While they say a little knowledge can be a dangerous thing, lack of knowledge can be even more dangerous. However, lack of knowledge seems to be a key trend when it comes to marketing in the kitchen and bath industry (see related Editoral).
In fact, many kitchen and bath dealers have no idea how much they are spending in specific areas of marketing. Additionally, many are not tracking leads or sales in relation to spending, making it far more difficult to assess if/how their marketing is working for them.
However, of those who do track their marketing, the Internet is emerging as a key venue for gaining leads and building sales and awareness, while referrals remain the strongest marketing area for generating a positive return on investment. That’s according to a new survey that polled more than 220 kitchen and bath dealers from all across the country. The responses represented a true cross section of the industry, not only geographically, but by business structure and showroom sales volume.
To better understand how kitchen and bath dealers spend their marketing dollars, and what avenues produce the most leads and greatest number of jobs, dealers were asked what percent of their marketing dollars are spent on the following:
- Network TV (local channels)
- Cable TV
- Yellow Pages
- Internet Marketing (Google, banner ads)
- Web site (design, development, updates)
- Outdoor (billboards, bus signage)
- Direct Mail
Lack of Knowledge
Perhaps the most troubling finding of the survey was the response rate for “I don’t know” in each category. Indeed, for each of the 11 marketing channels, the percentage of kitchen and bath dealers who responded “I don’t know” ranged from 43% to a whopping 92%.
As a business owner, it’s critical to know exactly where you are spending your marketing dollars, as well as how much is being allocated to each media. This is especially important because marketing is not a one-size-fits-all science. The best media or marketing channel for a business can vary widely based on location, size, type of jobs, target market, and many other factors, so tracking what works and what doesn’t for your specific firm is key to maximizing your marketing dollars.
Likewise, having a system to track leads and closed jobs is essential so that you can determine what marketing avenues are bringing in leads, and which are translating into sales. For that reason, every business should be asking each person who walks through the door, “Where did you hear about us?”
Tim Aden, CMKBD, principal at Sawhill Custom Kitchens & Design, Inc. in Minneapolis, MN says, “We developed a tracking system that includes a simple pre-printed card to remind everyone on staff of the information we are hoping to collect from showroom visitors. The card has spaces for contact information, the type of project they are interested in pursuing with us and a blank space asking, ‘Where did you hear about Sawhill?’ Without gathering that information, we would have no idea what aspects of our marketing program are paying off.”
Of those survey respondents who do track where they spend the marketing dollars, the results were a mix of familiar favorites and newer venues. It’s no surprise that the Yellow Pages, long an industry staple, still accounts for over 50% of where the industry spends its advertising dollars (see Graph 1).
The figure that is intriguing, though, is the marketing avenue that won the number two spot on the list of most dollars spent. That was the Internet. Indeed, nearly 40% of the industry is spending money to market their showrooms on the Internet with programs such as Google’s AdWords, paid banners and paid placement on search engines, according to the survey results.
Although newspapers and magazines only lagged by a couple of percentage points, it’s interesting that paid Internet advertising showed such strong results, especially since this is a relatively new marketing venue that has eclipsed almost all of the more traditional media just in the past few years.
Indeed, for dealers like Kathie Maughan Francis, principal of Maughan Design, Inc. in Portland, OR, Web marketing is so effective, the company doesn’t need to pursue other avenues right now. She explains, “We have a Web site and an established client base that sends us referrals, and we don’t currently do any additional marketing.”
Paul McDonald, president of Royal Cabinet Company in Hillsborough, NJ, sums up his marketing strategy by saying, “We still use traditional media such as lifestyle magazines, newspapers and cable, but we are now also venturing into online advertising. In all cases, we want to send the potential client to our Web site for a closer look at who we are, what we do, and most importantly, what we can do for them by showcasing dozens of examples. We use our Web site as a statement of who we are to help potential clients decide if we are the right place for them to visit in person.”
Jacob Nelson, owner of Studio Dwell in Salt Lake City, UT, also spends a portion of his marketing budget on Internet-based advertising. He notes, “We are always looking for new ways to advertise and I believe magazine and Web advertising seem to be the best.”
So how does it work? Marketing by Internet begins with understanding Search Engine Optimization (SEO), which is the process of optimizing a Web site so it can be found and highly ranked on search engines. Effective SEO is a result of many elements that make up a Web site, as well as some luck and the right keywords – in short; it is an inexact science at best. Programs such as Google AdWords help supplement the process and create a guaranteed way to create Web site traffic.
Brian Long, president of Harbor View Custom Cabinets & Interiors in Mooresville, NC, is sold on this form of marketing for his Internet-based business, The Cabinet Joint. “When we started ‘reselling’ kitchen and bath components, we set up a Web site immediately. While the site was great, nobody knew about it. In December of 2006, we decided to spend $500 per month each for Google and Yahoo keyword advertising. By ‘bidding’ on keywords, we were able to ensure that our company was at or near the top of the browser list when a given keyword was entered by a potential client. We only paid if the client actually ‘clicked through’ to our site.
