For electronic systems contractors, especially those who collect recurring monthly revenue (RMR), customer accounts are the most valuable and precious asset. As the lifeblood of their business, it is imperative existing accounts are maintained and new ones are cultivated. However, according to Security Sales & Integration’s 2004 Sales and Marketing Survey, doing so continues to get costlier all the time.
Since the last time this study was conducted in 2001, the average amount security dealers report spending on marketing per account has swelled from $30.89 to $46.70 for a 51-percent increase. Although this may seem unduly high, it is consistent with the findings since SSI initiated the first of what now totals four Sales and Marketing Surveys in 1992. At that time, dealers spent $11.74 on marketing per account, which through 2003, calculates to an average annual increase of 25 percent.
Congruent with these findings, the average percentage of companies’ annual operating budget being earmarked for marketing rose from 8 percent in 1999 to more than 9 percent in 2003 (see pie chart above). This difference is more significant when taking into account those budgets have expanded in relation to the average annual gross company revenues going from $1.69 million to $3.1 million during that period.
What continues to drive spiraling sales and marketing costs? As it turns out, many of the factors cited in the 1999 study — increased competition, heightened end-user sophistication, inflation, the necessity to explore emerging marketing channels and applications, and the proliferation of additional marketing mediums — are just as, if not more, relevant today.
The Sales and Marketing Survey was created to help security contractors pick up new lead generation ideas and see how they stack up against their competitors. This is especially important considering only 57 percent of dealers track their leads, compared to 69 percent in 2001. It is impossible to accurately gauge what can’t be measured. Fortunately, SSI’s Sales and Marketing Survey helps fill this void and make smart business decisions more possible.
Bigger Companies Are Spending Bigger Dollars Per Account
Let’s take a closer look at the aforementioned cost-drivers.
Competition has intensified as more large entities strong-arm smaller contractors into oblivion, and as allied fields become more aggressive in their pursuit of security business. The 2004 survey indicates large players (in excess of 500 accounts) are spending an average of $75.39 on marketing per account, while those with less than 500 accounts are paying an average of just $22.60.
Meanwhile, with scads of information a mouse click away via the Internet, marketing being directly aimed at them by manufacturers and less disposable income due to the economic slump, customers continue to become savvier. Having been bombarded with advertising through the years, most Americans are now much more educated and choosy about what they purchase.
Inflation is an inevitability that should be added to the saying, “You can only be sure of two things: death and taxes.” The nation’s inflation rate was 2.27 percent in 2003 and 2.5 percent the past 10 years. The good news is the rate has been steadily declining since the 1970s, when it was 7.36 percent. It dipped to 5.10 percent in the 1980s and 2.93 percent in the ’90s. However, with the economy improving, inflation will likely be renewed. Staying ahead of the proverbial curve often means discovering fresh ways to sell your wares via alternative channels. This may involve packaging products and services with others such as environmental controls and satellite TV, or pursuing altogether new markets or applications.
Finally, getting messages across has become more complex as advertising vehicles — the Internet, E-mail, wireless communications, print publications, trade shows and television channels — continue to multiply. This has also affected competition because there are now so many avenues to communicate with potential customers.
Print, Radio/TV Ads Continue to Claim Lion’s Share of Budgets
Understanding where money is going is even more critical than knowing how much is being spent, although it is preferable to be aware of both. The point is to be certain the expenditure is creating at least as much revenue as it is costing. This is called the return on investment (ROI).
Through the results of the Sales and Marketing Study, a similar relationship can be calculated between the amount being spent on different marketing methods and their effectiveness in generating leads.
Another sensible marketing method — the category of signs, decals and stickers — generates the most leads, at a hair over 48 percent. It brings in a nice average of 2.51 percent of leads per dollar spent. The biggest bang for the buck is community networking, which rustles up almost 36 percent of companies’ leads at minimal cost. Among the worst returns: Internet advertising with .47 percent of leads per dollar spent.
98% Say Customer Referrals Are Leading Source of New Prospects
In this era of diminishing returns from conventional advertising and marketing, means coupled with heightened customer cynicism, it stands to reason that positive word-of-mouth is a powerful sales weapon. Indeed, 98 percent of respondents cite customer referrals as a leading way to drum up new prospect lists. This percentage has risen from 94.4 percent in 2001 and 64 percent in 1999.
The great thing about referrals is they often have little or no cost attached. However, you do have to earn them. This technique can be particularly useful for smaller niche companies trying to succeed in areas dominated by large regional or nationwide contractors.
Referrals are not always devoid of monetary repercussions. Occasionally, existing customers may need an extra push to recommend family or friends.
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