This column is best read while humming Bonnie Raitt's classic, "Something to Talk About." Trust me — just try it and feel the difference.
In the July issue I challenged the notion that builders receive good value from their advertising expenditures. My not too hidden premise is that most builders are doing what everyone else is doing — screaming out in big, expensive print ads hoping to grab prospective homebuyers' attention and direct it toward their community. This seems painfully obvious to me when I look at the ads in the Sunday home section of newspapers throughout the country.
I suggested a provocative exercise to try with your senior staff members. The exercise — posting all of the competition's ads around the conference room and reading them aloud, one at a time — illustrates the problem rather dramatically. I hope that some of you followed through with it. If you did, you discovered that the ads pretty much leave you cold. My premise is that your customers are shivering right along with you.
I have not yet received any calls or e-mails suggesting I prove my notion about the ineffectiveness of these ads and maybe that's good because the truth is, I can't.
Before you counter that with statistics gathered from prospects or salespeople in models, you and I both know that these are seriously flawed. First of all, the data is easily manipulated. But let's assume its not and you present data that shows a customer cites a particular ad. You still can't prove customers wouldn't have found you anyway, nor can you prove the money for the ad was better spent there than some of the alternatives I am about to suggest.
At the end of the July column, I left you with this specific challenge to ponder with your staff, and if you missed it, I suggest you try it before reading on, because it is always best if you come up with your own ideas first. Break you staff in to small groups and insist that they come back with a solid plan to answer this question:
"If there was no advertising, how specifically would we get prospective customers to know who we are, what we build, how we do business and why they should seek us out and buy our homes?" Or put another way, "How would we get customers and prospects talking in the most positive terms about us?"
Let's first hang real numbers on this issue. I've studied the figures from many large companies and numerous NAHB Builder 20 Groups. The most quoted numbers on advertising expenditures run from between 1/2 to 1 percent of gross sales, with 3/4 percent being a good average. Now let's add in the additional overhead and hidden costs that go with spending this 3/4 percent and call it an even 1 percent. That's a pretty good working estimate of what most of you are spending each year.
For our purposes, let's assume a medium-sized builder with 80 employees, selling 400 units a year at $250,000 each. Thus our $100 million company can be assumed to be spending around a million a year in advertising — total cost.
I am not a big enough dreamer to think that many builders would go cold turkey on their advertising budget and just kill it altogether, although Seth Godin, a current leading business thinker and author of such provocative books as Purple Cow and Free Prize Inside, makes that suggestion. Let's just take half of the budget and free up $500,000. Here is my proposed budget:
$50,000 for three full days of quality and customer commitment training for each employee to get the organization on the same team. The team would have the same language and the same focus in the pursuit of the highest levels of service and satisfaction.
$25,000 for supplier/trade alliance training for the entire staff, key suppliers and trades people. The training would culminate in the establishment of fully functioning Supplier/Trade Advisory Council focused on improvement of product and process.
$50,000 to cover internal costs and support for a major social service project that involves the entire company. Habitat for Humanity, Christmas in July, Ronald McDonald House or any number of others will do — the key thing is that it involves all of your people and most of your key suppliers and trades. Note: senior management must be first on the job and last to leave.
$300,000. Pay off the mortgage of one of your closed homes for this calendar year. No, that is not a typo. Since half of the ad budget is still available, tell prospects that you are going to build 400 homes this year and at the end of the year, you are going to have a big party and draw one name from the hat and pay that family's mortgage off in full — taxes paid, of course. I am figuring a 20 percent down payment initially and a balance of around $200,000 so you'd have to pay the income tax for them, which I'd peg at about $70,000. That leaves $30,000 for the party.) This sort of gesture would generate a lot of free publicity.
$75,000 for an internal referral program. I hope you have one of these already and this will just be a pot-sweetener. I know, there are always people who will rig these programs now and then by setting up to get the award for their cousin Phil who was going to buy one of your houses anyway. So what? Put an award out there and put some real bucks into it. Get your own people talking up your company and your homes. Years ago, when I was employed by one of the big national builders, my efforts led to the sale of at least four homes after conversations started up at my kids' sporting events when people saw the logo on a hat or a jacket.
You've spent half a million dollars and still have a similar amount left for all of the ads you and all your competitors love to run. I don't care if you don't like all of my choices — go find your own. Better yet, let your people suggest anything and everything they can think of then pick from those choices.
But wait — let's look at my budget for a moment.
First, remember that you are still running a slew of ads; maybe just half pages instead of full pages. With the budget I propose, I predict you'll hardly notice the difference. You'll also notice the following:
- You are training all of your people — with the participation of key suppliers and trades — on common principals and language as it relates to delighting customers while continually improving products and service.
- You are creating more high level relationships with your suppliers and trades that can pay off in huge benefits in cost control, schedule and service.
- You have also launched a huge social service project that not only pulls your team together, but also unites them in a common purpose. The team's unity also spills over to the workplace, helping your team to overcome communication barriers and departmental roadblocks that have hindered the team in the past. You have given a family the ultimate "free prize inside" by paying off their mortgage and creating far more excitement, word-of-mouth advertising and media coverage than the same dollar value worth of advertising could never achieve.
- You have sweetened up your internal referral program to a level that really means something. You also helped engage all of your people as your sales agents in the field.
For half of your usual advertising budget, you have built your culture, engaged the trades, touched the community, sparked the media and captured the fancy of the public. Do you think that's got 'em talking?
Can anybody look me right square in their LCD monitor and tell me that the money would be better spent on more print advertising? Think about it — really hard. What gets people talking? What gets you talking? Other than the much-hyped ads of Superbowl Sunday, how many ads have caught your attention and motivated you to action? How many have got you and your spouse to engage in a conversation about the product? And how many of your company's ads are getting people talking?
There is a way. Stop spending and start thinking. Do something out of the box or maybe just do something very smart. Or wonderful. Or crazy. But you have to do something to get your company on the buyers' minds because our ads just aren't cutting it, anymore. How about we give 'em something to talk about already?