Taking the First Steps To Sustainability
A business consultant shares what makes some contractors vulnerable to changing market forces and what keeps others on the road to long-term sustainability.
As I consult with top energy contractors across the country, I see that they fall into two types. On the surface, both types appear to be successful, and in many cases they have found success in the short term. But when I “look under the hood,” I begin to see which contractors are vulnerable to changing market forces and which ones stand a good chance of long-term sustainability.
The first type of contractor depends primarily on state or utility program funding for almost all of his or her revenue. These contractors have developed a strong relationship with program contacts, have mastered the ins and outs of the available programs, and are leveraging the great pricing and financing options that programs offer to homeowners.
The second type of contractor is self-sustaining. These contractors are positioned to leverage existing program funding and are experts in executing their retail marketing strategy and utilizing sound labor management principles. They generate leads and project work outside of these utility programs. Maintaining mastery of the programs available, these contractors can also generate their own business, so they are not reliant on programs that may or may not change over time.
Which contractor are you? Contractors who hope to become self-sustaining must master two things. The first is retail marketing strategy. The second is the principles of labor management. In this article, we will take a look at marketing strategy, and I will share with you what I’ve learned from contractors who have succeeded.
Retail Marketing Strategy Gets the Ball Rolling
If you don’t have the energy audit leads, you can’t make the retrofit sales. If you can’t make the sales on your own, you don’t have a self-sustaining business. And you will stay completely reliant on program funding, which may work for you today, but may not work for you tomorrow. In order to master your retail marketing strategy, you have to ask yourself three questions (and then build your plan around the answers):
- Who is my target customer? Who is most likely to buy my products and services?
- What’s the best message to get that target customer to act?
- What’s the most efficient medium to deliver that message?
Once you’ve nailed down the answers to these questions in your particular market, you will have the key tools to build your plan.
Step 1: Identify Your Target Customer
All homeowners are not created equal. Because your annual marketing budget is not limitless, you can’t afford to waste money targeting people who will never buy from you. The best marketers are the ones who maintain a low cost per customer acquisition (CCA), and the first step to a low CCA is marketing to the people most likely to buy from you. While every market is different—Orange County, California, will have very different demographics than Wayne County, Michigan—here are two good, general rules of thumb to get you started:
First, homes that are 25 years old or older tend to be in greater need of improvement. And second, homeowners with a household income of $75,000 tend to be more open to making these improvements, primarily because they can afford them. How open they are however, depends partly on location. Households with a mean income of $75,000 in San Francisco will have different characteristics than households with a mean income of $75,000 in San Antonio.
Step 2: Determine the Best Message to Get Ideal Prospects to Act
You might be surprised at how many energy contractors stumble on this step. That’s because our industry tends to get bogged down in techno-speak when communicating with the customer. We don’t remember the Model of Communication when we craft our marketing messages (see Figure 1).
Here’s another way to describe it. Technical jargon and confusing science doesn’t get the phone to ring or close sales. So, for example, if one of your energy auditors can’t speak the language of the homeowner (which is emotion based and benefits driven), that auditor will be less likely to close any additional business from an audit. Once you understand your prospective customer’s personal filter—the emotion that drives them and the benefit they want—you can figure out what message will get that customer to act. Here are some ideas:
- Appealing to most people to save energy because “it’s the right thing to do” is not nearly as effective as appealing to them because saving energy will cut their energy bills.
- Laying out a case for energy improvements through logic, rational argument, and technical proof is not nearly as persuasive as telling customers what these improvements will mean for the comfort of their home and the health of their family.
Step 3: Choose the Right Medium to Deliver Your Message
Just as all homeowners aren’t created equal, neither are all media. I could write a few chapters on the variety of marketing channels you can employ, and their respective benefits and drawbacks. But for the purposes of this article, I’m going to share with you the top three Must-Haves in your marketing mix.
Web site and internet marketing. This is Must-Have Number One for a good reason. These days, your web site will serve as your storefront for many more prospects than your actual storefront or office will. You have the opportunity to target your message specifically to a variety of customers. You have great flexibility in the content you can provide. You have the ability to outshine your competitors and appear larger than you are. (It’s the best and quickest way to look like a big fish in your pond.) And everything you do online is trackable. (For a good example of a progressive home performance contractor’s online marketing, go to www.energytighthomes.com.)
Guerrilla marketing.Guerrilla marketing is most simply defined as a set of tactics that take more time, creativity, and effort than money. These tactics could include participating in a county fair, sponsoring a school’s energy efficiency day, presenting energy efficiency at one of your Chamber of Commerce meetings, or working a regional energy show. Think outside the box and try creative marketing approaches that get noticed and capture the public’s interest. Most home performance contractors are more passionate and progressive than the average business owner. Leverage that to drive awareness of your work within your community.
Targeted direct mail. Direct mail can be a very effective leads driver if it’s really well done. It can also be a colossal waste of money if your strategy is even just a little bit off. There are three core components to a successful direct-mail campaign—the list, the creative, and the offer. Your list must be full of high-quality prospects that fit your target profile. Your creative concepts must be visually appealing so that they are attractive and memorable and quickly and clearly communicate your key message. And your offer—the thing that will determine whether prospects give you a call or throw your mail in the garbage—must be compelling and of significant value. Miss in any of these three areas and you don’t stand a chance of success.
There can be a place for other activities as well, like print advertising and radio broadcast advertising, depending on your market and your budget. But you’ve got to make sure your marketing plan covers the three Must-Haves above all else.
Step 4: Salesmanship That Turns More Leads into Project Work
The goal of any self-sustaining energy efficiency contractor should be to develop enough leads that turn into audits and enough audits that turn into projects. Often it’s the second part that is the toughest—turning audits into sales of larger, whole-house project work.
If you’re going to find success selling retrofit work, you must have a streamlined sales process. And your team must be expertly trained in that process, and able to repeat it, over and over again. Your sales process cannot be arduous for your prospects, or it will be too easy for them to pass on your services. There are two ways to approach this. The first approach is to have auditors who are technically proficient and who also have superior sales skills. The second approach is to use a two-step process where your auditor hands the job over to a closer after he or she has completed the audit.
Both approaches can be successful, but the quickest and easiest path is to teach your auditors how to sell and close jobs. Ideally, these auditors will be able to communicate their technical findings in a way that resonates with the homeowners and compels them to take the action that is in their best interest.
In addition to training your people, you’ve got to arm them with the right tools to help them make their case to the homeowners. This includes a presentation book, easy-to-understand proposals, pricing forms that are simple, and so on. The easier you can make the decision for the homeowner, the more jobs you will close. And the more scalable your sales process will be, giving you more opportunities to replicate your successes and to grow your business.
Looking Forward to Part 2
Next article, I’ll be focusing on what it takes to incorporate sound labor management principles into your home performance business. This is the second skill that contractors must master if they want to become sustainable.
Blaine Fox, vice president of Warm Thoughts Communications, is a recognized expert on the residential mechanical services industry and is accredited as a LEED AP.
This article is part of a series sponsored by Home Performance with Energy Star, jointly managed by the U.S. Department of Energy and Environmental Protection Agency. The opinions, views and ideas expressed within this article are those of the author and do not necessarily reflect the official policy or position of any agency of the U.S. government.
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