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No leads, no sales #2: Finding a needle in a haystack

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Blog entry by closetguy posted 01-12-2009 06:47 AM 1642 reads 0 times favorited 21 comments Add to Favorites Watch
« Part 1: In the beginning Part 2 of No leads, no sales series Part 3: Who Are Our Customers? »

The road is littered with great woodworkers who crashed and burned. It is also littered with part time craftsmen who relegated themselves to weekend woodworker status because they tried to sell their works of art, to no avail, and decided there was no market. Of course, my favorite is the weak excuse that they can’t compete with “Rooms to Go” or Wal-Mart. I suspect that in most of these situations, they just could not figure out how to find the right customers. In this business, 90% of the success is finding the right customer and selling them on the fact that you have the best product or can build the best product. It all starts with generating leads.

So what’s a lead? A lead is a potential customer to buy your product. Leads come in different forms. It can be a window shopper who has no intention of buying anything. It can be someone who would like to buy, but is not yet convinced that they need it. Of course the best lead is the person who has decided to buy and is just trying to decide from whom. A lead does not necessarily turn into a sale. In my best years, I enjoyed a 70% closure rate. This means that 70% of the leads I talked to bought my product. This is a very high closure rate since 40% is thought to be acceptable. When I first started in business, my closure rate was about 10%. I did not exactly drip confidence and probably had “dazed and confused” stamped on my forehead. As time went on and I started making a few sales, my increased confidence contributed significantly to my increased closure rate. When I am working to close a sale, I now focus more on selling myself, than the product. I’m more successful with this approach.

A lead can come from anywhere. It can be a referral, response from an advertisement, a LJ project photo from a Google search, or someone walking into your craft show booth. It doesn’t matter where it comes from, but what does matter is what kind of lead it is. The American consumer is very good at wasting a small business owner’s time. Time spent talking to someone who can’t afford your product is just wasted time on your part. This is the reason you need to qualify the lead.

A qualified lead is one that convinces you that this customer is truly interested in your product and most importantly, can afford your product. Anything less is a waste of your time. I take the time on the first phone contact to determine if it’s worth my time meeting with the potential customer by asking a lot of questions. The biggest warning flag to me is when they start the conversation by asking how much my closets cost. Yep, if they have to ask, they probably can’t afford it. This happens all the time. I once had a lady call me and asked “the question” right out of the starting gate. I told her that my closets average $2000. She said “Oh I can’t afford that. But do you charge for appointments?” I replied “No”. “Well I can’t afford to do it, but come over and do a design for me anyway”. What audacity! I promptly told her goodbye and hung up. Don’t let the tail wag the dog. It took me a couple of years to figure out when to walk away from a lead. I have done it many times when I felt that I was getting jerked around by someone. Your time is valuable and there are other potential customers out there.

We get our leads from numerous sources and the type of product will generally drive the potential sources. I got my start by advertising in homeowner association newsletters. It is cheap advertising and allowed me to target the correct demographics. My typical customer lives in a $300,000 and up home. I went to those subdivisions, got a copy of the newsletter and contacted the publisher to buy an ad spot. Ads usually run $25 to $50 per month.

My best source for a lot of leads in a short amount of time has always been home shows. Atlanta has one in the spring and one in the fall. Each show runs four days. It costs $2000 for a 10×20 booth or $1000 for a 10×10, but after four days, I usually get 75 to 100 qualified leads. You don’t sell anything at the show. You just promote your product and essentially conduct presales with a confirmed appointment to meet later with the customer at their home. It is not uncommon for me to close $20,000 in sales from one show in the first week after the show with more sales coming throughout the year from people who kept my card. This is a great platform for someone who does custom furniture because this type of show is attended by homeowners looking for furnishings or the latest home improvement trends. There are window, home theater, and kitchen cabinet companies to name a few, but there are always a few custom furniture people with everything from high quality rocking chairs to quarter sawn mission sideboards. A home show is a lot of work because it is all about presentation and that means a high quality booth with real walls, slick brochures, and putting your best salesmanship forward. But for some woodworking categories, it is worth the effort.

