Issues 36: When free is too expensive

When FR££
is too expensive

A few editions ago, we offered the chance to get your hands on what we called The Bran Tub - a database of thousands of window company names that we weren't able to validate over the years. No takers, so far!

Everyone with any interest in business-to-business sales is always on the look-out for possible contacts - as sales leads - and there must be hundreds of compact disks changing hands every week, sometimes even with the approval of the boss.

It's even possible that some of these bootleg disks have a slightly negative effect on Windowbase sales but, if you turn down something that's free and kosher, it suggests that it really might be worth what we pay. So, if we pay nothing, the odds are it's worth nothing.

The names might come free but the costs of making contact add up. There are phone calls to be made, and someone has to be paid to make them. There are letters to print out, and post, and they also cost money. There are full-colour flyers, at so much per copy, going out into the wide blue yonder, most likely to become some kind of overhead to Royal Mail. The only way to know, for sure, what happens to what [in this instance] is almost certainly junk mail, is to put something on the back of the envelope, saying: if undelivered, please return to...

When you think about it, Royal Mail offer an additional service, completely free of charge, that allows you to verify the accuracy of your data: send out a mailing and they'll confirm all the companies that have gone away. All you have to do is save them up until one quiet Friday afternoon, when someone can eliminate all those names from your database. Then you know that the remaining names are "live" in some way.

But you do have to do the following up. So, if anyone does fancy a copy of The Bran Tub, it's still on offer and you can explain, when requesting one, that you have a very sophisticated operation and you're looking to go through the undergrowth of the window industry with a fine tooth comb, to see what - if anything - comes up. Good luck.

It's a hard life

Mailing labels are bought by two distinct types of company that, between them, probably account for 20% of the market. There's one where someone says it might be a good idea to spread the net a little wider and see what gets caught. Sales are holding up, so now's a good time to build on a successful formula. At the receiving end of an enquiry to Windowbase, these people are easy to spot. They might have a relatively local operation, so they take mailing labels (mostly with follow-up phone numbers) for one or two regions round the edge. Enquiries tend to be specific, the mailings go out and, as often as not, we get feedback to say it was a very useful exercise.

Several of these people come back to us, converting their option into data on disk. They are usually allowed a significant discount on the soft-copy data licence, meaning that their labels cost virtually nothing. Companies of this nature tend to go from strength to strength.

Down at the bottom end of the scale are companies in serious trouble. They can't pay their bills, and they're on the brink of collapse. Something must be done, and quickly, or there'll be no wages at the end of the month. The only answer is to get their hands on some mailing labels, post something out as quickly as possible, and hope that there's at least one order as a result that will plug the hole.

Cheques are promised, in tonight's post of course, but they don't always appear. There'll be a disgruntled caller, demanding to know what happened to the labels, and it's understandable because the guy's in serious trouble. The more irate the caller, the more serious his situation. The cheque was posted last night, so it'll definitely arrive tomorrow, so will someone get those labels in the post - now?

No.

What, you might ask, do both these enquiries have in common, apart from being at extreme ends of the market? The answer lies with Mr Desperate. If he knows nothing else, he does know that, when push comes to shove, mailing labels are probably the only way to generate enquiries quickly, and save the business.

Which just leaves the 80% in the middle: companies that say they're doing okay, thanks very much. Nothing brilliant but they're keeping their heads above water. Not quite the vision the boss had when he set up the company, a few years ago, is it? They were going to change the world. They were going to take the market apart. They were going to do all sorts of things but it's a funny old world, and there was some bad luck here and there. Yeah, right.

The subject, then, is Growth... which, to be sustainable, must be gradual. Transform your operation overnight from a Bit Player into a Big Wheel, and you'll be back where you started in no time flat. Mailing labels cost next to nothing [well, probably something like £200] - the sort of money you can just about charge to your company credit card, without repercussions from the Accounts Department. What's more, you can swing it so that, by charging the labels to your card, they become a general overhead, rather than being taken out of your year's budget. They might not be free, but they're as close as you get, without dipping into The Bran Tub.

All we seem to hear, these days, is that yet another house-builder has changed ownership, and the office has closed, as we chase round all the house-building groups to bring you the latest and best information on who's building where.

