This is a transcription of my podcast. As this is a transcript, you’ll have to deal with any grammar, typo or punctuation issues. It’s more like two friends having a discussion. You can click on Google Play if you’d rather listen than read. You can also subscribe to my podcasts on iTunes.
Mark Mitchell: Hi this is Mark Mitchell from Wizard strategy. In this episode, we’re going to talk about how to sell builders. I find it many building material manufacturers are too focus on the largest builders and are missing an opportunity with small to medium-sized builders.
My guest today is Stephen Crouch, who is the vice president of manufacturer relations and marketing at Builder Partnerships. If you’re not familiar with the Builder Partnerships, they are a networking organization for builders and manufacturers. They have over 600 builder members who build over 75,000 homes per year. They are also advisers to the builder members and help them improve their profitability.
I’ve been to several builder partnership events, and I’ve always been amazed at how much builders respect the advice they give from they get from builder partnership. I’ve also encouraged a lot of building material manufacturers to look into Builder Partnerships. They can look at your products and give you some great insights about how to sell your product to a builder. I also look at them as a way to call on the 600 builders at once. Stephen thanks for joining us today.
Stephen: Sure. Thank you, Mark. It’s a pleasure to be with you today.
Why Sell Mid-Size Builders
Mark Mitchell: Let’s talk about the small to medium-sized builders. First of all Stephen, why are they important to a building materials manufacturer?
Stephen: From manufacturer to column builders, it’s the challenge, but we see at Builder Partnerships is we see manufacturers spending a lot of time and focus on energy on the largest 30 builders or sell in the country.
You look at the top 30 less than and you see the volume and no doubt the volume is there. Is a significant amount of volume and it’s very attractive to most manufacturers but when you look at builders as a whole what we do is divide them between we look at them at Builder Partnerships in three groups. They look at the largest builders and mid-tier segment of builders and then the smaller builders.
The mid-tier segment of builders we are used the most attractive builders segment for manufacturers and those cases partly because it’s the largest segment of builders when you take them as a whole. If you look at the largest builders in the country, the top 30, the 50 builders. Take 30 for instance; you’re looking at 40, 40%…40-45% of the homes that are built in the country, you’re looking at 0.6% of the builders in the country.
And so that’s a lot of volume, but they also have with all that volume comes a lot of leverage. When you look at the build the mid-tier builders segment, that mid-tier builder’s segment is just as large. It’s not larger and a lot of in a lot of cases it depends on the market conditions that mid-tier builders segment is larger. It’s in that 50% range to make up 69% of the builders in the country at any point in time, and they represent a larger segment of volumes so….it’s…what’s challenging is that in a lot of cases for manufacturers is that that’s a very it’s not as small as group.
At 6% of the builders, you can still be talking about 4500 to 5000 builders in that segment. And these builders can range anywhere from 50 homes per year to 500 to 800 homes per year but it, overall, they are very attractive segment and it becomes very, a big part of most manufacturers strategy.
One of the things that we also like to say about that segment of builders is that they are the drivers of innovation. Anybody that’s never been part of a large organization or large manufacturer you know, what you strive for is to strive for standardization, and large builders are no different. They wanted build the same home over and over and over again. It’s the best way for them to manage their trades, it’s the best way for them to manage their plans and designs and everything else.
If it weren’t for that mid-tier segment of builders really look at for ways to differentiate themselves from these large national builders, there would be less change in the industry so if a manufacturer has an innovative product and they’re trying to get a foothold in the industry can be sometimes attractive and say wow if I get this one large builder then everybody else will do it as well.
But the reality is that the best way to get a foothold with a new product is to work with this innovation, [inaudible] driver there’s driver innovation the ones that are looking for ways to bring new products and new features to market and work with them and get a foothold because then once you work with a number of these builders then the large builders will follow because they have to compete.
Another one is when you look at those mid-tier segment of builders, in a lot of cases and Mark you mentioned that we have 600 builder members, a lot of cases are builder members are the leading brand in a market and they are those mid-tier builders. Of course everybody knows the large national builders but in every market you can also name the large local builder that is that leading builder in that particular market for those are the mid-tier builders. They build maybe a couple hundred homes maybe 4… 500 homes in that market but those are the best leading brands and so taking up then winning with those leading brands in any one market will get the attention of the national builders and get the attention of more of those other local mid-tier builders.
One of the, you know, I think it’s also important to recognize that on one thing that we surely recognize at Builder Partnerships is that manufacturers don’t always sell the builders and typically manufacturers don’t sell directly to builders. You’re selling through your channels and you’re selling through your trades and so working with and marketing too and selling two builders that are gonna be attractive to your channel partners is extremely important.
