Why is it so expensive for local contractors to generate new business?
If you’re a contractor struggling with a high cost of generating new business, then chances are pretty good that you’re focusing way too much of your time, energy and budget on prospects that are at the final stage of their Buyer’s Journey. That is, customers that are ready to rock and roll right now, put down a deposit today and break ground on a new project very soon. The problem is you’re not the only one doing that. That’s exactly what all of your competitors are doing also.
So if you and everyone you’re competing with are all putting most of your outreach efforts into the last leg of the Buyer’s Journey, simple supply & demand tells us that the price will go up.
What is the Buyer’s Journey?
At its simplest, the Buyer's Journey is a framework that describes the process an individual goes through leading up to a purchase decision. It’s usually divided into three main stages: Awareness, Consideration, and Decision, however there is also a 4th stage worth looking into for contractors and that’s the Unaware Stage which I’ll cover below.
Decision Stage
Decision Stage: In the final stage, the buyer is ready to make a purchase decision. They have evaluated their options and narrowed down their choices to the one that best addresses their needs. The decision phase involves looking into specifics like pricing, warranty, support services, and any additional offers or discounts. The potential customer might also engage in negotiations or consultations with sales representatives to finalize their choice. For businesses, the goal is to facilitate this process by making the purchase as smooth as possible, offering excellent customer service, providing clear pricing and product/service information, and showcasing testimonials or success stories to reinforce the buyer's decision.
Targeting customers at the Decision stage of their Buyer's Journey is more expensive for local contractors for several key reasons:
High Competition: By the time customers reach the Decision stage, they are ready to make a purchase, leading to increased competition among contractors vying for their business. This heightened competition drives up the cost of advertising, as contractors bid higher for keywords, ad placements, and visibility to capture these ready-to-buy prospects.
Increased Marketing Costs: To influence customers' final decision, contractors often resort to more direct and aggressive marketing tactics, such as targeted pay-per-click (PPC) campaigns, retargeting ads, and personalized sales promotions. These strategies require a larger budget to effectively reach and convert these prospects, compared to more generalized awareness-building efforts at earlier stages.
Urgency to Convert: Customers in the Decision stage are looking to make an immediate decision, prompting contractors to invest in quicker, more direct marketing and sales efforts to close the deal before they choose a competitor. This urgency can necessitate premium ad services and expedited sales processes, further increasing costs.
Sales and Follow-up Efforts: Engaging with Decision-stage customers often involves more intensive sales efforts, including personal consultations, estimates, and follow-ups. These activities require significant time and resources, increasing the cost of customer acquisition.
Promotional Discounts: To sway decision-makers at this late stage, contractors may offer discounts or special promotions to secure the sale. While effective, these incentives cut into profit margins, making the overall cost of acquisition higher.
In essence, the combination of high competition, targeted marketing strategies, and the need for immediate conversion efforts make targeting customers at the Decision stage more expensive. Contractors must balance these costs with the potential for immediate revenue, carefully managing their marketing budgets to ensure profitability.
Great, but how do I lower the cost of generating new business?
You lower the cost by targeting prospects earlier in their Buyer’s Journey.
Awareness & Consideration Stages
Awareness Stage: For most this is the initial phase where the potential buyer becomes aware of a problem or need they may have. They may not have a clear understanding of what the issue is, but they recognize that something needs to change. During this stage, the individual seeks to learn more about their problem or need, often through research that could include reading articles, exploring social media, or asking peers for insights. Businesses aim to provide valuable information at this stage to help potential customers understand their issues better.
Consideration Stage: At this point, the buyer has clearly defined their problem or need and begins exploring various solutions or methods to solve it. They compare different approaches, products, or services, looking into their features, benefits, and potential drawbacks. The consideration stage involves deeper research into options, such as reading product reviews, watching demonstration videos, and seeking expert opinions. Companies focus on positioning their products or services as the best solutions through content marketing, detailed guides, comparison charts, and case studies.
Targeting prospects at the Awareness and Consideration stages of their Buyer's Journey can be more cost-effective for local contractors for several reasons.
Lower Competition: At these early stages, competition for the prospect's attention is generally lower compared to the Decision stage. This reduced competition means advertising costs, such as pay-per-click (PPC) rates, are often lower, making it more affordable to reach potential customers.
Content Marketing Leverage: During the Awareness and Consideration stages, prospects are seeking information and solutions to their problems. Contractors can leverage content marketing (e.g., blogs, how-to videos, infographics) to educate their audience. This type of content is relatively inexpensive to produce and can attract prospects organically, reducing the need for paid advertising.
Building Trust and Authority: By providing valuable information early in the Buyer's Journey in the form of content, contractors can establish themselves as trustworthy experts in their field. This trust, built at a lower cost, can lead to higher conversion rates in the later stages without the need for expensive sales tactics.
Early Engagement: Engaging prospects early allows contractors to guide them through the Buyer's Journey, nurturing leads with targeted emails, educational content, and social media engagement. This long-term relationship building is more cost-effective than trying to win over prospects who are already considering competitors in the Decision stage.
Efficient Targeting and Segmentation: Digital marketing tools enable precise targeting and segmentation at these stages, allowing contractors to reach specific audiences with tailored messages. This efficiency reduces waste and ensures marketing budgets are spent on prospects most likely to convert in the future.
In short, targeting prospects at the Awareness and Consideration stages allows local contractors to build relationships, establish authority, and nurture leads in a more cost-effective manner than focusing solely on prospects ready to make a decision. This approach leads to a higher ROI by investing in lower-cost, high-value interactions that guide prospects towards choosing their services when ready.
Unaware Stage
Unaware Stage: Most marketers break the Buyer’s Journey into the 3 stages above but there is a sort of secret stage and when done right, it is beyond a doubt the most cost effective way to generate new business. And that’s by targeting customers that may not know they have a problem.
There are many ways for contractors to target prospects at this stage. In the residential specialty construction space, the most cost effective tactic is usually going door to door.
The benefits of door to door include:
Personal Connection: Door-to-door sales allow contractors to establish a personal connection with potential customers. This face-to-face interaction can be more persuasive than digital or mass marketing methods, building trust and rapport more effectively.
Direct Feedback: Engaging with homeowners directly provides immediate feedback on their needs, concerns, and objections, allowing contractors to tailor their pitch or offer solutions on the spot.
Market Insight: This approach can offer valuable insights into the local market, including the popularity of specific services, competitive pricing, and homeowner preferences.
Targeted Marketing: Door-to-door sales enable contractors to target specific neighborhoods or communities that may have a higher demand for their services, such as areas with older homes needing renovation or communities affected by recent storms needing repairs.
Conclusion:
Throughout the Buyer's Journey, effective communication and tailored marketing strategies are critical for businesses to engage with potential customers at each stage. By understanding and addressing the unique needs and concerns at the different stages, contractors can build trust, establish authority, and ultimately guide the buyer towards choosing their solution.
