By William Atkinson
Special to CONTRACTOR
Yellow Pages advertising continues to be the overwhelmingly favorite way that CONTRACTOR readers promote their service businesses, according to an exclusive survey that this magazine commissioned last fall to profile the plumbing-and-heating service market.
More than 76% of respondents place ads in the Yellow Pages to promote their plumbing-and-heating services, our study shows. Other marketing vehicles popular among CONTRACTOR readers are newspaper ads (29% of respondents) and direct mail (23.3%). Almost 23% of readers now use the Internet to advertise their services.
Contractors also cite radio ads (15.4%), coupons (14.4%) and telemarketing (3.2%) as preferred marketing tools. Mentioned in the “other” category (29.5%) are word of mouth, television, direct sales, vehicle signage, billboards and “none.”
The survey was sent to a random sample of 2,000 CONTRACTOR readers via either e-mail or the fax machine, and we received responses from more than 20%. Our goal was to capture information from our readers on where they saw their service businesses going in 2003 and how they were going to get there. We asked our readers specifically about which markets they served, how much of their revenue they derived from their service business, their favorite marketing tools, and also about their truck and tool purchases. MST Research of Indianapolis helped us develop the questions, sent out the survey and collected the results.
More than 40% of the contractors responding to our survey realize between 30% and 74% of their annual revenue from service or maintenance. Another 20% state that more than 75% of their annual revenues come service work.
The residential market represents the highest segment (54.8%) of respondents’ overall service business. Respondents also do commercial work (29.5% of service business), industrial maintenance (9.2%), institutional (4.5%) and government (4.1%).
The study shows that 73.4% of respondents perform plumbing services. Other categories listed in the survey are: water heater service (71.7% of respondents); kitchen-and-bath repair and remodel (55.6%); and hydronic heating maintenance (51.3%). Less than 4% of respondents say they do not provide service.
Services mentioned in the “other” category (38%) include: HVAC; fire sprinkler; electrical; backflow prevention; water treatment and conditioners; drain cleaning; sewer jetting; industrial and process piping; controls and automation; and radiant heating systems.
Marketing to an end
When it comes to reflecting on 2002, some contractors look back with appreciation, others with grief. Regardless, most look for 2003 to be better.
The chart on the front page of this issue shows that 62.3% of our survey respondents expect an increase in their service business this year over 2002. In contrast, 58% say that their service work in 2002 was the same or less than it was in 2001. In addition to the survey results, CONTRACTOR asked experts in the service field to comment on what lies ahead.
“In last couple of months, we have talked with a lot of non-member contractors who don’t want to see a repeat of 2002,” reports Lisa Schinstine, a business enhancement specialist with Contractors 2000, a member-owned organization that provides best practices and training to 275 residential service contractors in the plumbing, HVAC and electrical trades.
“In 2002, most of our members experienced flat sales to nominal growth, where they had been accustomed to double-digit growth,” adds Greg Niemi, president and COO of Contractors 2000. “We also heard about some other contractors who saw declines of up to 30%.”
Niemi notes that service work tends not be as cyclical as new residential construction.
“In other words, when new construction is booming, residential service business will be up, but not as high,” he explains. “Conversely, when new construction is down, we will be down, but not as low. There is also usually about a six-month lag.”
Niemi says he also expects growth in 2003.
“One positive indicator is population growth,” Niemi says. “In addition, housing sales have been very good, as has residential new construction. Remodeling of existing homes has also been strong, which, of course, provides direct benefits to contractors in the service/repair sector.”
Some weak indicators exist as well, Niemi notes. These include unemployment and uncertain financial markets, which have a negative impact on consumer confidence. Still, Niemi says he is cautiously optimistic and sees early 2003 as being the time for the strong to get stronger through improved marketing and service.
“We strongly recommend that service contractors develop or maintain strong fiscal management,” Niemi explains. “However, this doesn’t mean not spending, especially when it comes to marketing. Do not stop marketing. This is the time to be investing in your marketing, because this is where your competitors are going to cut back.
“Another challenge is to improve customer service levels to those that customers expect and deserve. Overall, we believe the service sector is strong and should remain strong well into the future because people like doing business with local people whom they trust and who are customer service-oriented.”
What slow economy?
One contractor who understands the importance of marketing his service business is Larry Metzler, president and CEO of Metzler Plumbing in Indianapolis.
“Last year started with a boom for us, with people doing some things they had been putting off for awhile,” he explains. “However, things started to sour in September and have remained slow since then. I’m hoping 2003 is better.”
Metzler sees one of the most important keys to growth as being aggressive marketing.
“We need to do a better job in this area,” he admits. “I plan to spend more time training our technicians on selling and marketing when they are on the job.”