And in a lot of cases this mid-tier builders they are the ones that are looking for those partnerships and the market looking for they have the strong relationships with maybe the local installers. The local installers aren’t selling necessarily only to a purchasing manager but they may also know the owner of that installer, may know the owner of the building company and so being attractive to a marketing to the builders that are most attractive to your channel partners in the market is also extremely important.
Builders Don’t Just Want a Lower Price
A lot of times the builders are looking for more than just price. They are looking for that long-term relationship after all we’re doing this call at a time when labor is in short supply and a lot of different building product categories and we can [inaudible] relationships that’s extremely important for builders and also for the trades.
One of the other reasons and kind of in the top 5 and the many more the one other one is that it’s very frustrating sometimes to think as a manufacturer when you have to work with a hierarchy of purchasing people to write a national organization. I want to as a national accounts manager for manufacturer I would basically have to go work with the VP of purchasing for a large builder just to be able to open the door for them my salespeople to be able to go in at any individual market and sell to that builder.
When you’re working with a lot of those mid-tier builders with one of those builders that are more local your trades are you as a manufacturer you’re working with the decision-maker in a lot of cases. You’re working with the person that can pull the trigger. It doesn’t matter whether or not you have a contract with the national VP it’s all purchasing or anything, you have you basically in a lot of cases you have a team of three or four people in that office and you can go to that office and you can meet with them and really engage with that builder and engage with these decision-makers.
So I think we find that it’s a very attractive what once again what can be the most challenging piece of working with those mid-tier builders and those mid-sized builders is the fact that there’s so many of them and that’s really the challenge, just having the strategy on how you gonna leverage your sales team as much and it really be able to may be as effective and as efficient with a reasonably sized sales team and recognizing that most manufacturers don’t have hundreds of salespeople out there calling on these thousands of builders.
So that’s in the nutshell kind of those 5 points of [inaudible] the largest builder category their innovation drivers, they’re the best brands and their local markets. They are very important customers for your trades and they also you have the purchasing decision-makers there and the office and I’d say that’s what makes it most attractive.
Mark Mitchell: Thanks Stephen. What if we were to characterize these builders and compared to other types of builders what would you say they’re looking for? You know I hear so many times manufacturers they go “oh it’s just the purchasing person and they only cares about a lower price,” that’s all they care about and I don’t believe that’s true. And what if you can enlighten us a little bit about what you see this type of builders looking for from a manufacturer?
Stephen: Yeah, there I would admit that whenever you ask any purchasing person the word price and always comes out of their mouth. What I think it’s important but you have to really listen to the purchasing managers and what you hear from a lot of purchasing managers for the mid-sized builders is competitive price.
They understand that there are trade-offs to price. They understand that they once again they live and breathe in these market and in their market. They know the owner of the company lives and breathes in their market. They know the different trades. They know the different products. They know who they are working with. They know what a lot of times the lowest price means. It means the lowest quality, it means the lowest… It means a lot of other things that are low.
So what it really have to it really comes down to service and support. When you really get again to what the part what the builder wants, they want to know that the products can be there, the products can be available, that you’re gonna support them with your labor as best as you possibly can and we know that everybody has labor challenges that the relationship exist there between the manufacturer, the channel partner, the trade, and the builder to make sure that the builder’s be taken care of.
It comes down to it really comes down to a relationship and that’s how you can get to that competitive price. Making sure that there’s a communication about the value that you bring to the builder with all of the services. Talk a lot of times about when I’m working with manufacturers I talk about the fact that when a manufacturer engages with the builder it’s the opportunity for that manufacturer to sell their entire company not just some product to the builder and bring to there all of those other services, all of those other areas that a manufacturer invest in the company, whether it’s engineering, customer support, distribution, product design and customization, whatever you have design support, whatever you can bring that all goes in to that value equation. And it really goes into that competitive price because it’s not just a dollar amount when you talk about price. It’s weighing the additional soft benefits. The competitive price is the key.
Mark Mitchell: Okay and well as well as your whole story as you brought out about the products, the quality and service and so forth.
Stephen: That’s right. And all of that goes into determining what’s a competitive price.
Mark Mitchell: Yes, so Stephen the certainly the purchasing person is the gatekeeper and I always view the [inaudible] person is a person with a shopping list and you maybe have a product or product idea that isn’t on the shopping list perhaps it’s an upgrade which probably isn’t on his list find more expensive windows for example. But maybe those your product or your presentation would be of interest to somebody maybe in construction management or somebody in sales or marketing because overall the builders looking to be more successful. What’s the best way to approach a builder?
