Remodeling Market Memo

There is a lot of talk about “Social Media.” I have not counted the exact number, but in the last week, I have received no less than 10 invitations to webinars conducted by “Social Media” experts on how I can use it to boost my business. The phrase “Social Media” is overhyped and so is the notion that web-based social networking applications are magical and transformative, in, and of, themselves. So you may wonder why I am holding up two such applications for greater consideration as a business tool. The reason: although they are not magical and transformative they can be incredibly useful when used diligently, with specific goals in mind, especially when used in concert with other social media, blogs, and your Web site.

Here’s a fact to remember: more than half of all remodeling customers say they do research about their remodeler on the Web before they make a call. They use the web to get familiar with who you are and how your company presents itself. Think of social media or Web 2.0 applications like Facebook and Twitter as vehicles through which you can extend your company’s brand with numerous links back to your Web site. At the end of the day, it is all about bringing qualified remodeling and home improvement prospects back to your Web site. Once there, you can let your site to tell a story while providing ample opportunity for your prospective clients to enter their contact information so you can follow up.

Twitter

Back in ‘08, the first time I signed on to Twitter, I was confused. I “followed” someone and I simply scrolled down a list of their tweets — a series of thoughts from a person or company, encapsulated in a very short format, 140 characters. I thought: “This is the dumbest idea I have ever seen.” (Sometimes it takes me awhile to gain proper perspective on things.) What I soon learned, however, is that there is no limit to the number of people you can follow, which greatly enhanced the experience. Later I learned that there are several ways to “reply” and “direct message” others about what your or your company is doing. At our company we have a news feed. Anytime the content management system for our web site changes, a ‘Tweet’ is automatically generated and sent out to our magazine’s “followers.” This helps people keep up to date on the latest industry trends. We now know that Twitter acts is similar to the ripples in a pond when a stone is thrown in. Our tweets go out to our 1,000 or so followers and they retweet the ones they like, and so on, and so on. When we look at our Web site traffic reports, we know that our Twitter news feed @qualifiedremod is giving a significant boost to our numbers. Remodeling firms and exterior contractors can do the same thing. Use twitter to post links back to your site any time you make changes to your site — new photos of complete projects, awards, honors, tips for remodeling. It takes time to develop followers, but once you get some momentum you’ll be generating traffic to your site from past customers and other prospect. Best of all, it is free.

Facebook

My first impression of Facebook was “not my cup of tea.” And that stands to reason, the social networking site was founded by college students and intended for their use. Over time the medium has matured to the point that there are more than 350 million users of all ages and stages of life. Remodeling companies should have a “fan” page on Facebook. You certainly don’t want to post a page willy-nilly. You should see it as an extension of your company in a different milieu. Fan pages are great for posting project photos, videos, blog entries and any other update you have about your company. Publicize the existence of the page in all of the materials that you send out to current and past customers. With a simple click, they can become “fans” of your company and therefore agree to get pinged every time you post an update. This creates traffic to you page, and strengthens connections to your greatest source of referrals.

The last point I want to make about Twitter and Facebook is that they are increasingly associated with mobile devices. Once the initial set up is done, maintaining your presence is as simple as sending short messages from your phone. There is an upfront investment of time, but the level of time necessary for maintenance decreases quickly. Good luck.

ARLINGTON HEIGHTS, Ill. — Marketing: Then versus now

Then (2004 - 2007) the leads flowed, the phone rang, backlogs were bursting and marketing was all about moving up the income scale, picking the right clients, narrowing your focus on certain tight geographic areas.

Now (2008 - possibly 2013) the leads are fewer, the phone does not ring (not a technical problem), backlogs are thin to nonexistent and marketing (among other things) is about casting a wider net and finding prospects with stable incomes within a feasible driving distance.

Here is my contention, and this applies to all remodelers: Not enough attention is being paid to ALL of the natural constituencies that are available to your company through connections that already exist.

I like to tell the story of a prominent remodeling company owner whose business was hitting the skids at the end of 2009 — great company, 20 years of satisfied customers doing high-end work. He told his peers that he was looking at closing up shop due to the lack of leads — cut his losses ahead of time. Interestingly, he said, his work as an oil painter was taking off.

Oil painter? Yes.

Turns out that this man had gotten into the remodeling business as a way to support his artistic endeavors and that over many years he had begun to sell his oil paintings and artwork. Wow. Art buyers tend to be well-heeled. Did the oil painting buyers know that he was also in the remodeling business? No. Why? Because he always treated them as separate entities, separate worlds onto themselves. With this nugget of information, his peers recommended having an art show at his remodeling office to bring the two worlds together.

