The James Harcourt Lead Generation Report

Leads Dip but Order Levels are Buoyant

Some highlights this quarter

• Lead flow fell slightly in the three months September to November compared with the previous three months.

• Reduced leads occurred among medium-sized firms and those in the North.

• Average order values were 4% up overall at £2601 in November.

• “There is no such thing as a free lunch. Look after your marketing in good times and bad, and it will look after you.”

Jason Currall, Marketing Manager
James Harcourt

Lead Flow

Just less than three in ten firms improved lead flow in the three months September to November compared with the previous three months. Three in ten had fewer leads and just over four in ten saw no change.

A useful way to look at the results is by the net balance of companies reporting either way. If for example, 60% of companies saw an increase and 40% a decrease, the outcome would be a net balance of +20%. A negative net balance shows more companies reporting a decrease than an increase. A net balance of zero implies that little has changed.

On this basis a balance of 2% of firms had fewer leads compared with the previous quarter, as shown in Chart 1. Medium-sized firms suffered a drop in leads (net -17%) while small companies (8%) had more leads and companies with more than 50 employees saw no change overall. (But the greater the number of frames produced, the greater the drop off in leads.) Firms in the South and Midlands reported no change in lead flow, but leads fell (net -6%) in the North.

Leads remain buoyant compared to the same three months of 2001. Just under six in ten firms reported a pick up. More than one in ten saw leads fall and just less than three in ten had no change in lead flow overall. A net 44% had more leads than last year (see Chart 1). Small companies (net 48%) were slightly ahead of medium-sized (40%) and large companies (41%). The Midlands did best (64%), followed by the South (44%) and the North (29%).

Number of leads

The average number of leads per firm was 11% down in November compared with August, and 50% down on November 2001. Large companies generated 13% more leads than in August, but lead generation among small companies was down 8% and medium-sized companies slumped by 29%.

Retail Orders

A net balance of 40% of firms increased orders last quarter compared with the previous three months, particularly buoyant for this quarter, as shown in Chart 2. In contrast to the pattern for leads large firms (58%) were ahead of medium-sized (37%) and small firms (35%). As with leads, the Midlands and the South (48% and 46% respectively) outperformed the North (27%). Firms producing more than 125 frames per week did best for orders.

A healthy net 56% of firms banked higher orders year on year (see Chart 2). All company sizes performed well, although small and medium-sized firms (57%) were slightly ahead. The South (67%) and the Midlands (64%) did better than the North (38%).

Conversion ratios

SIZE	Average leads per firm in November	Average orders per firm in November	Calculated average conversion ratio in November*
Small	45	27	1:1.63 (60%)
Medium	65	32	1:2.03 (49%)
Large	163	88	1:1.85 (54%)

Average order values

Average order values were up from £2508 in August to £2601 in November (see Chart 3). Order values for medium-sized companies were up 16% from £2389 to £2779. Small companies' values were also higher at £2518 from £2413. Values for large companies were 16% down at £2468 from £2925 in August. Average order values were up by 12% in the South, but fell 6% in the Midlands and by 1% in the North.

Finance

The number of firms selling finance was down again this quarter from 13% in August to 10% in November. Most of these companies used finance for less than 15% of orders. The average order value of financed sales was 9% higher than unassisted sales, as shown in Chart 3, a sharp fall from August.

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“Our main lead source is referrals and recommends and we have put a good deal of effort into building a strong team so that every potential customer can be helped immediately by any member of staff.

The internet is becoming a very important sales tool. Although it demands a reasonable investment in terms of design and content, it is a powerful way of reinforcing the company image and message.

Compared with 2 years ago, we have doubled monthly leads from 150-300, while maintaining a 65-70% conversion rate overall. As a result, company turnover has grown by £1 million in each of the last two years.”

Mr Richard Robinson, Sales & Marketing Director
Alexander Windows Ltd, Stockport

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Budgets

The proportion of turnover spent on marketing was 3.7% of sales in the year to November, compared with 3.6% in the year to August (see Chart 4). Just less than eight out of ten firms spent less than 5% as the downward trend for marketing spend continues.

Leads from the Internet

The average number of sources used to produce leads is up from 6 in August to 6.6 in November. The three biggest sources for leads were referrals and recommendations (92% of firms), add-ons (66%) and press advertising (48%). The single biggest source was referrals and recommendations (68%) followed by press advertising (17%).

More than three in ten companies gave the Internet as a source of lead generation, with just under one in ten planning to generate more enquiries via the Internet. Leaflets or mail drop and recommendations were other sources that companies were keen to develop.

