In today’s economy, consumers spend less and have greater anxiety about parting with large sums of money. In the vertical of home contracting, we hear repeatedly that potential customers are seeking more bids for jobs, taking longer to make a buying decision, and considering partial fixes to keep costs down. As a result of this consumer anxiety, several contractors mentioned that they’ve turned to methods of face to face marketing such as canvassing neighborhoods or manning booths at local fairs and events.
One such contractor recently shared that he had completely withdrawn from local mass media and had replaced it with a mix of neighborhood-focused direct mail, canvassing and manned booths at local fairs. His average lead cost was now $72, compared to the $240 industry average. Our challenge? Given this very low cost per lead, could we improve upon it by implementing response driven retail television?
The contractor’s strategy was to send out a direct mail piece three times to a neighborhood in which he was doing a job. One piece dropped the week before the job, one the week of the job and one dropped the week after. In conjunction with the direct mail, he canvassed the neighborhood in those weeks as well. His lowest cost per lead came through canvassing, followed by the manned booths at local fairs and then the direct mail. Again, his average for all three tactics was a $72 cost per lead.
In breaking down this marketing approach into three pieces, it became clear that the direct mail component of his strategy was the least efficient element. In the acquisition of new customers with whom a business has no prior relationship, direct mail can cost ten to twenty times more than local broadcast television, provided that broadcast television is executed with the proper response driven retail principles. For those advertisers addicted to direct mail, the liberating “ah-ha” moment occurs when they first realize their actual cost per thousand to use this medium. A classic direct mail user will say, “it only costs 46 cents per piece…and that includes printing!” and they will often share that information with a zealous ‘gotcha’ tone. Sadly, 46 cents per piece (or one person costs me 46 cents to reach) is equivalent to a $460 cost per thousand. Most broadcast affiliate’s CPMs are in the $8-$10 range, perhaps $15 on the high side.
When you move on to look at the other two marketing tactics, canvassing and manned booths at local events, both combine the acquisition of a new customer, i.e. getting them to call in the first place, and the retention or sale of that customer. So naturally, they have efficient cost per leads because the marketing dollars spent here combine two steps of this contractor’s normal business process into one. So these two pieces are a smart use of the budget because of this increased efficiency, although bad weather could negatively impact the cost per lead for local fairs.
Thus, while canvassing and local fair marketing tactics proved efficient enough that we could leave them in place, the math of media showed that this home contractor could be speaking to more people for less with broadcast television than with the dollars spent in direct mail. Even if you made the argument that only those people in the neighborhoods in which jobs were taking place were valuable to this business and then recalculated the cost per thousand of the broadcast television schedule to remove non-target zip code areas, those zip codes being targeted as a percentage of the population of the overall market would still deliver a lower cost per thousand than direct mail. In fact, given this argument, the greater the number of neighborhoods in which a home contractor is working, the more efficient broadcast TV would be.
The lesson for the day here is that when faced with a client who is 100% convinced he does not need paid local mass media, consider the following approach:
- Start by breaking everything down into pieces.
- Root out and demonstrate the mathematical inefficiencies
- Recommend a manner which affords the client the opportunity to speak to more consumers for less
Jodi de Riszner is a media and retail strategist in the firm ESA & Company, based in Red Bank, New Jersey. She lives in Buffalo, where images of sunshine dance in her head.
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