 The upshot: Today’s recessionary spending habits with deflated home values dictate that all artificial barriers between groups of people you and your team interact with should be torn down. How about church groups? Do they know what you do? Perhaps a 10% discount to all parishoners or congregation members advertised in a church bulletin.

Once you tear down all of the boundaries between your natural constituencies and your business, leads will begin to flow. It really works. Find creative ways to get the message out about the broad range of jobs in which your firm excels.

Broadening your target, in the literal sense, is also important. Put push-pins on a map for all of your past customers. Are they concentrated in just one or two communities or are they all over that map? Many remodelers, then vs. now, narrowed their geographies to the best customers. To get more leads your company must consider making a move to adjacent buyers that might be one peg up or one peg down the socio-economic ladder.

 How do you best serve these new targets? Research that question. And when you find the answer, develop a marketing campaign that drives inquiries to your Web site where demographic information can be captured and where they can find a phone number to call.

Then: Marketing was branding. Now: Marketing is about leads. Broadening your target is the best way to drive new leads and new business.

SAN FRANCISCO — Among the builders, architects and remodelers walking the aisles of the Pacific Coast Builders Conference held here this week, marketing and driving new leads continued to be a topic of primary interest. Phones are still not ringing like they were a few years ago.

That is why — all spring long — me and my fellow editors on Qualified Remodeler magazine have been sharing the best marketing ideas we’ve heard from remodelers around the country. An idea that seems to really be working is to move toward offers on specific types of projects. Case-in-point is a marketing program put in place by Shoreline Builders Inc. near Boston. With leads from their ongoing marketing of a full slate of remodeling services slowing down, the owners and management of Shoreline moved forcely into the niche of building porches. In fact, they set up a new division The New England Porch Company to anchor their focus on driving leads.

Guess what? It worked. Direct mail and magazine ads linked back to a dedicated Web site and the inquiries from consumers started to flow. There are side benefits too. Because the jobs are more focused, they are able to turn them around more quickly. In addition, they’ve been able to cast a wider geographic net because a dedicated crew can stay on the job from start to finish — sometimes just a matter of a couple weeks or less.

Taking advantage of the ‘While You’re Here’ effect

At the end of each porch project, a New England Porch Co. representative introduces the client to the full-range of remodeling services offered by the parent company Shoreline Builders Inc. This helps set the stage for future business and for referrals. And, as most remodelers know, clients often ask for prices on new jobs while the first job is in production. QR columnist Mike Weiss, CGR, CAPS calls this the “while you’re here” effect. No doubt about it, selling niche projects is a great way to acquire new customers and thus building a pathway to selling larger projects now and into the future.

This ‘niche’ sales and marketing approach has worked well for a full-service remodeler in Richmond, Va. who was searching for a way to acquire clients who own waterfront property. Why waterfront? Typically waterfront property has some of the highest values and therefore its owners have some of the highest incomes. The solution: develop a marketing program offering dock repair and dock building. Two years later, the company has had good success acquiring clients with dock-related marketing, always making a point to sit down with those customers and explain their full range of remodeling and outdoor living services.

In the coming months, I would challenge yourself and your team to rally around a profitable niche. It’s a proven marketing strategy that seems to be working in this recessionary environment.

NEW YORK – Ellen Cheever CMKBD and educator for the National Kitchen and Bath Association recently related a story about how green is impacting remodeling. A client was unwilling to part with a two-year-old dishwasher because it was still perfectly usable. The trouble was that the old dishwasher did not match the other new appliances. Then she learned the real reason the client was unwilling to part with the dishwasher: His 13-year-old son considered it extremely wasteful and bad for the environment to send it to the landfill prematurely.

The solution was to find a charitable outlet for the dishwasher. In this case it went to a Habitat for Humanity retail store, where old appliances and cabinets are resold to raise funds for the charity. The father bought new, matching appliances and the son had the satisfaction of knowing that his family was not contributing to the world’s ecological challenges.

This is not the first time that I have heard such a story. A recent edition of The New Yorker magazine featured the story of the Kevin and Joan Salwen of Atlanta, who sold their big house, scaled back their lifestyle and donated half the proceeds of the sale to a village in Ghana (New Math, Department of Philanthropy by Larissa MacFarquhar March 15, 2010). The reason for making the move, the couple’s 14-year-old daughter had pressed her parents on the need to live so large in a $1.5 million home with an elevator. They did not need the space said the daughter, while others need so much more. Implicit in her argument was the ethos of living smaller and not consuming as much as we need to.