Stephen: The best way to approach a builder is through purchasing, through the purchasing manager but let me kinda now add a little bit to that comment. Because the purchasing manager is the gatekeeper and they are looked at by the rest of the organization as the resource internally inside of the builder as a person that’s going to help that help everybody else, whether it’s design, whether it’s marketing, whether it’s sales, souls there challenge, their problem.
Find the products that are gonna help marketing and sales differentiate, find the solution that’s gonna be the right solution for design to meet their need or go out there and negotiate to deal with the gate with the manufacturer that design has chosen. So even the purchasing is the gatekeeper whenever manufacturer gets the first meeting it’s not be an exploratory meeting for the manufacturer.
The exploration, the understanding on what to need to that builder are and the opportunities with the builder. Come way before that that’s the research. That research can take a lot of different forms. It can take walking models and designs and looking at what’s current and what the builder’s offering knowing who the builder’s competitors are, knowing who the builder’s competing against, understanding the market it could be talking to the sales reps inside of these models.
It could be meeting the owner of the builder at a HBA function or some other event. It could be talking to marketing and talking to the production managers and the superintendents on the job sites to get some more input about where to talk what problems are they having, machine or are they having deviation on opportunities for your products.
There is no problem at all as a matter of fact purchasing managers every purchasing manager I’ve ever spoken to has always appreciated it when the manufacturer’s sales person walks in their office and knows what they can what the needs are and how they can bring value to the builder.
Now what they don’t like is they don’t like and say they don’t necessarily like if a manufacturer goes away marketing person says, “hey you know can you go tell this purchasing guy to buy my product?” That’s not something that’s usually that’s going a little bit to over the line and it’s kinda stepping past the purchasing manager and trying to force their hand.
Purchasing managers don’t like to have their hands forced because they already have their role to play just like everybody has their role to play in an organization and has a team as part of the team and they are definitely part of the team and so do your homework as a manufacturer. Talk to everybody that you can possibly talk to and understand what the builders trying to achieve and what they are trying to do but realize that the purchasing managers is the gatekeeper to selling the product.
Mark: That’s a good suggestion, Stephen. I think one of the other things that we should touch upon that when you and I have done surveys in the past in preparation for some of our webinars for manufacturers we found that builders frequently will say complain about the lack of knowledge of the salespeople who call on them. They seem to know a lot about the their product and they’ve been given some lessons on how to be a salesman but many of them literally don’t know how houses built or don’t know how a builder makes or loses money. What do you feel about the importance for the manufacturer of saying don’t just send salespeople out and say sell this to builders?
Knowledge is Critical
Stephen: Yeah, oh, I couldn’t agree more. I would say I worked for manufacturers for 17 or 18 years before I started working with Builder Partnerships and start really understanding the builder a little bit better. And I still learn everyday about builders a little bit better but and one thing I can tell you for certain is that the way that manufacturers look at their business look at their P&L and it’s very important and it’s always proven throughout the organization everybody knows what to focus on.
It’s different than the way that builders look at their P&L and look at their business and what were their challenges are so I think being able to speak the speak, being able to go in there and when you’re meeting with a purchasing manager, when you’re meeting with someone from with the builder understanding what their challenges are, understanding that where their where the difficulties are and sometimes it’ll be very obvious to you like the case of that we have now with labor shortages and inflation on the labor side of things.
And just not being able to meet your demand and your sales schedule and construction schedule so those are obvious and those impact everybody and everybody can talk about this. But sometimes it can be price, sometimes it could be interest rate, sometimes it could be one specific products in the market that’s really holding up their construction process. Asking questions, being in tuned with your market, being in tuned with what builders and what their struggles are, that’s important.
And it have really comes from once again that research and walking home then, and talking to people on the job site, being part of your Home Builders Association and talking and listening to the Home Builders Association address the challenges that builders are having.
Those are all the ways just reading the newspaper and reading the real estate section and understanding some of the challenges of the marketing I mean those are very important. I would also say one thing I was a little bit surprised about when I first started talking with builders and asking about how can a manufacturer do their homework and really engage with builders and learn about the homes that they build and the purchasing managers all said well go to our job sites, talk to our supers, check out how we build our homes, how we install the products that you’re selling.