The rate of change is accelerating and the industry is on the move, at all levels and in all regions of the UK.

If you are trying to sell to house-builders and you are leaving it up to your sales team to manage your lists, you're fooling yourself if you think they are accurate and up-to-date. Or if they are, then your sales team is spending too much time on research and administration, and not enough on selling!

Persimmon, the UK's largest and most successful house-builder, is the latest to hit the headlines with news of its proposed £643 million cash acquisition of Westbury. Persimmon, with a turnover of £2.3 billion, is now just ahead of Barratt Developments. The company has a track record of making large acquisitions, having successfully integrated Beazer following a £560 million take-over in 2001. It's now valued at £2.8 billion, and on the brink of a place in the FTSE 100 index of leading shares - the first house-builder to enter it in 15 years.

York-based Persimmon is on track to sell 12,600 homes this year. The number of current site outlets is ahead of last year with more than 120 new outlet openings planned for the first half of 2006. As well as buying Cheltenham-based Westbury, which should give them about 15,000 new plots of land to build on, Persimmon snapped up Senator Homes, a regional builder based in Carlisle, for £25 million in December. Once the Westbury deal is complete, the enlarged group plans to build 16,700 homes this year.

John White, Persimmon's Chief Executive, says they have a devolved style of business with regional chiefs given large amounts of autonomy: "There are hundreds of house types. Even if a style has the same name, you would find it looked subtly different in different regions, reflecting the taste of different markets," he said. "There are many areas [of specification and materials] where we do not dictate to the areas [regional operations]. We allow the guys to decide what specifications to put in the houses. It allows people to have a culture of being able to make things happen. There is no single standard way of doing anything." In other words, he's saying that each of Persimmon's regional offices can be influenced by your sales team.

Other house-builders that may end up on someone's shopping list are Redrow, Bellway and Bovis. Even larger players such as Wilson Bowden and Taylor Woodrow could be targets. At the time of writing it's still not too late for a counter bid for Westbury from Barratt or George Wimpey.

A matter of timing

Synseal won the Best Small Budget Campaign (under £25,000) category of the prestigious Construction Marketing Awards 2005 last November.

The cost of the winning direct marketing campaign came in somewhat under £25,000 - in fact the total bill was only £480, including postage!

Nick Dutton, Synseal's Sales and Marketing Director, said “It was one of the toughest categories with more finalists than most, so we were delighted to win the prize for what was described as an innovative and outstanding use of direct marketing.”

“The campaign came about last April, when we got reliable information that a well-known multinational building materials company was about to announce the closure of its UK subsidiary systems company, to import products from across Europe. We instinctively felt their customers would see the resulting uncertainty as an opportunity for change. We also knew we had to act quickly. With our style of management and an accurate and up-to-date database we could do that.”

“We decided on a direct marketing campaign, sending a series of seven postcards - one a day for seven days - aimed directly at the 150 customers affected. Our first postcard reached the targeted customers' desks before their multinational supplier had informed them of its intentions. The remaining series of cards went out daily, followed by a phone call to fix appointments with our sales team.”

“The results show that direct marketing doesn't have to be expensive to be effective. It's all about seizing opportunities and acting fast with the right message to a highly focused target audience. Receiving the CMA Award for Best Small Budget Campaign is recognition we had not anticipated when we planned the campaign and went into action. Winning the award and the recognition that brings is pleasing, but the main gain for Synseal was six new customers with, at the time of writing the award entry, an annualised value of £2.3 million. That's a 4792% return on investment. Since then even more have made the switch to Synseal.”

How do they it? Nick Dutton again: “That campaign would not have been possible without Windowbase. It's the most up-to-date, accurate database on the market. People ask me how Synseal grows so fast, whether the market is growing or not. The answer is simple. Whereas others talk about it, we are always marketing, year in, year out. Every month, for example, we mail potential customers with reasons to buy - news of new products, new services, or just helpful information. Opportunistic mailings like this one are in addition to our planned marketing programme. If I had to give up all the items in my marketing budget, one by one, the last to go would be my Windowbase database.”