When Metzler himself goes out and works, he makes it a point to look for add-on sales. He wants to make this second nature with his technicians as well. One recent night, for example, he was doing a routine gas leak detector check at a customer’s house and found a leak next to a water heater.
“I ended up turning this into a water heater sale,” he says.
Another marketing opportunity relates to selling pressure-regulating devices. Recently, Indianapolis began increasing its city water pressure, he says.
“Most homeowners don’t know this, so we have made it mandatory for our technicians to test water pressure anytime they’re on a job that receives city water,” he adds.
Another contractor who says that he’s not hurt at all by the economy is Roger Peugeot, president of Overland Park, Kan.-based Roger the Plumber, a $4 million a year business. He’s a member of the Quality Service Contractors, an enhanced performance group of the Plumbing-Heating-Cooling Contractors - National Association.
“While some people may try to ‘do it yourself’ when the economy is weak or they’re out of work, most people are still going to call a plumber when they have a problem,” he explains.
Peugeot says he has thrived on a combination of state-of-the-art service and marketing.
“The contractors who are competing against us are having to compete on service, not price,” he points out. “Some contractors have been around for years, because they’ve been a bargain.
“However, they haven’t been able to pay their people well or offer benefits, and they haven’t been able to do any marketing. All they sell is price, so they can’t compete against us.”
Peugeot delineates the elements of his company’s service:
- Technicians show up at a promised time, usually within a one-hour window. “We make promises on when we will show up, and that’s when we show up,” he explains.
- All technicians show up sporting clean uniforms and photo IDs. They park on the street, not in customers’ driveways. Depending on the weather, they either wear booties inside or at least bring a piece of carpet with them to wipe their feet.
- Roger the Plumber offers expanded hours, which are 7 a.m. to 7 p.m. Monday through Saturday and 9 a.m. to 6 p.m. Sunday.
- After-hours calls are handled with integrity. “So many of my competitors advertise 24-hour service, but they either don’t show up or even respond at all,” he explains. “Even if they do call back, they will say, ‘We’re tied up, and we can’t get there.’”
Peugeot says he prides himself on always having customer calls answered by a real person, 24 hours a day, seven days a week. A dispatcher answers calls until 8 p.m., at which time calls are rolled over to an answering service company.
“We have been working with this same service for 32 years, so they know the kind of response we want to provide,” he notes.
As a result, customers are never farther than a phone call away from service. For example, someone called recently at 10 p.m. to say he had water running all over the hardwood floor in his kitchen. Roger the Plumber had someone there within 30 minutes.
After talking with the customer again the next morning, Peugeot found out he had been calling plumbers since 6 p.m. He kept getting answering machines with recorded promises that someone would call back. No one did.
“When he called us, a person answered the phone, and we are able to dispatch someone immediately,” Peugeot says.
Marketing is also a strong priority for Peugeot, whose technicians are always alert for new business.
“When we were out at that customer’s home that night, for example, we saw some other things that needed to be done, and we told the customer about them,” he says. “The customer called the next morning to place the order.”
Peugeot operates a Web site (www.rogertheplumber.com), which he incorporates into his marketing strategy.
“We have our Web site address printed on the side of our trucks,” he explains. “People often first hear about us that way, go to the Web site, then call us. It provides more information than a Yellow Page ad.”
Peugeot also expects to see more service business in 2003.
“We are growing,” he says. “In fact, this year, we are buying two new trucks and hiring two new people.”
Truck, tool purchases
Among service contractors, Peugeot is not alone in contemplating the purchase of two new trucks this year. Respondents to our survey say they will replace an average of 1.2 trucks in 2003. In line with expectations for more business this year, respondents also will add an average of .72 trucks to their fleets in the next 12 months.
While many contractors have more than one type of vehicle in their fleets, vans are used more often than pickups, cube vans and other kinds of trucks. Among all the trucks used by respondents to our survey, vans are the largest category (46%), followed by pickups (33%), cube vans (12%) and other types (8%), which are utilized in specific service applications.
All those trucks will be stocked with tools, of course, to be used on service calls. About half the contractors in our survey (48.9%) say they carry less than $5,000 worth of tools on their trucks, although almost 40% carry a tool inventory valued between $5,000 and $10,000. The remaining respondents carry upwards of $10,000 worth of tools with the top 1.5% stocking tools valued at more than $30,000.
That same 1.5% will spend more than $100,000 in tool purchases this year. Most respondents will spend considerably less. About 62% of the contractors in our survey will spend less than $10,000 in tools in 2003 and another 25% will invest between $10,000 and $30,000. The remaining 11% will spend between $30,000 and $100,000 in new tools.