“The effect was instantaneous. We began getting phone calls, faxes and e-mails on the first day, all as a result of hits on our site. We now do no other advertising. And our revenue for the first eight months of 2007 has been almost $500K!”
Long continues, “We can’t say enough about search word advertising. We can actually see the results immediately when we change the price we are willing to pay for a keyword or when we increase our budget. We believe this is the way of the future for marketing and the payback is tremendous.”
While the Yellow Pages and Internet topped the list of media dealers use to advertise their showrooms, most dealers surveyed said they use a multi-pronged approach to marketing, incorporating several different venues to maximize their exposure.
Of those surveyed, 51% said they spend money on Yellow Pages ads, 38.7% spend marketing dollars on Internet advertising, 36.8% invest in newspaper ads, 35.8% spend dollars on magazine advertising, 29.4% spend dollars on direct mail and 23% invest in radio advertising.
A smaller percentage of dealers said they see television as a viable marketing vehicle for their firms, with 13.7% investing in cable TV ads and 7.4% investing in network TV advertising. A small portion of dealers (4.9%) said they spend marketing dollars on outdoor billboards to capture potential clients’ attention.
In addition to the Internet, Yellow Pages and other primary marketing avenues, there are many secondary costs which most dealers do not view as part of their marketing budget, per se, even though they are essential elements to supporting marketing efforts. These include areas such as Web site design, collateral materials, sponsorship of community events, home shows, public relations expenditures, signage and more.
Of these, nearly 60% of those surveyed said they spend money on Web site design, development and maintenance, 42.6% invest in collateral materials, 37.7% sponsor community and cultural events, 37.3% spend money on home shows, 24.5% invest in public relations, and 22.5% spend dollars on yard signs (see Graph 2).
The survey also looked at annual gross sales in order to determine if sales levels played a role in how dealers marketed their businesses. According to the results, larger companies tend to spend more on magazine and television advertising, while smaller companies trend toward the more cost-effective options like newspaper advertising, yard signs and public relations (see Graph 3).
The great equalizers appear to be Web site design, Internet advertising and radio, the demand for which runs across the board, regardless of size of firm or annual gross sales.
Return on Investment
Since the purpose of marketing is to achieve a favorable return on investment, the survey also looked at what media avenues had the strongest correlation to leads brought in and jobs sold. According to those polled, referrals showed the greatest return on investment.
Indeed, of the 36.8% of dealers surveyed who spend money on referrals, 67.2% get leads from these, and 67.6% close jobs from these (see Graph 4). And, the monies spent on referrals create a 184% return on investment, according to the survey (see Graph 5).
As Maeghi Lucier with Designs by Maejic in Duncan, British Columbia said, “I work in a small community on Vancouver Island, British Columbia and most leads and/or advertising comes from word of mouth.”
Advertising on network television stations was the next most profitable marketing investment, showing a 140% return on investment, according to those surveyed.
However, it’s interesting to note that this was the least commonly chosen investment of ad dollars (fewer than 5% of of respondents buy TV time), which suggests that this might be too large an investment for the average dealer to make. Or, conversely, it might suggest that dealers are getting free TV time via interviews and news segments.
As Rick Clarke, owner of Rick Clarke Design, RCDC of Victoria, British Columbia, explains, “My advertising on TV has amounted to interviews on camera for our ‘Young Life Home Tour,’ which we have been doing for 17 years. They have come to some of our homes that have been renovated or redecorated and had us on the noon hour and local evening newscasts. Being out there as one of our hometown experts in the field has given us a great return for our time on TV.”
Loreen Perry of Perry Supply Company and Golden Eagle Design in Albuquerque, NM explains her firm’s investment in television advertising. “We spend about $11,000 a month in television advertising, so it is very expensive. However, as large advertisers working closely with our station rep, we are able to get favorable spots. We advertise during weekend NFL games, and plan to have a presence during the Olympics. Our customers include many who travel from out of town because they’ve seen our TV ads. It helps our bottom line. The ads definitely pay for themselves.”
Of course, what works for one firm may very well be ineffective for another, as marketing is a complex science that must factor in geographic location, business structure, target market, budget, business goals and even the style and personalities of the salespeople.
This snapshot of the industry’s marketing trends is something to keep in mind as you begin to formulate your 2008 marketing budget. More importantly, remember to pay attention to where your marketing dollars are going, and where your leads and jobs are coming from. As Loreen Perry puts it, “They say that it takes money to make money, and there is some truth in that statement. But placement of your advertising dollars is too important to leave to chance."