My largest single sales have always come from interior designers. Leads from these people are automatically qualified and I have a 100% closure rate from these leads. Customers who use interior designers have money and they always use who the designer recommends. It is not uncommon for me to have a $10,000+ sale from an interior designer referral. The average has been around $5000. You have to work hard to get their business and it takes time to gain their confidence, but once that is done, it is a wonderful thing. Here is an avenue for all woodworkers. Interior designer showrooms are full of fancy trinkets that they purchase at shows. Everything from candle holders to chest of drawers and wood sculptures are on display. It’s like a high-end flea market in some of these showrooms.

Direct mail comes in different forms. There are individual mailings of custom made post cards and there are coupon books like Valpak. Both are comparable in costs, but I never had much luck with Valpak. However, individual custom printed post cards have worked well for me in the past. I had four color cards printed up and bought a mailing list based on zip codes and certain demographics. The first mailing of 1500 cards resulted in no leads, but the second mailing the next month, to the same addresses resulted in about 20 leads and 15 sales. The third month resulted in about 10 leads and a few sales. This is a campaign that needs to be run at least a couple times per year.

The Internet is like one big window that attracts the largest volume of window shoppers for me. I really don’t know the best way to describe my Internet leads. I get leads because of my web site, but they are consistently low quality. I have never experienced better than 10% closure rate from these leads. It is so easy to window shop and click on a button to email me, that people must do this on impulse without thinking it through. I have had many emails from people asking to be contacted. I call them, leave a message, and never hear back from them. A couple years ago I paid a marketing firm $1500 a month, on a three month trial, to put my company at the top of the sponsored links on Yahoo and Google. It surprised me how well it worked because I started receiving around 75 leads per month with most of these appearing to be good quality leads. However, 200 leads and $4500 dollars later, I was only able to close one sale. The Internet tends to draw a younger crowd with eyes bigger than their pocketbook. The younger crowd also seems to have more time on their hands to waste your time. They live in big homes or fancy condos, but tend to spend their disposable income on flat screen TVs and fancy cars. Traditional leads (non Internet) tend to be a slightly more mature group, who have the financial ability and don’t waste their time window shopping. They tend to covet home furnishing and decorations more so than the younger crowd.

I have never advertised in the Yellow Pages. When I first started the business, Bellsouth would not list my cell phone number in the ad. They wanted me to buy a business land line. So I walked away from it. Some business owners I know swear by this method and some have mixed feelings. It’s expensive and a 12 month commitment. I also found other, more targeted ways that worked so I never felt like I was missing out. One friend of mine in the same business had good luck with the little regional telephone books. These books are much less expensive, but his cost per lead was pretty high using this method.

I have never had much luck with the newspaper. It may be because the Atlanta paper is so big that it is easy for ads to get overlooked. It’s expensive and is just thrown out there with no target, but with the hope to hit something. However, some of my best business came from one newspaper story a few years ago. I was doing the Atlanta home show and through just dumb luck, I scored a live TV interview at 7am one morning in my display booth. A local newspaper reporter picked up on the interview because she was planning a story on closet organization. The next thing I knew, I was the centerpiece of her story. I took her and the photographer to a customer’s house where I had just installed a $10,000 mahogany (melamine) closet. They photographed it and interviewed the customer who couldn’t say enough good things about me. When the article came out, I was on the front page of the Lifestyle section. My phone was ringing off the hook for weeks. I also picked up a few builders that provided work over the next few years. In my opinion, this type of exposure is the best you can get. It conveys to people that you are real, and it’s free advertising. Everyone likes a good story.

Then there are the referrals and repeat business. There is nothing better. This is my bread and butter and what keeps cash flowing during slow periods. If you do a good job and maintain a good rapport with your customers, they will tell their friends and the phone will keep ringing. This is also a free lead. I have not spent a penny on advertising in the past four years. I didn’t need to because people were finding me through word of mouth. Of course, this takes time to develop, but I view it as the payoff from busting my tail and spending thousands on advertising in the early years.

There is a big difference between advertising custom built services on the Internet and selling individual products through a shopping cart web page. The latter is so impersonal. When you get a lead for custom services from the Internet, you get a face to face opportunity with the customer to sell your product and yourself. Selling widgets through a shopping card is predicated on driving as much traffic as you can to your site with the hope that some percentage will buy. It’s kind of like filling your vehicle up by pouring gas all over the top and hope some of it soaks into the gas tank. Hit counters don’t tell me anything. Why was that customer looking at my product? Was it by accident? Did they look at it and read the description and my story, or did they spend two seconds and move on? This is the reason I prefer shows. I can see and talk to a customer. I get immediate feedback on the products and have the opportunity to close a sale. When a person steps into my booth, they automatically become a lead that I now know how to deal with. If they don’t leave with a product, I generally have an idea why.

