Growing labor shortage includes weatherization workers
With the housing market heating up, residential construction firms report growing difficulty finding skilled labor, including weatherization workers. Survey results released on March 21 by the National Association of Home Builders show that labor shortages caused 46 percent of builders to experience delays in completing projects on time, 15 percent to turn down projects, and 9 percent to lose or cancel sales.
Good reads for home-performance pros
- Pearls of wisdom from recent conferences, by Martin Holladay
- Why to consider cork exterior insulation, by Alex Wilson
- Holes and leaks, by Joe Lstiburek
- Spray foam isn't a magic bullet, by Carl Seville
- Big houses and blower-door tests, by Allison Bailes
- Dos and don'ts for high-performance homes, by Matt Risinger
- Conferences, codes and realities, by Sean Lintow
Home efficiency: Two steps forward, one step back
Several new reports point to enormous potential savings from making homes more efficient, along with stepped-up consumer interest in getting it done.
More than half of homeowners are pursuing energy efficiency, according to a survey by the Association of Energy Services Professionals. However, only eight percent of those surveyed had conducted home energy audits.
In the meantime, more effective appliance labeling and better incentives for purchasing energy-efficient heating and cooling systems could go a long way toward helping consumers shave more than $1 trillion off their energy bills over the next 15 years, according to a report released on March 18 from the American Council for an Energy-Efficient Economy.
Not surprisingly, some of the easiest gains may come from unplugging. A new survey from the Energy Information Administration shows that heating and cooling, for the first time, comprise less than half of residential energy use. Offsetting that decline? Electronic gadgets. D'oh.
Appraisers get better "green" insights
The Appraisal Institute has updated its guidelines to help appraisers analyze the values of a home's energy-efficiency features. The institute's Residential Green and Energy Efficient Addendum to Fannie Mae's Form 1004, which is the valuation professional's most widely used form for mortgage lending purposes, now includes solar panels and energy saving devices. Since 2011 the addendum has included fields on the types of insulation in the home and corresponding R-values, and envelope tightness based on blower door test.
I get this question all the time. "What is the most effective marketing?"
Contractors are rarely satisfied with my answers, which are usually some variation of "your most effective marketing is what works best for you." Whew, the tomatoes start flying. I can also guarantee that whatever plan I give them (including the creative content, channels, and spend) it wouldn't be the right answer, even if it was exactly what their most successful competitor was doing.
My point is, you're not your competitor (although admittedly it sometimes seems that way). Marketing, which permeates everything you do, is inherently unique to your company and the services you provide. Finding the right answer doesn't just involve developing that nifty radio jingle or tagline, but also planning, tracking, and adjusting your strategy. And since the right answers change over time, more planning, tracking, adjusting. Forever. And that's an area where most contractors could do better.
As a basic starting point, you need three things.
You need a plan.
Now this plan can be simple or complex, but it has to consider your business, your customers, your market, and the ecosystem in which they all come together. It should be a plan that considers how needs and actions change throughout the year. For example, you don't want to be pushing high-efficiency furnaces on a radio campaign that starts July 1. (Or maybe you do!) And the air-conditioning campaign might not gain traction in New Hampshire in December. Your plan should include a deliberate approach, weighing the need for leads in busy and slow times, and what messaging would be required.
I like breaking this down by month, since that's how I break down an annual plan, and how I look at prepared financials. But a simple quarterly plan will do.
Planning ahead also means you can craft messages and campaigns carefully, rather than throwing them together at the last minute. If you know you're going to run a furnace replacement special in September, you don't have to wait until Labor Day to develop the ad. If you know you're likely to see ice dam problems in January, you can develop that radio spot months ahead of time. And so on.
You need a budget.
The budget will tie into your marketing plan (as well as your annual business plan and cash flow analysis). How much should you spend? (Refer to those answers I gave above—the ones you hated.) It depends. Hopefully you have some historical information to draw from. If not, here are some reference points that you can start with, and refine as you gain experience.
I polled a few contractors at a DOE sponsored event last summer, and the consensus seemed to be that most home performance contractors spend around 7-8 percent of their gross revenue on marketing. Informal surveys over the past few months corroborate that. Maybe it's not a bad starting point. However, if you're starting out in a new market or with a new business, that could be significantly higher; as high as 20 percent. Likewise, even for mature businesses, if your plan calls for strong growth and a boost in market share, you'll have to bump that 7-8 percent up several points. With more conservative plans, you might be in the 4-5 percent range. And if you're an established HVAC company adding home performance to a strong existing business, you might only spend 2-3 percent of associated revenue for that portion of your business. In any event, make sure you're spending plan lines up with your overall business plan—at least as a starting point.
