Your Own Personal Recession – 2 Changes Building Materials Companies Need to Make Now
There are major changes going on in the building materials industry. Manufacturers who aren’t ready will be hit hard by them – as hard as they would be by a recession.
A few things happen to building material manufacturers when a recession hits:
- Many companies that aren’t well financed or have overextended themselves by taking on too much risk will go out of business
- More prudent companies still risk going out of business simply because their sales decline too quickly and they can’t cut enough costs to remain viable
- Some manufacturers will only survive by being acquired by another company (either a competitor or an investment firm)
Most companies aren’t in a position to handle the kind of financial stress that comes with a dip in the economy.
If that includes you, you should be worried right now. And it’s not because I’m forecasting a huge economic downturn (I don’t have that kind of crystal ball). It’s because the way the industry is moving right now, many companies are facing that kind of risk even if the economy stays healthy or goes on an upswing.
The largest companies are probably not going to go out of business, but they could see a recession like drop in sales. If they are publicly traded or owned by investors, they will face some tough questions like, “Why are your sales declining when the market is growing? Why didn’t you see this coming?”
And most of this is happening because of two major changes.
Change #1: Eliminating Waste and Inefficiency
One of the major factors is a demand for reduced waste and inefficiency at every stage of the construction process and in every type of construction, whether it’s new construction or repair and remodel, residential or commercial.
If I’m being honest, this was a long time coming. The way buildings have been built for years is just fraught with inefficiency. And it’s been that way at every stage, from how we design buildings to how we select, source and install the materials.
An engineer who was quoted in the New York Times put it perfectly. He said if car manufacturers made cars the way we constructed buildings, they’d make every single car built to order. The manufacturer would deliver every individual part to your driveway and a large crew of mechanics would assemble your car.
That analogy should be a wake-up call: imagine how inefficient car manufacturing would be and how much more expensive it would be to buy a car if they were building each one individually and from the ground up.
So, if construction has been inefficient for so long, why the sudden change of heart? Why is everyone suddenly interested in efficiency after all these years?
There are two main reasons:
- Overcoming labor shortages that keep us from being able to build as much as is needed to meet demand (the more efficient the construction process is, the fewer hands need to be involved)
- Having a competitive advantage (more efficiency means delivering the same or higher quality at a lower cost)
Building Materials Companies Aren’t Responding Quickly Enough
This is a major change, but most companies are slow to realize it’s even happening.
They think of every sale in isolation. They want to know how many truckloads of their product the customer wants, but they’re not taking the time to step back and realize that there’s a trend behind the sales they’re making (and the one’s they’re losing). They don’t see a major shift in what their customers want or what it’s going to mean for them going forward.
What they don’t realize is that building materials manufacturers need to completely rethink how their product is designed, manufactured, delivered, specified and installed. The needs of a factory builder are very different than a site builder.
What could you change about your product if you didn’t have to depend it being installed on site? What if you could depend on it being installed correctly every time? If it was installed by a robot what might you change?
Moving to factory-built is a big change. That’s why I predict that a lot of small- and medium-sized companies are going to really get behind this. Meanwhile, a lot of larger companies will be so slow to wake up and get on board. They’ll start seeing steep, sudden declines in sales and by the time they understand why, it’ll either be too late or they’ll be struggling to catch up.
Another big challenge is that these factory builders are only going to buy directly from manufacturers. