Direct Marketing, Lead Gen Marketing or Referral Marketing?

There are three primary types of marketing:

1. Direct Marketing
2. Lead Generation Marketing
3. Referral Marketing

Here at Home Pro Partners we go against the grain of our competitors and focus on referral based marketing to help you win more projects and earn higher rates per job. Learn more about each marketing type below…

The business of selling products or services directly to the public, e.g. by mail order or telephone selling, rather than through retailers.

If you take a look at the illustration above, you can see how this works. In the middle is you, the service provider. Surrounding you are clients and potential clients who need your services, as you can see the connection between each potential client is 1-2-1 and quite limited in reach. This is a very common marketing approach and certainly works, but there are several problems with using it.

Time Consuming: First of all, this process is extremely time consuming to try and connect with each potential client individually. This includes making phone calls, sending emails, knocking on doors and similar techniques. If you are a small to medium sized service company, you may simply not have the manpower to take the time for these methods of connecting with a potential client.

It is Expensive: Think about every time you go to your mailbox, it seems like every day you receive yet another postcard for some roofing company, or painting company or flooring company. Imagine how many houses receive these postcards (or door-hangers), potentially thousands per month. The cost to print and mail these types of marketing materials directly to each potential customer is expensive and are not overly successful.

Low Success Rate: No one likes being “sold to”, no matter how genuine a company or person is when they talk with you, it can still come off as just trying to make a quick buck and can feel like you are going to get scammed.

There is nothing against doing direct marketing and it does work and people have great success with it, but for small companies with limited budgets, it may not be the best solution to win new clients efficiently.

Another common marketing technique is by using a Lead Generation service like Home Advisor, Angie’s List, Houzz and similar companies…

Lead generation is the process by which a company finds prospective customers for its product offerings. Prospects can come in the form of names and addresses, names and phone numbers, email addresses and fax numbers. Lead generation services are businesses that specialize in providing leads to other companies.

Take a look at the illustration above, at the top of the illustration we see a few common lead gen services within the home services industry. Potential customers visit these sites and typically submit a project request through web forms on the sites. These services then do thousands of calculations and determine which 5-10 contractors would be the best fit to fulfil the project request that came in.

As a contractor, if your profile is setup properly for that type of job you, then will be notified about the potential “lead” that you can choose to follow up with and pay to get. This sounds like a great solution, but the biggest issue is that 5-10 of your competitors also received the same lead as you. Let’s expand on this issue and more…

Competitors: As mentioned above, a lead is sent to you and many of your competitors, keep in mind, your competitors also see YOU as a competitor. These lead gen services set you up to be bitter about your competition, it becomes a cut-throat situation and the lead gen service simply sits back and takes in all the money while you fight it out.

It is Expensive: Think about it, a typical lead is anywhere from $75 to $150, if you accept just one lead a month at $150 each, you just spent $1,800 on winning a “potential” client. Now expand on that and think about it from the lead gen companies’ perspective…

Profitable (but not for you!): If ten contractors accept the lead at $150, that means the lead gen service just made $1,500 from one lead, in one location, in one industry. Imagine this across hundreds of industries, thousands of locations and millions of customers. These lead gen companies are making billions off of your hard work and forcing you to compete with your competitors which forces you to drive your prices down to scraps.

Race to-the-bottom Pricing: If you are directly competing with 10 competitors for a job, what is the most obvious option to try and win that job so you do not waste your lead fee? You lower your prices to try and look the most reasonable to the potential clients. When you lower your rates, now you have to do more jobs to simply make a profit. This is a losing situation for you as a home pro provider.

Home Pro Partners thinks lead based fees and pitting competitors against each other and forces prices down is not a good solution, instead we focus on referral based leads…

Simply put, referral marketing is spreading the word about a product or service through a business’ existing customers or professional network, rather than through traditional advertising.

Home Pro Partners believes in the power of Referral Marketing, the power of using the trust of your past clients with the trust of your referral partners creates a powerful ecosystem of success.

What is a referral partner? A referral partner is a person or company that is in the same industry as you but has a different focus or category than you. For instance, we consider “Home Services” as an industry, within that industry you have hundreds of categories. Painting, Roofing, Electrical, Plumbing, etc. If you are a painter, a good referral partner for you might be someone that does sheetrock, or a window installer, or a flooring person. These are not competitors of yours but they work with similar clients.

It is very likely that you have become friends with many of these other contractors over the years and feel confident enough in their work that you would refer your own clients to them and they’d do the same for you. These are your trusted referral partners.

Taking a look at the above illustration, in the middle is you, the medium sized people are your referral partners (other home providers) and the small people are all of your combined clients. As you can see, the network effect of all these people and companies builds a staggering level of connections to generate leads from and more importantly connections you can provide leads to.

Warm Referral / Lead: From our experience, getting a warm lead or referral from a past client or contractor that we know and trust leads to a far higher win rate than getting a lead from a lead gen service. When a client asks for a referral for a good house painter and you can provide them with a painter that you trust completely, this gives the client confidence that hiring the painter you recommended is a good decision, because your client trusts YOU.

Fewer Competitors: If a trusted partner refers you to a client, it’s likely you will have fewer competitors to compete with to win the job. It’s likely the client will only seek out 1 or 2 additional estimates, rather than 5-10 they might get from a lead gen service. This simple math leads to better odds of winning a job.

Better Rates: When you have fewer competitors bidding against you, it’s easier to keep your rates higher because now you are competing more on quality and service than simply quantity of competitors. Higher rates leads to more profits, more profits means you can spend more on other types of marketing, hire more people and help support your community.

When you create a profile on Home Pro Partners you have the ability to invite all of your Trusted Partners to join the site as well and if/when they do, they will automatically be added as a Trusted Partner on your own profile.

If you view another company profile, you can always add or remove them as a trusted partner from the sidebar if you want to do it manually. They can do the same with you and your profile.

As you build up your trusted partners list, it starts to build a mini-network between you and your partners, this increases the visibility of your profile on our site and gains trust with potential clients if they see that you have a bunch of partners connected to your profile.

As you meet with your own clients and they ask you for a referral to other home pros, if you have a trusted partner on your profile that your client asks for, you can easily share your profile with the client to see everyone you know and trust. You can also share your profile within Facebook Groups, on Nextdoor and countless other social networks to promote you and your partners.

This is just the start of our trusted partner system, there will be more to come that improves the experience and success of having a network of trusted partners.