Yang
Lead Buyer Be Aware
Consider the following if you’re thinking about doing business with a lead provider:
1) Ask for references. Can the company supply you with names and contact information for at least two contractors of similar size and of similar business model who have successfully used its service for six months or longer? Then be sure to contact those people.
2) Find out how many leads the company can supply you weekly, or monthly, and what percentage of those leads you can reasonably expect to translate into sales appointments. If it sounds too good to be true — if they say 90%, for example — it probably is.
3) Ask the lead-generation supplier when and how it gets its leads. Ask for an example of a market where it currently has a pay-per-click campaign running, so that you can verify.
4) Be fully aware of your contract’s terms and conditions. Some lead providers charge a fee to sign on; some charge a monthly maintenance fee, in addition to the cost of individual leads. If so, you may want to ask under what circumstances that monthly fee can be waived.
5) If everything else checks out, make sure you allot yourself sufficient time to know whether or not the lead-generation company you’re using is a good fit. Many prospects researching a remodeling project are not even at the planning stage yet.
6) Since most lead-generation companies develop their customer contacts through the Internet, be sure that you’re prepared to immediately get in touch with prospects supplied by the lead generator, and to follow up with marketing messages over time in the event that the lead doesn’t immediately translate to a sales appointment.
7) And don’t expect lead-gen prospects to buy tonight, or next month, or ever. The automated nature of most lead-generation companies prevents them from distinguishing between hot prospects and tire-kickers, says Mark Paskell, a former remodeling sales director and owner of The Contractor Coaching Partnership. “This is a name and a number,” he says. “This is a person who has an interest in doing something in the future.” But how keen that interest might be is not known. Maybe the homeowner is just curious about the cost, and quite often, remodelers say, these prospects profess shock at the answers given when it comes to discussing price.
—Jim Cory is editor ofREPLACEMENT CONTRACTOR, a sister publication ofREMODELING.
Hanley Wood, the company that publishesREMODELING, has a business relationship with ServiceMagic.