Within your overall marketing budget, I'm most comfortable with about 15-20 percent of your marketing spend being used on branding, things like uniforms, vehicle branding, yard signs, business cards for staff, etc. You will get leads and awareness for this - and you'll support your professional image.
You need to launch, track, evaluate, adjust, repeat.
So now that you have your plan and a budget mapped out, jump in. Pump out the creative in the chosen channels. And then track results. Planning and budgeting are important first steps. But determining how different messages and media are working via the number of leads you're getting, the sales you make, the dollar volume of business you're doing, and the return on your marketing spend is critical. Without the tracking and evaluating, you're just guessing.
Let's say the average cost of a new customer is $250. (When I ask contractors, I usually hear it's in the $200-300 range.) If you look at a particular campaign, and see that it costs $476 per new lead generated, you should be concerned. On the other hand, if the lead costs $95, I might think "excellent!" But don't make the mistake of thinking it's just about leads. Leads are simply an early indicator. Quality matters! You ultimately need to track how many leads convert to sales. Maybe for a variety of reasons those $476 leads close at 80 percent. That might work. But what if those $95 leads close at 10 percent? They don't look so attractive now. This lead cost per sale, or what some call a cost per acquisition, is critical. And it's why those $35 leads from an online lead mill might not be worth a second look.
Some campaigns will work. You can momentarily put them on autopilot, and then tweak until you've got a set of campaigns you're comfortable with. Keep doing what works. Change or stop doing what doesn't work (even if worked great two years ago!"What have you done for me lately, Tired Old Ad?"). And always be dabbling in a couple of new ideas because sooner or later what used to work won't work anymore.
These three steps should be practical for most contractors in the home performance world. That said, the majority of contractors I meet don't follow them, and they really struggle to find an effective marketing approach. In contrast, the vast majority of successful contractors I know do these things. Which camp's flag do you fly?
You don't have to make this complicated. If you're not doing any of the above, this marketing planning and evaluation tool (Download Excel .xlsx file) can help you get started. Ideally, you would have this tied directly into your CRM, financial, and tracking system(s). However, even the manual method in this tool is a start. And it's better to start today than putting it off another month or more.
During a recent early morning drive from Philadelphia to Ohio, I visited a rest stop along the Pennsylvania Turnpike to grab a cup of coffee. The woman who worked the food counter was full of energy and enthusiasm; she was obviously a morning person. Customers were greeted with a smile and an inviting demeanor - "how may I help you?" The pervasive aroma of fresh-baked pastries, sizzling bacon and fried eggs filled the room and created an appetizing ambiance. However, the only purchase I had in mind was a cup of Joe.
I ordered my coffee and pulled a five dollar bill from my wallet when the woman asked, "would you like a breakfast sandwich - they're fresh?"
So there I stood cash in hand, in the presence of an upbeat person who just invited me to taste the food that smelled so good. I accepted and added $2.50 to my total. After she handed me my breakfast and said "thank you," I stepped aside to add a little milk to my coffee. I overheard the next transaction in which a customer ordered a cup of coffee and sure enough, the woman suggested he try a breakfast sandwich - which resulted in another sale. Intoxicated with curiosity, I waited in the lobby, ate my breakfast sandwich, and watched her serve more customers. She sold an additional four breakfast sandwiches in about five minutes. This woman's sense of timing was outstanding. She waited until the customer had cash in hand, and then asked an upselling question followed by a value proposition, "they're fresh." Wow, I thought – that's an additional $10.00 every five minutes, which could translate into $120.00 an hour. As I walked back to my car, I remarked to myself that this woman really understood how to upsell.
Moreover, the woman at the counter also maximized her use of the Halo Effect. The Halo Effect is the positive feeling we experience a split-second before we can intellectualize why we feel that way. For example, before I could think about whether or not I wanted a breakfast sandwich – I said yes. Why? Because of the positive vibe that culminated from her smile, greeting and demeanor (the aroma didn't hurt either).
For many professionals, upselling is one of the least understood business behaviors, but can have a dramatic impact on revenue and profitability.
An HVAC technician who came to my home to repair our furnace maximized his Halo Effect simply by being observant, and making a suggestion at the appropriate time. The technician's name was Tommy.
