Here are the five biggest problems that building materials companies are facing today. If you recognize any of these issues, in your company, the sooner you get your head out of the clouds and get to work on these issues the more successful you will be. If you don’t deal with these issues, eventually you will see a competitor, who chooses to deal with these issues, make your life very difficult.
1. Not Keeping Up With Customer Changes
Whether they are builders, contractors, dealers or distributors, your customers are changing, and building materials companies are not keeping up with the pace of these changes. Your customers are telling me this. They tell me, “We are changing, our needs are changing, why aren’t manufacturers keeping up with our changing needs?”
One of the biggest changes in your customers is how the big are getting bigger, mainly through acquisitions. Bigger customers are more sophisticated and can afford to invest in systems and data, smarter people and better marketing to their customers.
The larger they get, the less influence and leverage the manufacturers have as these larger customers strive to make their brand more important than the manufacturers. The end result is that they have more leverage over pricing and terms. This also means they will have more control over whether or not your sales grow or decline.
As your customers get larger, it’s even more important that you continue to strengthen your sales and marketing approach to be the category expert that these larger customers respect. You don’t have to be the leader to the category expert; you just have to be more knowledgeable and committed. The other choice is to become a simple order taker who’s job is to do anything not to lose the account rather than to grow your sales.
2. Not Preparing for Tomorrow
I don’t see building materials customers preparing for two big issues they will face in the not too distant future.
The first is the looming issue of many contractors, dealers and independent reps not having a succession plan. Over the next ten years, a lot of people are going to simply retire and close their business. This will mainly be a problem if you use independent reps or sell through specialty dealers. Contractors will also be closing up shop and with the shortage of labor, we will probably see fewer new contracting firms.
The majority of independent rep firms are very small and built around the owner who is the person with the with the contacts, skills, and knowledge. When they decide to retire most of them will just close up shop. There is no one to sell it to and you, as a manufacturer will find yourself with no sales coverage in the state or area that the rep covered. It will be almost impossible to replace them as young people today are not starting rep firms. There are some rep firms who are becoming larger sustaining businesses. We’ll have to see if there are enough of these to go around.
The same will happen with long established specialty dealers who sell things like fireplaces, kitchens and garage doors. We may see manufacturers getting in the dealer business or some multi-location dealer may decide to get larger. Whatever happens there will be a hole in the marketplace that may leave you with no path to a sale.
The second is preparing for the next downturn in the economy, who knows when it will come but we know that it will at some point. Now is the time to prepare by making sure you are in the strongest position.
This is the time to focus on growing your market share. You can always invest in new factory equipment, software or other things that lower costs or improve your efficiency. When you place these above investing in growing your sales, you have decided that the market determines how much you will sell. You are playing not to lose rather than to win. Winners do better through downturns than those who play it safe in good times as well as bad times.
3. Not Moving Online Fast Enough
We have reached a tipping point in building materials where your online presence is more important than anything else you do. Architects, builders, contractors, and others don’t differentiate between their personal life and their business life when they go online. If they can design and price a new car online, they don’t understand why they can’t do the same with any building material product. You no longer get a pass because you are a building materials company.
The companies who are recognizing the benefits of having the “go to” website in their category along with tools like content marketing, CRM, and marketing automation are quickly outpacing their competitors. As most building materials products are very comparable, the companies who do not improve their online presence will find themselves becoming irrelevant.
This shift is so important that you should stop every other marketing activity you are doing to find the funding if you can’t invest in this. Don’t go to another trade show, run another ad or print another thing until you fix this.
This will be expensive and take time. It will be challenging to implement as you will have to reorder the internal pecking order of who is in charge of what to make this work. The technology needs to drive the way your organization is structured as it won’t fit neatly into your current structure. You may need a new organization chart.
The longer you wait to make this commitment, the more it will cost you. When you decide to make this investment, your goal should not to be “good enough” but to be the best online company in your category.
4. Not Looking For an Advantage
Building materials companies are not very good at being a disruptor. They are very good at playing by the rules and working to be better and more efficient within these rules. It’s like everyone is playing football and only runs the ball.
What everyone forgets is that there are no rules. You and your customers have established the rules to make it easier to play the game. You sell to a distributor because they can buy truckloads which is convenient for you. The distributor sells to his customers, who are really your customers.
What if it wasn’t this way? What could be better for the customer and in the end, better for you? Disruption can happen with products, pricing, information, installation, distribution and more.
In looking for advantages, building materials companies tend to think small and to think in ways that are relatively easy for a competitor to match. Companies used to have R&D departments that were actually looking for creating an advantage through product innovation. If they have an R&D team today it spends more time on value engineering costs out of the products.
Companies should be constantly looking at everything in order to create a real competitive advantage by asking lots of “What If” and “Why Not” questions.
5. Not Working as a Team
Building materials companies continue to be plagued by the silos of sales, marketing, customer service, IT, finance, HR, production, and others all more interested in growing their own kingdoms than working together to make the company more successful. It’s like watching the Game of Thrones in an office building. You can literally see the kingdoms.
When I work with a company, I frequently identify an unexpected issue, such as poor customer service or shipping, that is holding back their sales. When I present the results of my research and my recommendations, I am amazed at the reaction I get.
They say, “Mark thank you for identifying this issue for us. Unfortunately, that issue is within the kingdom of Herbert. No one takes on King Herbert as he has a lot of power so we put up with poor customer service. Let’s move on to your next recommendation on how we can grow our sales. We realize that because we are unwilling to fix the problem within the Kingdom of Herbert that we will be working with one hand tied behind our back, maybe if we improve our website, customers won’t care that our customer service department is incompetent.
These are the five biggest challenges that are facing building materials companies today. The sooner they take their heads out of the clouds and get to work on these, the more successful they will be.
We are going to be addressing these issues and more at my upcoming Whizard Summit for building materials companies on October 26 and 27.
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Thanks for the following comments. I’d like to hear your feedback and suggestions on how to sell architects.
“Great insight from Mark on several things us #LBM dealers need to keep in mind.”
Strait & Lamp Lumber Company
“Great points Mark. These are often deep rooted issues in many organizations and many are paralyzed by the mere thought of combating them.”
“Our organization is tackling these items head-on. Your points are very well known across the building materials…”
Director of Marketing
Rocky Mountain Forest Products