Ray and Ron Melani, owners of Melani Bros. in Yorktown, Va., spent two decades building their company to be one of the leading sunroom construction firms in the greater Virginia area. When one of their primary lead sources, making up 92 percent of their direct leads, diminished, the brothers knew they had to do something to save their company.
In 2002, the height of this catastrophe, the brothers decided to venture into marketing ? telemarketing. As inexperienced telemarketers, the company gained a few leads here and there, but nothing that would recover their 92 percent loss. In June of 2003, another strike against the brothers ? the Do-Not-Call legislation ? was implemented. With two strikes against them, the Melani brothers looked to Sudden Impact Marketing and the Jerome Group, both with a vast amount of marketing experience in the home improvement industry, to start up a direct-mail campaign to brand the the company in the greater Virginia market.
Following is a story of how a leading company fell way below a profitable year and made a comeback with record-breaking profits. Rick Menandez, vice president of marketing for the Melani Bros., and Mike Wegmann of Jerome Group, share how a skillfully executed direct-mail campaign saved this company from going under.
QR: After the contract with the home improvement retailer faded, how did the company manage to stay afloat?
Menendez: There were some massive layoffs that were necessary to hold us in a position where we could keep the company open. In April 2003, Sudden Impact was contracted to devise a marketing plan to replace the lead source that was lost by Lowe’s Home Improvement and somehow turn the company back into a profitable situation.
So, that’s when I formulated a relationship with Ray and Ron Melani; there were a lot of things that had to be done. We implemented a four-tiered marketing program with Melani Bros. that ended up working well. We finished up that year in a profitable situation and there was some growth. But the annual sales had still fallen from the previous year’s $12 million to $9.6 million because of the Lowe’s situation.
QR: How did you narrow in on the target market for this marketing campaign?
Wegmann: We got the list of past customers from Melani. We had to learn about the market they sell into geographically. In some cases they may sell in one city; in other cases they may sell in four or five. Then, we also looked at the product mix they sell in each one of these cities ? we do that both in an overview level and in an analysis level. We take that data set and we try to look for those areas where they have the best base of customers and mail to those areas first. We also look at the other areas that demographically have similar qualities as those areas and we go there next. That may vary from market to market.
Menendez: Philosophically, in the first year, we don’t know our market as well as we will in the future. Our direct-mail campaign is to prospect. We try to include as many people as we can in the mailing list. Now, we are at a point within our structure at Melani Bros. we’ve done enough mailings that we know what areas are going to give us the most amount of success. So, as time goes on, we can actually mail fewer pieces, and spend less money with more returns.
QR: Can you explain what the four-tiered marketing program entails?
Menendez: We want to be able to brand the company ? they need to have an image in the community. So the next step is database. We want to create a large database of people who have expressed some interest in the products that we sell. Now, that’s where direct mail starts to come in both ways. Every time they receive mail, they receive an impression of Melani Bros. and that starts the branding process. Second, we use a sweepstakes process; it invites people to respond to us. Last year we ended up bringing in 30,000 people in our database that stated some type of interest. And now we have, with those people, permission to call them because they sign a form of some sort that gives us permission to call them even if they are on the do-not-call list.
Wegmann: One caveat to that piece is when they return the card to enter the giveaway, they give us permission to call them.
QR: What percent of telemarketing was part of the business?
Menendez: When I first got here, they were trying to use a form of telemarketing. They had bought a dialer ? a predictive dialer. They never were able to do very well in this area. That was one of the reasons there was such a drop in sales. They spent a whole bunch of dollars and had a hard time doing telemarketing. The biggest lost of lead sources was Lowe’s, but the actual percentage of telemarketing was around 20 percent.
QR: Did they have an in-house telemarketing department?
Menendez: Yes. They bought a dialer and tried to make this form of marketing work. It was a start-up telemarketing operation. The difficulties of telemarketing go beyond the do-not-call list ? it’s a people-reliable business. You have to have a good manager and you have to have a good telemarketer. Those types of people are hard to recruit.
QR: Let’s go back to the third tier in the marketing campaign.
Menendez: The third tier is appointment setting. There’s a certain amount of expertise that is necessary to be able to convert the sweepstakes entry into an actual appointment that is sellable by sales reps. We have various methodologies we teach our clients: scripting, how to answer objections, rebuttals, etc. Appointment setting is a huge portion of what we teach.
The fourth tier is keeping records. One of the beautiful things about direct mail is the response card. Unlike television and some other mediums, I don’t know exactly how much response I get from that. If I make a mistake, I can cut off the mailing. If I hit a home run with it, I can invest more money into that particular piece. To date, Melani has four pieces that have proven to have better returns.
QR: What makes this campaign such a success?
Menendez: Making leads in the home improvement business is really the key to how big your business is going to be. The more leads you get that are sellable, the bigger your business is going to be. We basically brought in predictable methods with Melani. We also spent 2 percent of our budget on research and development. I put that money back into new pieces and I’ll do it till I get out of this business ? I’ll try things that I’ve never tried before. The most important reason this campaign is a success is due to the follow-up phone calls.
QR: How much of a response did you generate from these mailers?
Wegmann: In 2004, we mailed a little over 600,000 pieces. Of that, there were 13,234 valid responses. Which was a 2.17 percent overall response rate.
Out of those responses, now, keep in mind that those people who were on the reply card are in our database that Melani can call. So, out of those 13,000-plus leads, they issued a little over 2,100 appointments to salespeople. The appointments that were set out of that, they sold a little over $2.9 million in business.
QR: Any advice you could give remodelers who may want to get into direct marketing?
Menendez: If a marketing company doesn’t have specific experience in the home improvement market, they don’t have a chance of making this work.
QR:What’s the difference working with a home improvement company?
Menendez: Many companies bring in “showroom” types of leads from home shows, etc. They put themselves in positions where the only people they see are in the market; in other words, people who are getting bids. And when you are getting bids, you have to be very price sensitive. We can get to the consumer before they are in the market and we can shape their buying habits to resemble our own. And we take them off the market before our competitors can. To stay ahead in the home improvement industry it takes a lot of creativity.