It was a cold winter day and I had a plane to catch. Tommy sensed my concern about wanting the furnace repaired ASAP. After he replaced a broken hot surface igniter, Tommy waited patiently to gauge my satisfaction. Upon feeling the warm air streaming through the vents, my concerns were alleviated, and when I thanked him, he said, "it's my pleasure." And then he made a suggestion about replacing the PVC, which was attached to our clothes dryer exhaust, with sheet metal.
"The PVC could be a hazard in the presence of extreme heat," Tommy said. "It should be replaced with sheet metal." Similar to the situation on the PA Turnpike, before I could think about whether the PVC should be replaced – I said yes. My positive answer was based on the feeling that Tommy was trustworthy and capable.
Tommy probably noticed the PVC when he first entered my basement, and he knew his best approach was to maximize his use of timing. Being patient and waiting for my satisfaction enabled Tommy to take full advantage of the Halo Effect.
The definition of upselling is "offering a suggestion to an already receptive buyer to enhance the value of his or her purchase." Upselling does not include aggressive tactics. The purpose of upselling is to build a mutual benefit so that both you and the customer win. So if upselling is such a great business practice, why don't more companies do it? Perhaps the answer lies in the fact that upselling needs to be trained.
Training must also include what a contractor should NOT say. The Halo Effect can be derailed when a contractor conveys too much information, which results in customer skepticism. When a contractor says too much, this is called editorializing.
For example, after a contractor has finished installing a new water heater, they compliment the customer for replacing their old and inferior water heater. This good intention can backfire, especially if one of the contractor's counterparts installed the older water heater a few years back. The customer latches on to the word "inferior" and begins to wonder why they paid top dollar for sub-par equipment in the past - and this can result in an angry phone call to the company owner.
"Your contractor just told me you guys installed an inferior water heater the last time you were here. I demand a refund," says the customer as the company owner winces, and struggles to explain that his company only installs quality equipment.
Customers hear what they want to hear. Every word and nuance conveyed by a contractor can be twisted around and misinterpreted.
As demonstrated by the woman at the rest stop, Tommy, and the contractor, a Halo Effect manifests itself in a variety of outcomes. It's important to recognize the appropriate timing and opportunity in order to capitalize on future gains.
Congratulations to Ron Clark of Energywise Consulting in Carson City, Nevada for finding the missing pieces to last month's home performance puzzler.
Last month Bo Jespersen The Breathable Home in Manchester, Maine, told us about a troublesome leak that appeared shortly after his team had completed spray foam installation and attic sealing above a second story bedroom in a modern Maine home. Just two weeks after the job was complete, the homeowner complained that water was dripping into the room below where the work had been done.
Bo's team returned to find multiple air leaks along the seams of the rigid foam, especially the ridge beam – and noticed that warm air was racing into the air gap above the rigid foam, and to the cold sheathing causing it to condense as it hit dew point.
Ron, who has experienced similar situations, realized that the drastic difference in temperatures was certainly the root of the problem – causing condensation and the subsequent leak into the room below. Ron suggested that in order to fix the problem, Bo ought to create an access to the air gap above the rigid foam, and completely fill the gap with foam while sealing the top of the rigid insulation near the ridge beam.
Ron explains, and Bo agrees, that this would eliminate any possibility of warm moist air from encountering the cold roof sheathing, and therefore stop the condensation and the leak.
Thanks to everyone who submitted an answer to last month's Stump the Chump!
This Month's Stumper
This month's stump the chump comes from a mystery contributor, a caped crusading building performance specialist from Burlington, Vermont.
During a recent job, the crusader was reminded of a stumper he encountered in the late 1990's.
The homeowners of a 19th century duplex were in trouble; victims of uncomfortable rooms and high energy bills. With their patience wearing thin, they called in the local home performance hero to upgrade the shell of their home. The scope of work included significant infiltration reduction; upgrading thin rockwool attic insulation to R40; dense-packing 2x6 finished slanted ceilings with cellulose; dense-packing 2x4 exterior walls with cellulose; dense-packing the perimeter of the 2nd floor framing system with cellulose; R19 bandjoist insulation; and a few other minor things.
Following the upgrades, the homeowners saw very little savings in the amount of natural gas the building used on a yearly basis. Four years later, the caped crusader returned to make one more upgrade, which resulted in a 60 percent reduction of natural gas use from the previous year.
What did this dark knight of home performance miss in the initial audit, and what was the cure to the problems?
Hint: Each of the two units had a single pipe steam heating system.