Teen-agers are wildly aware of the need to protect the planet. The next time you have a customer or client who is pushing green, take a moment to peel back the rationale and you may find that these decisions are increasing pushed by teens. Being green means appealing to the awareness of the entire family. Offering de-construction instead of tear outs is a great place to start.

CHAVEZ RAVINE, Los Angeles, Calif. – I tip my hat to the remodelers, architects, builders and suppliers who ply their trade in the Los Angeles basin. How they manage to navigate this sprawling metropolis and get work done is a mystery to me.

Los Angeles

At the Pro Expo held at Dodger Stadium this week, I anticipated that I would finally get to meet a good cross section of remodelers from this great city all in one location and I did. But I had hopes for more.

In all, more than 300 attended the event, which was held on a sparkling, warm and clear evening, but many more who had planned to come ultimately were unable to make it due to the vagaries of traffic. This was confirmed via text messages and e-mails I exchanged with some who had said they were coming but cited the city’s notorious traffic as the reason for the change of plans.

Said one remodeler friend: “If I try to get there at the end of the day, it might take me two hours as opposed to 45 minutes to make the drive.”

I allowed plenty of time for my mid-day drive up I-5 to central Los Angeles from neighboring Orange County, so the traffic did not bother me. But in this town, the mantra must and should be: “Make No Unnecessary Driving Trips.” The negative repercussions are just too costly in terms of lost time and money.

Qualified Remodeler magazine has had a large and vigorous readership in California from from our very first issue in 1975. Today almost 15 percent of our print circulation, which consists of presidents and owners of remodeling firms, is mailed within the state of California. For demographic reasons, this stands to reason. The state is home to a very large segment of the U.S. population. Its largest city, L.A., is not just a city. It is an urbanized region of many cities with lots of natural topography to further complicate matters. Back in the old days, Qualified Remodeler had a strong connection to the bygone Western Remodeling Show. That event, I am told, managed to be a reliable gathering spot for hundreds of the regions top remodeling firms.

Our two industry associations NARI and NAHB Remodelers both have active chapters in Los Angeles, but not as active as they should be, given the density of firms located there.

I am still looking for a time and a place where a bigger chunk of the vibrant and highly successful home improvement and remodeling community in Los Angeles can gather. It seems that all of the things that make L.A. great: its economic vitality, its weather, its mountains, also serve to keep it compartmentalized into small, extremely local segments.

Maybe it is time to resurrect the old Western Remodeling Show…. as soon as they build more rail lines and highways.

ARLINGTON HEIGHTS, Ill. — Silicon Valley investor John Doerr is trying to do for green tech what he did for Internet companies like Google and Amazon. Not only is his firm investing in green technology firms that offer a long-term upside, but, in his capacity as a member of the President’s Economic Recovery Advisory Board (PERAB), Doerr is also promoting a $23 billion program to weatherize thousands of American homes. It is still too early to know if the program will be enacted, but it is currently gaining momentum at the highest levels of government.

Doerr’s program was the centerpiece of a PERAB discussion held with the President on Nov. 2 at the White House. And in subsequent weeks as the outlook for a “jobless recovery” has grown more likely, so too has Doerr’s proposal, with proponents of the idea added to the list every day.

“In the very near term, the way we can generate the most jobs is through home retrofits,” Doerr told the group in a videotaped meeting in the Roosevelt room. “There is about 17 percent unemployment in the construction industry right now and there are about 200,000 home retrofits done each year. But over the next 20 years, we probably ought to be doing 5 million of these retrofits per year, or saving the energy wasted — up to 40 percent — over 100 million existing homes. Were we to develop a program to do that, we could create hundreds of thousands, even 1 million jobs per year in an industry with high-wage jobs and where the savings from the work stays in the pockets of American consumers.”

Officially dubbed “Home Star” (in a nod to the Energy Star program), the program would consist of $18 billion in homeowner incentives, $2 billion for quality assurance audits on energy efficiency projects, and $3 billion in retailer incentives as well as funds to create awareness for the program.

 ”The way I like to put it is that ‘Cash for Clunkers’ mobilized America’s car dealers to cause change very rapidly,” Doerr told the group. ”The equivalent of that for home retrofits would be ‘Cash for Caulkers.’ What we would do is incentive consumers to work with our out of work trades, remodelers and builders to do this work.” The phrase got a chuckle from the President and other economic recovery board members, which include GE CEO Jeff Immelt, White House chief of staff Rahm Emanual, former Fed chairman Paul Volcker and current chair of the council of economic advisors, Lawrence Summers, among others.

