For five years Paul Eldrenkamp cultivated relationships with architects in hopes of getting referrals for Byggmeister, his home-remodeling business in Newton, Mass. Then sales plummeted during a recession, prompting Eldrenkamp to reexamine his strategy. He discovered that architects generated low-margin jobs because, while clients trusted the architect, they viewed the remodelers as interchangeable and would award business to the lowest bidder. His more profitable referrals came from satisfied customers. From then on, Byggmeister began selling directly to past customers, who were less concerned about price and trusted the quality and value of the company's work.
The results were so impressive that Byggmeister no longer advertises in newspapers or the Yellow Pages. Instead, Eldrenkamp spends his marketing dollars where he knows they'll do the most good: servicing warranties for past clients. The new program costs a mere $6,000 a year--less than the amount spent on ads, and the annual check-ins to tighten a cabinet or buff a floor give him a chance to chat up a customer and gather new leads. "Staying in touch with clients, becoming friends, doing things for them, making them happy--it's a lot of fun," says Eldrenkamp. It's also lucrative: Sales now average $1.4 million annually, and profits have increased as well.