Sales Insights July/August 2022

July 28th, 2022 by Nathan Hobbs

Making the Most of It: Now Is the Time to Revamp Your Marketing

By Dave Yoho

You run a specialized home improvement business selling products and services to homeowners. Or perhaps your company makes and sells products which are marketed through home improvement companies. In either case, following are some key issues for you and your business.

The Federal Reserve Rate

The U.S. inflation rate has risen at the fastest pace in nearly 40 years. Recent adjustments in the federal funds rate affect a variety of current and future business issues, including credit card rates, home improvement loans and home equity lines of credit. An increased rate makes it more expensive for consumers to borrow money.

If your customer has an adjustable-rate mortgage (ARM), their payment will get more expensive. The home equity loan, which has become a popular method of financing or acquiring cash for payment, is predicted to rise to over 6% by the end of the year and is predicted to increase in early 2023. Consider how these additional costs affect a consumer’s decision to buy now. Also consider the status of the loans which are already approved and sitting in your backlog.

The good news is most home improvement products represent the best bang for your buck in this economy, provided that your company can educate its customers regarding the benefits of finance and purchasing at your current, guaranteed pricing. Indefinite buyers can be reassured with financial options fitting their specific situations. Work with your financing sources to provide the information necessary to accommodate customer satisfaction. Review and update your in-home presentation. Preparedness is the prescription.

Mortgage rates at the beginning of 2022 were at an average of 2.8%. They are now over 5%, with further increases projected for the third and fourth quarters of this year. For the average homeowner, staying in their current home while making improvements is a better option than moving. Are you preparing your salespeople for this forthcoming paradigm shift?

ROI and Marketing Costs

When asked to evaluate the efficiency of their salespeople, owners and managers often recite closing ratios measured against presentations. But the true way to measure the efficiency of your salespeople is by dividing the number of leads issued into the net retained sales volume acquired over the same period in which leads were issued. Some are more efficient than others. To continue issuing more leads, irrespective of return on investment (ROI), results in a decrease in efficiency and revenue. It also increases your marketing costs. Since the value of a marketing plan is measured by the revenue produced from the leads acquired, it is important to examine how your home improvement company is allocating its marketing costs.

Here is an example: XYZ company sold $400,000 (net sales volume) for a typical month. The net volume constituted gross sales less cancellations and credit rejects. During that month, they spent $60,000, or 15% of the total volume, on marketing; however, in that same period they completed installations of $480,000. In typical accounting procedure, the $60,000 marketing costs when measured against the $480,000 installed business (revenue) indicates marketing costs of only 12.5%, which is not a realistic
measurement.

At $60,000 per month, the company in the above example is spending over $720,000 per year and still doesn’t have a grasp on the true total marketing costs until year-end statements are prepared.

The incontrovertible truth is that marketing costs have been rising at an alarming rate and, if you intend to improve your profitability, you need to consider revising your marketing strategy.

Dave Yoho is president of business consulting firm Dave Yoho Associates. Dave Yoho Associates (www.daveyoho.com) promotes the company as the oldest (since 1962), largest and most successful consulting company representing the remodeling and home improvement industries.
dave@daveyoho.co

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