When the Cornerstone team has early conversations with owners of home services businesses, we frequently emphasize the importance of building your company’s brand in the markets where you do business. There’s often more than a hint of frustration in their responses. “Yeah, yeah … that brand-building stuff is nice, but right now, what I really need are some hot leads.”
Those comments represent a misunderstanding about the role of brand-building in growing a business. More often than not, we hear them from business owners whose companies are growing slowly – or even shrinking. They’re typically the owners who are proud of the longevity of their businesses, but when we analyze their sales data, it becomes clear that their revenues have barely kept up with the rate of inflation over that time.
It’s a simple truth that too many HVAC, plumbing, and electrical business owners learn the hard way: you cannot grow your business unless you’re investing some money in advertising. There’s a common misconception that simply taking good care of the customers you have will produce a never-ending stream of revenue. Owners who share that misconception assume that means they won’t have to spend money to bring in additional customers, because repeat business and referrals will do all the work for them. The few who take the time to analyze their performance will quickly see that just isn’t the case.
Stats that debunk popular myths about loyalty
We’ve spent decades working with home services companies of all sizes, all over the country. Time and again, we see the same patterns in their results. The one that may surprise you the most is that between 65 and 70 percent of the revenue you’ll receive from customers happens during the first 18 months of the relationship. Put in practical terms, those loyal customers you count on to drive your revenues have already paid you most of what they’ll ever spend with you.
Second, it’s safe to assume that only 80 percent of the prior year’s revenue will return on its own without any targeted marketing. That represents normal attrition for companies like yours, and it’s caused by a variety of factors. Not to be morbid, but a certain percentage of customers will die every year. Some will sell their homes and move elsewhere. Others may not have been as happy as you thought. More than a few have simply forgotten the name of your business, so the next time they need your services, they end up calling your competitor. All that attrition means you need to replace 20 percent of your annual revenue just to stay where you are. Growth will demand even greater new customer acquisition and more aggressive sales goals.
Your business won’t grow on its own
We know how proud you are about the way you do business and how many satisfied customers you have, but what we just discussed is why you’ll never meet your growth goals if you don’t make an investment in finding and selling to new customers. The unfortunate thing about targeting new customers is that it’s far more expensive than marketing to your existing customers, largely because your current customers already know your name.
Are you using these powerful tools?
Two of the most effective –and remarkably affordable – tools for acquiring new customers are direct mail and OTT (over-the-top) television commercials. That may have startled you, because we’re willing to wager that you’ve considered both to be costly.
Direct mail. The reality is that direct mail (especially co-op direct mail) nearly always proves to be the least expensive way to build brand in a targeted area. That’s particularly true when you use it regularly in a cadence that reflects the ever-changing need of your business and market. (For example, you’re not going to market humidifiers in July, but a special $29 AC tune-up will draw business from homeowners hoping your cheap tune-up is all they’ll need to spend on their aging system.) While the cost of individual direct mail efforts can be higher, you can target your audience and any offers you make more specifically.
OTT. If you’ve not encountered OTT, it refers to the many ways your potential customers receive entertainment and other content online today. Streaming services like YouTube and Hulu are examples of OTT media. You’ve seen OTT advertising when you’ve watched your favorite channels. Beyond the fact that it allows you to target a highly specific group of viewers, it reaches them no matter how they choose to view content. Whether they’re relaxing on the couch watching Netflix or catching some videos while waiting for a restaurant table, they’ll see your name, branding, and message. You may feel that TV is out of your reach, but OTT gives you an affordable, targeted way to get your name out there.
How Direct Mail & OTT Build Brands
Both direct mail and OTT are likely to generate a small number of immediate calls and sales, but their real value is in establishing your name, brand, and reputation in the prospective customer’s mind. They’re going to be more likely to recognize your service vans around town, and most important, when they ask Google for help and your name pops up as one of the top suggestions, they’ll remember who you are and be far more likely to click your link.
OTT generally has a higher price tag (often around $30/thousand) than co-op (similarly around $30/thousand) and individual direct mail (anywhere between $650 – $1,000/thousand), but being seen on TV can dramatically increase a viewer’s perception of your company. Similarly, a handful of recipients of your direct mail may keep it handy because they anticipate a need for your services.
Should You Do One Or The Other?
Business owners who do their own marketing budgets often see different channels like direct mail and OTT as either-or decisions. We’ve learned through plenty of practice (and success for our clients) that businesses like yours market most effectively when they use a mix of channels, each with specific objectives. What’s in that mix and how the budget should be allotted depends largely upon the size of your business and the stage you’re currently in. A young, aggressive company and an established market leader have strikingly different needs.
How much should you spend on marketing? There’s no magic number, but the average we see for home service businesses is 6 to 10 percent of their annual revenue. If your goals are aggressive or you do business in an unusually competitive market, 12 to 15 percent of revenue is more realistic.
What’s The Right Marketing Mix For Your Business?
The best way to determine that is to have a simple conversation about the state of your business, your objectives, and your frustrations. Ask our clients, and they’ll tell you their initial conversation with us was nothing like any they’ve had with a marketing provider. After all, we may be a marketing agency, but our business is about helping your business grow and succeed. The easiest way to start is to email kerryf@cornerstonead.com, give us a call at 317-804-5640 x108, or book a free marketing budget review with us here. The sooner you reach out, the sooner you’ll see the benefits of having a Cornerstone team of your own.