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“We have benefited from high home improvement spending brought on by low interest rates, high house prices and mortgage equity withdrawal.”

“We are a well established business and well known in the area. Our reputation will hold us in good stead for the future.

We are anticipating improved sales in the New Year, although some consumers may have reached the limit of their borrowing capacity.”

Mr Alastair Devey, Sales Manager
CR Windows, Bristol

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“Our lead numbers have increased over the last 2 years mainly due to recommendations. We have developed a solid reputation by offering quality and competitive prices.

In particular we target leaflet drops to coincide with the specific areas in which we are carrying out installations, so that potential customers can view our work first hand. We have also identified and targeted a niche in the add-on market for UPVC doors.

We maintain a guaranteed 10 day lead time by ensuring that our work force have interchangeable fabrication and installation skills.

In this way we have reduced our marketing spend from 15% to 5% of retail sales turnover, and improved our conversion ratio so that we now win 7 or 8 orders from every 10 leads.”

Mr Richard Matto, Proprietor
A & R Windows, Nottingham

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Sales Planning

Less than one in three firms plan to sell windows and doors on the first visit, and less than one in ten plan to sell conservatories in this way. Just under seven in ten of the firms we spoke to do not have a formal structured approach to selling with a specific aim of selling on the night or on the second visit.

Overview

“Forecasting is a tricky business,” comments Mike Rigby, whose company produced this report. “Gordon Brown certainly threw his balls too high when setting forecasts for UK economic performance last April.

“Revised forecasts last month nearly doubled the Government's borrowing requirements and sent economic growth forecasts reeling from 3.25% to 2.25% this year and from 2.75% to 1.6% next year.

“The Chancellor isn't the only one whose predictions have been confounded. Against all expectations Halifax reported a record monthly increase in house prices of 4.7% in October. The rate of growth was calmer in November at 1.4% but the annual rate in the year to November is just short of 30%. Generated by a shortage of housing stock, low interest rates and high employment, the housing boom has helped to fuel consumer spending. The Centre of Economics and Business Research calculates that equity withdrawal from the housing market will hit nearly £40 billion this year to finance 6% of consumer spending.

“On paper the UK looks to be in fine form. Britain is in its 11th consecutive year of growth. UK inflation is the lowest in Europe. Interest rates are at 38 year low and unemployment at a 27 year low.

“But many fear the imbalance between the strong consumer and weak industry. Retailers may be doing well but manufacturing output is falling. Household debt is now at record levels and house values are high relative to incomes.

“The greatest threat to Gordon Brown's plans and the window industry lie overseas in the US. President Bush's sacking of his economic team in early December casts doubt over recovery in the US and any change in direction is bound to influence the UK. Fingers crossed.”

Comment

Jason Currall, Marketing Manager of James Harcourt who sponsor this survey comments: “In general window companies will look back on 2002 as a busy and successful year. But it will be interesting to see how many are able to say the same thing at the end of 2003.

“The economy has been buoyed up by strong consumer spending over the past 12 months and, encouraged by high house values, much of this has been invested in home improvement financed by borrowing against home equity.

“Smart companies have not been coasting but have used the good times to improve their performance and competitiveness. As we see from the companies quoted in this report some have cut their lead times to win more business and improve their conversion ratios. Others have invested wisely in Internet marketing; over thirty per cent now get leads from the Internet. A few have seen their leads double.

“The worrying trend is the continued slide in marketing spend. Your accountant may argue that you can cut your marketing budget and pocket the difference when times are good and leads pile up. But lost momentum is hard to recover when markets dip or competition picks up. Those who took a break in their marketing will wish they hadn't. The evidence from past business cycles is clear. There is no such thing as a free lunch. Look after your marketing in good times and bad, and it will look after you.”

The James Harcourt Report, a quarterly trends survey, is produced by Michael Rigby Associates, and sponsored in conjunction with The Installer. The aim is to provide fabricators with key information on current trends and the effectiveness in practice of lead generation methods. Michael Rigby Associates is a management consultancy specialising in fact based marketing, PR, research and performance improvement for the window and home improvement markets. The survey covers a representative sample of 100 retail window fabricators. Telephone interviews took place between the 2nd and the 6th December 2002 across a balanced spread of size of firm and geographical area. Numbers employed was used as an indication of company size. The categories are small (1-19 employees), medium (20-49) and large (over 50 employees). © Michael Rigby Associates, 2002 For more information contact Helen Isaacs on (01453) 521621.