And I ask a question, so really you can do that? And they responded, absolutely. Go and do that. We expect you to come to us with knowledge about what about how our how we’re working with your product and how you can help us do a better job. And once again that’s what you should bring to a builder’s. Bring a value proposition not just a brochure or flyer and say “hey we’ve got these great products and here they are and [inaudible],” that usually doesn’t work very well. It’s how can you help the builder build a better home, make more money. Be a better home and make more money that’s really what it’s about.
Mark Mitchell: Yes, that’s great. Hey, one other one I just wanted to make sure you agreed with me I know that’s where I have your opinion but I tell manufacturers who are who say I want to start selling the builders and I wanna go call on a largest top 20 builders and I will caution them and say you know that’s not the place to start. Don’t go do that unless you have a seasoned salesperson on your team that knows how to deal with these large builders ‘cause it’s a whole different animal and you’ll either be wasting your time or may end up being your nightmare customer or certainly unprofitable. What do you think?
Stephen: I would agree a hundred percent. And I can tell you just a little quick story when I was when I was with a manufacturer and national [inaudible] I was selling a new product already in the market [inaudible] brand but trying to bring a different shade of profit, more value and trying to sell to one of the largest national builders and I was speaking with the VP of purchasing and he basically said “well you know you should give me the best deal, as a matter of fact, you should sell me your product and offer me to install your product in my home even at a lost because it’s a market.”
You know if I do it then everybody else will wanna do it so basically marketing expense for you to sell your product at a lost. And that was that’s a very eye opening experience. I think unless you have the neatest, coolest gadget that everybody in the world wants right now which usually Apple have those and a couple of other maybe only a couple of other manufacturers in the world but if you’re a typical manufacturing and especially a new manufacturer offering a product that is already installed in homes and it’s just it’s a differentiated better products, the best way takes a little bit more work but the best way to get engagement and to really get the value that you want to get and that you expect and that you deserve because of the investment that you’ve made in that product is to work with the builders that are gonna value which are gonna be that meets your builder.
Mark Mitchell: Oh, that’s- you’re right. So to me that new person said it’s definitely stay away from the largest ones. Stephen if you one any other thoughts about to building material manufacturers about the importance over calling on the mid-tier builder or if you just wanna summaries what are the main points that they should take away from this.
Stephen: No, and I think and I’ll just also touch on I don’t I would say just stay away from that large builder. I would say educate the large builder but don’t make the large builder the cornerstone of your builder strategy. It becomes the longer-term part of your builder strategy. The really the strong the best way to get that foothold is through the mid-tier builder and keeping them national builders informed and there’s some great national builders out there.
I do want to make it sound like they’re all bad but it’s- they do what they do and mid-tier builders do what they do but just more attractive for manufacturers. I think overall really having a strategy having a way to engage with the mid-tier builders is that mid segment of builders is important, identifying them. I’ll put a little bit of applaud in for Builder Partnerships saying we that’s what we do and that’s how we help manufacturers and that’s what we help you do as we have 600 builder members that are all from below number 30 on down to somewhere in the 1500 to 2000 rank and so the best majority of them build 50 to 500 homes per year. We help you…they’re not all the same.
Every builder in that mid-tier builder segment is not homogeneous. They’re not the same builder. They all specialize some in starter [inaudible] starter homes, something move up, something more luxury homes so you start the segment then start to know which builders gonna value your products and where you’re gonna have the best opportunity and then engaged them and that’s what we also do is we help manufacturers engage directly with them.
We have relationships with everyone of our builder members and we help put them in direct personal contact with them so I think whatever your purchase as a manufacturer that should be your goal…is to find those others, segment them, target the ones that are gonna find them that you’re gonna have the best chance of success at and input your sales team on but make sure that your sales team know that there’s someone to a builder and not an installer or distributor.
Mark Mitchell: Good Stephen if someone thank you for that if someone would like to get in touch with you and learn more about Builder Partnership what’s the best way?
Stephen: The best way is to just send me an email. My email address is Stephen and that’s with a P H. So s t e p h e n @builderpartnerships.com. There is an S on builderpartnerships at the end so builderpartnerships.com. You can also just go to our website. Our website is simply www.builderpartnerships.com and you’ll be able to [inaudible] a lot of information form there as well if you’d like some more information.
Mark Mitchell: Great, well thank you Stephen. This has been very good and I hope our listeners that this has been helped them to be more successful in selling to builders and if you wanna grow your builder sales you can also feel free to contact me Mark Mitchell. I look forward to talking to you on our next episode.
Don’t forget, you can also subscribe to my podcasts on iTunes.