 Building Performance Institute Backs It

Among the clear winners if Home Star moves forward are agencies that provide credentials for performing energy audits, namely Malta, N.Y. based Building Performance Institute. Not surprisingly, the organization offered its official backing to the program.

“The nationwide unemployment rate is at 10 percent, but the construction industry is one of the hardest hit at 17 percent. The need to install energy efficiency improvement tactics on 5.9 million homes will bring people back to work,” says David Hepinstall, BPI’s Chairman of the Board. “Struggling contracting companies can transition their business model or a portion of their business completely into weatherization services, including whole-home energy audits and the development of work scopes for energy retrofit improvements, or with appropriate training and certification, begin to incorporate some weatherization improvement measures into their existing areas of expertise.”

New York Times writer David Leonhardt recently wrote a feature story about the Cash for Caulkers initiative. He also dug up some of the proposed details and posted them on his blog.

CAMBRIDGE, Mass. — Actually, I attended Miami University in Ohio. But more recently, I have been a part of a remodeling group that meets at Harvard every six months. There, economist Kermit Baker hosts an update of the remodeling industry research he has supervised since 1995. I have been attending these meetings consistently since 2003, when our magazine joined the Remodeling Futures Steerting Committee of Harvard University’s Joint Center for Housing Studies. To me, it is like one long conversation. You pick it up at intervals and lately the number of participants in this conversation has grown. Plenty of new information stands out from the most recent meeting, but here are two points worth emphasizing.

1. Immigration: The impact of immigration (legal) has tended to be in the abstract when it comes to actual dollars being spent on home improvement projects. It has long be noted that well-educated foreign born nationals have been legally immigrating to the United States at a clip of about one million people per year since 1993. This does not sound like much, in comparison to the total U.S. population of 307 million, but one must remember that these legal immigrants tend to be ready-made households. They have income and they are buying and renting homes from our existing and new stock of 130 million homes. It adds up to about 450,000 additional households added to the housing market — each year – over the last decade and a half. In past meetings of the RFSC, it has been well established that the greatest impact of these homeowners has been felt in so-called gateway cities — New York, LA, Miami, Chicago, Denver and Houston, among others. This meeting, research associate, Abbe Will provided  new data on the amount that legal immigrans actually spend on home improvement — and the surprise is that they tend to spend more than their native counterparts. Immigrants spent $2,550 on home improvement annually between 2001 and 2007, while the average for the rest of U.S. homeowners was $2,440. In total, this amounted to $23.4 billion in home improvement spending in 2007. These real dollars attached to immigrant spending add are bolstered by findings that immigrants tend to be “more mobile and active participants in the housing market.” They tend to have larger families and significantly higher house values. And they are disproportionately younger compared to native-born homeowners. Lastly, immigrant homeowners tend to increase their spending on home improvements the longer they live in the U.S. For remodelers looking for every market opportunity, this one is hard to ignore.

2. The Coming Recovery: Mr. Baker’s assessment of the remodeling market is that its decline is not as steep as it once was. One of the bigger achievements of the steering committee’s ongoing work is the development of a leading indicator of remodeling activity, the LIRA. It is typically presented in a three-quarter trailing average. This is designed to smooth out the trend lines and to remove the bumpiness of specific readings along the way. For the past few quarters, the LIRA has shown that remodeling has declined at a double-digit rate. Now the LIRA has shown single-digit declines that suggest the market is probably headed for a gradual recovery beginning in the first quarter of 2010. What was interesting was a version of the LIRA that removed the trailing average component. It showed that remodeling is very near to the point of posting a quarterly gain. The single quarter version of the LIRA shows that remodeling will likely decline only .09 percent in the fourth quarter of 2009. In the past I have learned that remodeling grew at an unsustainable pace during the first seven years of the decade. Our approaching new low will, in fact, be very large compared with most of the last 20 years. I learned that projecting a flat year ahead is probably the way to go for most remodelers. But, as always, there will be those who outperform their competitors. 2010 could be a winning year for focused and aggressive firms.

The word “Green” has come to mean many things to many people. In fact, I think we are nearing the point in our larger “Green” conversations — with clients, with suppliers, with our peers — where we need to be a lot more specific.

Does that mean that I think Green is a passing fad? On the contrary. I think it means that we are heading to a new point in the spectrum of the adoption of “Green” attributes — in remodeling, building, designing and replacing. I think that we need move beyond the sheer enthusiasm that many of us have for the topic and for the promise that it holds for the remodeling industry.