With all the different avenues for generating leads, it’s still voodoo magic to me. One source will generate a gold mine of leads for a couple of months, only to completely dry up for no reason. Sometimes you try something new and end up spending a couple thousand dollars and not generate one lead. The cost of a lead has to be managed. To me, a lead should not cost more than $50. Sometimes it goes as high as a couple hundred because the amount spent on the campaign didn’t generate as many leads as hoped for. I don’t mind spending $200 to get a $5000 sale, but if it’s for an $800 sale, I am working for free.

The most important thing in this magic and often confusing world of marketing is that you have to know who your customer is before you start spending your time and money. I mentioned before that my average closet is $2000. It would be a total waste of money for me to advertise in the ghetto. I go where the money is, or not at all.

So who is your customer? Stay tuned…..

-- I don't make mistakes, only design changes....www.dgmwoodworks.com



21 comments so far

View Max's profile

Max

55978 posts in 3024 days


#1 posted 01-12-2009 07:28 AM

Great information, it is very much appreciated.

-- Max "Desperado", Salt Lake City, UT

View lazyfiremaninTN's profile

lazyfiremaninTN

528 posts in 2704 days


#2 posted 01-12-2009 07:42 AM

Man, what a wealth over info. SO MUCH info, so little time. I wish that there was a way for you to teach a class about all this.

-- Adrian ..... The 11th Commandment...."Thou Shalt Not Buy A Wobble Dado"

View majeagle1's profile

majeagle1

1418 posts in 2247 days


#3 posted 01-12-2009 07:47 AM

Once again, much appreciated !!!!!!!!!!!!!!!!

I can’t tell you how valuable your knowledge and experience is for LJ’s out there like myself, trying there
best to kind of “get started” in the business end of woodworking.

Thanks for all your previous blogs/posts and look forward many more!

-- Gene, Majestic Eagle Woodworks, http://majesticeagleww.etsy.com/, http://www.flickr.com/photos/majesticeagle/

View kiwi1969's profile

kiwi1969

609 posts in 2193 days


#4 posted 01-12-2009 07:48 AM

great post, you should put this in a book

-- if the hand is not working it is not a pure hand

View FlWoodRat's profile

FlWoodRat

732 posts in 2660 days


#5 posted 01-12-2009 12:00 PM

Closetguy. Great posts. IMO, your thoughtful presentation on ‘Marketing” is spot on. A lot of folks confuse “Marketing” with “Selling”. Marketing is ‘finding a customer, identifying their needs, then providing the product’. Selling is finding a customer for what you have. In the long run, “Marketing” leads (no pun intended) to higher margins of success.

Your story reminded me of my ‘summer of 72’ when I worked as a door to door book salesman for 8 weeks in the rural areas of Chattooga County, GA., for the Southwestern Publishing Company of Nashville, TN. There I learned many valuable lessons regarding sales:

1. You have to set goals.
2. You have to chrystalize the steps you need to take to meet those goals
3. You have to ‘make the calls’.
4. You have to know your product and what it can do for your customer.
5. To know what it can do for your customer, you have to know your customer’s needs
6. To know what your customer needs, you have to either ask them (or their neighbors).
7. When making an offer to the customer, always give them the choice between two “yes” responses instead of a “yes” or “No” response
8. “ABC” Always Be Closing”
9. Go into ‘call’ the EXPECTING them to buy from you. If you think you can or you think you can’t you are right!
10. A Postive Attitude is PRICELESS!

By the way, after working those eight weeks during the Summer of 72, I SAVED enough money to fund my entire Senior year in college (High Point College, High Point, NC).

I eagerly await your next post on the subject. May good fortune meet you head on!

-- I love the smell of sawdust in the morning....

View Russel's profile

Russel

2199 posts in 2690 days


#6 posted 01-12-2009 01:49 PM

Fantastic information. There’s nothing like the voice of experience to give sound guidance. Thanks.

-- Working at Woodworking http://www.VillageLaneFurniture.com

View Moron's profile

Moron

4724 posts in 2644 days


#7 posted 01-12-2009 02:45 PM

all my leads are referrels, no exceptions. I dont advertise, no yellow page ads.

