This posting in Adams Hudson’s newsletter shows how brains and money in this industry are sometimes not aligned:
A contractor who had been doing well in the go-go economy, was seeing his agreement renewal rate slip, his closing ratios tilt downward, and his margins erode to get the jobs. “This is the economy” he told us.
We suggested circling the wagons and protecting his customer base first, locking down renewals, beginning a low-cost referral campaign, then getting aggressive with Direct Response acquisition strategies for better-heeled, less price sensitive new customers.
In essence, he responded “Nonsense”, and promptly spent $60,000 on a radio campaign that was more about his ego and price-cutting than existing customers. Failure ensued.
During the past 12 months, he’d actually reduced his Customer Retention campaign to fund the “new” marketing. In time, his “old” customers heard the “new” offer, saw it as superior which generated two responses: a) Cut me the same deal or I’m gone and/or b) If that’s how you treat loyalty, I’m gone. Thus, his respondents became a mix of current customers seeking a concession and cheapskates.
Immediate margin erosion and accelerated customer exodus sent our contractor into a tailspin. Most profitable leads dried up. Ninety days later and half a staff later, he still has $15grand a month due in radio, his YP budget was never trimmed (suggested for 3 years, “couldn’t give up the priority placement” said his ego), many current customers and their agreements defected due to inequity and inattention. Some defectors commented on a blog site and reflected same in Google Rankings. Not good.
He admitted that he’s very likely a couple pay cycles from the “B” word if things don’t improve. Called his company a “victim” of the economy. Your assessment?
Anyone who would start advertising with this sort of budget without thinking about the consequences, frankly, needs a head examination. Advertising to price-sensitive potential clients without considering the nature of your current clients and reviewing what you can do to enhance loyalty and repeat/referral business is absurd.
How do you advertise intelligently?
As the Construction Marketing Ideas blog publisher, I would like to share a story of how an advertiser played my business like an accordion to negotiate an exceptional deal for himself this evening, but if I do that I would be cutting my own (business) throat. Suffice to say, if you plan properly and can negotiate effective last-minute deals, you can sometimes save real money if you have your ad copy ready and know what you want to accomplish.
Radio and other media advertising can be effective and powerful, especially if your competitors never advertise and you have the resources to be patient while you wait for results. However, you should always consider this form of advertising only after you have maximized your in-house marketing for repeat and referral business and everything you do with public advertising should take into account its impact on your relationships with existing clients.