In many ways, serious proponents of green have begun avoiding the word in favor of going directly to one of the term’s component parts. Sustainability: There are whole schools of thought pertaining to this one topic. Is the overall plan for a remodeling project built with sustainability principles in mind? Are the products used — from cabinets to countertops and decking material — made with materials that can be replaced. Life Cycle: This is a narrower topic. The durability of the products selected is typically well known. Will it last for 50 years? If the client sells the house and a product is ripped out, is there another use for the product. Can it be recycled? Energy Efficiency: This is a particularly powerful topic among remodeling clients these days. It is practical. It has a clear payback. And, with the current Stimulus Package tax credit in place, the relevance to focus on energy-efficiency is particularly urgent. Are you offering windows that will qualify for the tax credit. Are your clients interest in solar or geo-thermal? The payback is longer but the tax credits are bigger. Carbon Footprint: Can a selection be made to source locally produced materials? Energy-efficient windows that are shipped on a big rig across the country might do wonders for the homeowner who pays the subsequently lower energy bills, but the environment is slightly worse off from the carbon emissions involved in the long-distance shipping.

These are just a few of the ways green, and conversations about green can be taken to more useful levels. There are numerous other topics – de-construction of used materials, water-conservation — and this is ultimately where the conversation must go. Eventually, there may come a day when green completely recedes into the background. All good remodeling and building will be green, but we just won’t have to think of it that way.

The housing market is not out of the woods by any stretch of the imagination. But July 28, 2009 may go down as a day when the market and perhaps the rest of the economy began to be seen as resting on terra firma once again. Granted that this new terra firma is substantially below peak levels, but the notion that we are entering a period where further declines in home prices may be a thing of the past is nonetheless significant and symbolic.

The news that the Case Schiller index of home prices increased by .5% nationally and rose or stayed the same in 15 of 20 leading metropolitan areas is also a big moment for remodelers and home improvement professionals. It may mean that remodeling clients will, once again, be able to more easily calculate the future value of improvements they make today. For the past couple of years, and especially since the financial crisis of last fall, home-price declines have unerved a lot of potential customers. Many of have been waiting on the sidelines for better decision-making conditions. So here’s the question: how much remodeling money has been waiting on the sidelines? Is this the perverbial leak in the dike that eventually leads to a dam burst of new “discretionary” remodeling spending? Time will tell, but after almost three years of home-price declines, that .5% increase feels very good, as it should to everyone connected to the remodeling market.

A few days into the mandatory energy audit scheme put in place by the Austin, Texas city council and already there is negative press about the new ordinance.

Page three of today’s Wall Street Journal carries a story about how the new law is ”vexing” the city’s homeowners. Some complain that disclosures will dampen home-sale prices. Others quoted in the story resent criminalization of non-compliance – the law carries the threat of a misdemeanor charge. And many are simply confused by the new law. They are surprised to learn that an energy audit is not part of the typical home inspection.

Formally known as The Energy Conservation Audit and Disclosure Ordinance, the new law took effect in Austin on June 1. And while it does mandate an energy audit for home sellers, it does not require them to pay for any improvements that may be uncovered. Similar ordinances in San Francisco and Berkeley, Calif. require put a home-improvement onus on the homeowner prior to selling.

According to the Austin Energy web site www.austinenergy.com the ordinance is part of a broader city Climate Protection Plan, which aims to substantially reduce the region’s carbon footprint. The goal is to offset peak demand for electricty by 700 megawatts by the year 2020. This is an admirable goal, but should these constraints be put on homeowners, perhaps to their financial detriment? The answer in most places remains ‘No’. But we can certainly expect that energy audits will become an increasing part of the home selling disclosure process — one way or another. Even if an energy audit is not required, many savvy home buyers are going to ask for one at their expense, or (in this slower home buying market) may require one conducted by the seller prior to closing.

One can also envision a time, in the not too distant future, when home buyers will reward those who have paid for energy performance improvements and pay a premium for homes that score well on energy audits. To a homeowner who puts in new windows, adds insulation, seals their HVAC system, a $300 energy audit will seem like a small price to pay for tests that will ultimately boost their asking price.

Legally required energy audit disclosures are fair. Home sellers already expect to provide past home energy bills to prospective buyers. It makes sense because it brings greater clarity to a free market for homes. It brings more transparency to the home buying process. And in the end, laws like the one that recently took effect in Austin, will help us as a country move toward a more energy independent future.

What do you think about the Austin Energy-Audit Ordiannce? We’d love to get your feedback.