I have yet to make a dime off a “designer” (with the exception of one) nor have I ever worked at a company that made a “dime” off a designer….............bizarre

-- "Good artists borrow, great artists steal”…..Picasso

View closetguy's profile

closetguy

744 posts in 2643 days


#8 posted 01-12-2009 04:13 PM

Roman, you have to give them an incentive. I pay a 10% commission for all closed sales that come from an interior designer. A designer will only refer people to their customers who they know will provide a high quality product and/or service. But, they also are in business to make money. There have been many times that I have written checks for over $1000 to a designer. I don’t extend the commission past the immediate lead. For example, I have repeat business and referrals from these customers, but I don’t pay the designer for additional sales. I only pay if it is a sale from a direct lead through the designer.

For the past four years, I haven’t spend a penny on advertising because referrals and repeat business brought more business than I could handle. However, it took a couple of years and a lot of advertising dollars to get to that point. Had I not advertised in the early years, no one would have known I existed.

-- I don't make mistakes, only design changes....www.dgmwoodworks.com

View Woodchuck1957's profile

Woodchuck1957

944 posts in 2515 days


#9 posted 01-12-2009 04:13 PM

I think part of the equation also has to do with what part of the country, and the size of population your in. Also, all the home improvement TV shows have created alot of doit yourselfers, who do you think keeps all these new home improvement stores that have poped up in the last 10-15 years such as Menards, Lowes, Home Depot. etc. going ? Theres got to be alot of botched up homes out there. The David Marks video that someone posted in this site I watched, and it doesn’t even look like he’s doing much in the shop other than teaching a few people here and there, it also looked like his enthusiam has dwindled. For me it’s not worth it, been there, done that, don’t plan on doing it again, especially in this day and age and economy.

View Thos. Angle's profile

Thos. Angle

4438 posts in 2713 days


#10 posted 01-12-2009 04:14 PM

Interesting, I’ve spent a lot of time visiting with designers and leaving portfolios with zero results. What works for one doesn’t always work for all. A lot of really good info here for beginners and old pros. Referrals and word of mouth are still the very best. The client comes to you with your rep already in his pocket and is usually 90% sold.

-- Thos. Angle, Jordan Valley, Oregon

View Kindlingmaker's profile

Kindlingmaker

2654 posts in 2277 days


#11 posted 01-12-2009 05:29 PM

Thank you closetguy! Your words have a solid validity to them and the most logical I have heard in a long time. May your business grow…

-- Never board, always knotty, lots of growth rings

View dustygirl's profile

dustygirl

862 posts in 2479 days


#12 posted 01-12-2009 05:38 PM

What a great well written blog closetguy.I’m sure a lot of people will be helped with your information.thank you for posting it.

-- Dustygirl..Hastings,Ontario.. How much wood can 1 gal chuck if 1 gal can't cut wood?

View Greg Wurst's profile

Greg Wurst

783 posts in 2583 days


#13 posted 01-12-2009 06:03 PM

Very informative read. I have no personal interest in selling my projects at this time, but I find these inside views of the industry fascinating.

-- You're a unique and special person, just like everyone else.

View closetguy's profile

closetguy

744 posts in 2643 days


#14 posted 01-12-2009 06:34 PM

I agree Woodchuck1957. I think the opportunities right now are greater in larger cities. Atlanta is so large that there has always been more than enough work for everyone. Even with business dropping off, there are still more potential customers. If you live in an area with 200,000 people, the opportunities for leads are much smaller than with 3 million.

When I was looking at craft show figures a few months ago, it looks like the Northeast is where the money is being spent right now. One show in Chantilly, VA. brought in 20,000 people and over a million in overall sales. Many of the same shows in Philly and other Northern cities were also doing well. The same promoter brought this show to Atlanta two weeks after Chantilly and only had 4500 show up with less than 300,000 total sales.

I communicate regularly with a some of my peers, with similar businesses around the country. I think home-based products, such as casework, electronics, etc are doing better in the Southeast right now than other areas around the country. The first half of last year had my type of business doing better in smaller cities. It just flip flops around sometimes.

-- I don't make mistakes, only design changes....www.dgmwoodworks.com

View DannyBoy's profile

DannyBoy

521 posts in 2616 days


#15 posted 01-12-2009 07:23 PM

Great information. Thanks for putting it up.

-- He said wood...http://hickbyassociation.blogspot.com/

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