How Much Should My Plumbing or HVAC Company Spend On Advertising?

We get this question all. the. time.

Hey guys, it's Ryan here with Levergy. Hope you're having an awesome week. I know it's been busy in my neck of the woods in the office here, but hope you're doing well. Let me come at you with another video. Again, I get asked a lot, so this is a common question I get asked by HVAC guys, buoys who own plumbing companies, electrical contractors, and it's one big question. They're in the weeds, they're trying to figure out how things should be managed in the business. So the question is this, how much should I be spending on my marketing budget? How much should I spend on my marketing budget?

Thesis a big question because with every business you've got only so much money that you can use, and how do you know you're spending it in the right way. Employees will be happy, you need trucks you've got to outfit, you need tools you've grotto get out, and everything costs money. So how much should you spend on marketing. Real quick, marketing is going to include everything that you might do. That might be phone books, you pay your year subscription for a phone book. That could be as low as $1,000. That could be $2,500 a year, whatever. You could be direct mail. Maybe you're a shop that you put a lot of pieces of mainland you make sure every time, maybe every month, every three months, you hit your customers in their mailbox. Maybe you do newspaper ads. You get the circulation in the biggest newspaper, and you always try to have something there. Or maybe you do the old school way of you take your business card and you throw it on the bulletin board at a restaurant or in a hotel lobby, something, just trying to get out.

According to the Small Business Administration, the SBA, they recommend between 7% and 8%of your annual revenue as a company goes back to marketing, 7% to 8%. In my experience, I've found that companies do a little bit better when they spend little bit more, so somewhere around 9% or 10% makes a lot of sense. What that means is if you're a million dollar shop, you should be throwing about $100,000a year back into your marketing budget for everything you do, for the newspapers, for the phone books, your website, everything. Now some of you are thinking that's a lot of money I don't know how to do that, or maybe you 'rethinking I don't need more customers, I'm just fine and you might be true. The issue is though you might be good today, but how will you be tomorrow when you have a competitor down the street and he's undercutting you in price or he 'doing better advertising than you are.

All of a sudden you're going to have to be keeping up with advertising. Like most advertising, you know it takes a while for it to pay off. You start throwing money at it and very few channels will you be able to throw money at and see really quick results. It gets into this thing called a conversion funnel. Now if you go to business school, if you studied marketing, this is basically the process that every customer goes through. It doesn't matter if you're ordering a plumber, or if you're ordering a pizza. Basically the funnel starts at the top with the biggest and moves down to finally where your customer is ready to make a purchasing decision. At the top it's awareness. It's I know who you are, I know you exist because let's face it they can't buy from you, they can't be your customer if they don't know who you are and that you exist.

The next stage down is interest. Interest is an interesting column because it says okay, obviously I've got plumbing, I've got electrical needs, I've got a house project that we're working on doing, a bathroom remodel we're getting ready to plan, so yeah let's see what you have to say. Preference is an awesome position to be. That's the next stage. So awareness, interest, preference. Now what's awesome at preference, I describe it this way. I've got two young kids. My kids prefer McDonald's over Burger King. Even if McDonald's is five miles away and Burger King is one mile away, my kids prefer McDonald's. Even if it's less convenient, even if it's pricier, even if the food isn't as good, whatever, because McDonald's has the preference with my kids, they determine where that money goes. Even though personally I'd prefer a Whataburger or a Chick-fil-A or something like that. The preference goes a long way.

Finally it's conversion. Now with plumbing, with HVAC, with electrical, what's unique with your industry than what most of the companies can experience is for the most part your customers don't look for you unless there's a problem. They just don't. Not many people just sit down and go huh, what are the plumbers that are around my neck of the woods just in case I need one. They likely only look for a plumber when their water heater doesn't work, or their toilet is leaking, or they only look for an electrician if the power went out, if their panel burnt, if they're doing a remodel and they need to move the panel from here to here. They need something and that's why they're doing it. So the conversion funnel actually looks a lot faster.

The way that marketing channels work ... So let's say you're one of those shops who spends let's say $20,000 a year on billboards. Most billboards around me go for about $2,000 a month, between $2,000 and $3,500 a month. You're spending this money on a billboard, and you're great at getting awareness. People know we exist, this is who we are. The problem with that is that billboards are going to convert at about 1 to 10,000. What that means is for every 10,000 eyeballs that drive by that billboard, only one of them will even notice you. That's scary math when you're spending $2,000 a month. At the other end of the funnel is what we call referral. Referral almost always converts at a one to one. That means if you need heart surgery and you had a friend who just had heart surgery, chances are you're going to go to your friend, ask for his recommendation on his surgeon, and that's going to be the person you call. That one to one referral work every time.

Most of the people that we're going to be talking about who need plumbing services, who need HVAC, who need electrical services, they're at the bottom part of the funnel. Someone's told them you've got a problem, we've got to fix it. That's why they're looking. They're not up here. They're not in the world of billboard. They're not in the world of radio. They're not in the world of direct mail. You can spend money on those if you need to, if you have it, you're going to get far better results at the bottom part of your funnel. If you were to spend 10% of your budget targeting the bottom part of the conversion funnel, you will have massively better results that you can put back into the company to do more growth. It works every single time.

One of the best ways that we use here at Levergy is AdWords. We use AdWords, we use Bing ads. Statistically most of the people are on Google, so we spend a lot of time massaging AdWords. How that works is when someone sits down to a computer and they're typing in hey I need a plumber, this is where we're starting to curate those results for you. Instantly a customer who's in your area, they're in your city, they're in your neighborhood, they're in a spot you want to service, they're doing a search that says they've got a problem, we can instantly show your sponsored ad to them, that they see it right when they need it. They can even click to call. If more than half of all web traffic right now is coming from a mobile device, they can actually just, instead of having to go to your website and scroll through and push a button, just straight from the search results, from the ad, they can click to call and instantly you can take care of them.

If you spent let's say 7%, if you're a 5% get up to 7%, if you're at 7% take it to8%, to 9%, to 10%. If you can spend 10% of your advertising dollars, of your total revenue right, so 10% of your total revenue toward advertising dollars, and if you focus that not on the awareness part of the funnel, not up here, but down here where people have a problem and they need a solution, you will see far better return on your investment. If you're able to do the referral marketing, you will almost always see a one to one sort of return. It's incredible. You might be a little bit higher up, it might be a 2.5, or 5, or10, or 25 to 1 conversion process to get them to contact you. Either way, that's far better than doing all of your advertising on billboard, on radio, on TV, for 99% of the people who don't need a plumber right now, but they will.

Thinking about this, think about how you can do your business, about how you can manage your marketing dollars to make the most for you. At Levergy, we'd love to help. Feel free to check us out, levergy.com. This is what we do. We can help you generate really quick results. We manage AdWords campaign, but we also couple it with SEO, search engine optimization. Over the long term, you get incredibly effective results that does not break the bank. So, great seeing you. If you have any questions, you can always reach out to us. You can click here to go to our website. Guys, that's it for me today. We'll look forward to seeing you next time.