The rest of the iceberg

Everyone talks about "the tip of an iceberg" but nobody ever mentions the rest. The tip is what can easily be seen but what lies beneath the surface is worth our attention. Commercial contracts attract attention, yet they might account for only a small proportion of what's being spent by a major social landlord.

Not everyone seems to know the difference between maintenance and repairs. One is supposed to prevent the need for the other. Fine when it's your car - book it in for a 10,000 mile service now and again, and you shouldn't ever need to call the AA man from the hard shoulder. Once your car's done more than 100,000 miles, things do start to wear out, so you trade it in before it happens. Well, it doesn't work that way with houses.

Houses are supposed to last a long, long time but they weren't necessarily built that way and, to make matters worse, there isn't always the money to do what's needed. Repairs are a way of life, there's no getting away from them, and somebody has to do them. Most social landlords have their own Direct Labour Organisations, whose job is to get on with it.

They spend HUGE amounts of money on all sorts of products and services that don't come to anyone's attention, the way big maintenance contracts do. Mrs Jones at 46 Warwick Street needs a new back door, her neighbour's gutters leak. His Lordship came home drunk last night, had no key, so he put his elbow through the kitchen window before going to sleep in the dog's basket.

Maintenance can be funded from revenue or it can be capitalised. The amount of work that's paid for out of the rent income is vast and it just seems to happen, day in, day out. Capital projects need specifications and tender documents, so products get named, and reps come a-calling, with the scent of an order in their nostrils. Meanwhile, the DLOs just keep ordering more of the same. Wads of money to spend but they must feel like the poor relation, sometimes. Their materials, as often as not, come from the local builder's merchant because nobody bothers to persuade them otherwise.

Windowbase has completely updated the Housing DLO database. One list says who sub-lets its work to outside contractors, and the other [the main one] offers a range of contacts - people with an awful lot of spending power. Can you say for certain they don't need what you offer?

If you don't ask, you don't find out. Windowbase tells you who to ask.

Style at almost any price

Conservatories are a 'lifestyle' purchase. Unlike replacement windows, which are mostly a necessity, and purchased on the basis of lowest cost, conservatories are a way of extending the home while demonstrating some taste and style.

What does this mean for the building and related industries? For a start, it should mean that consumers don't go for the cheapest option, but can be impressed by issues of quality, status and culture. They can buy the poor man's conservatory from the sheds, but the opportunity for adding value to a sale comes in spades. Glass roofs in place of polycarbonate, interior and exterior colour, stained glass or just solar protection? Quality stonework or cheap brick, even outside patio stone rather than basic decking?

Even if the basic structure is relatively cheap, there's so much more that can be offered to this market - floor tiles, heaters, blinds, fans, furniture, rugs, lighting, security. In fact the basic cost of the conservatory can be more than doubled - and in easy instalments. Many installers have still not grasped the reality that an existing customer means opportunities for future repeat business - just by helping them add value.

So that's why Windowbase now offer a Conservatory database - information on who's installing, who's fabricating and who's supplying the conservatory roofs. Nearly 10,000 conservatory installers (over 8,500 in PVC-U and 3,300 in wood), 4500 fabricators (2,400 PVC or 2,000 in wood) and some 500 companies making conservatory roofs for their own use or trade supply.

It's a wonderful market to go for, one that the industry still expects to expand, and maybe you can be part of it.

With the UK's slight recession over the past 18 months, we are seeing a lot of changes in the marketplaces we serve. Many companies seem to think that, once they've built a database, it will stand them in good stead. But cleaning to remove deadwood is still essential. Finding new customers to replace the lately dead is difficult. In many cases one company going out of business can spawn two or more new ones as ex-employees seize the opportunity. But it happens, and we at Windowbase try to contact companies twice a year in the more mobile industry sectors, to keep our data [your data] up to date. Recently we've found greater stability in Scotland and Northern Ireland, with the greatest changes being in Yorkshire and the Northwest.

We measure change by identifying companies that were there at the start of the year but not the end, new start-ups during the year, and those who moved premises. The average change in 2005 was just under 25%. But individual sectors showed marked volatility - often because a company would close down one activity to concentrate on something more successful. So we saw a huge fluctuation in the PVC-U sector of conservatory and window installers - no less than 38% of the companies differed in some major way during 2005.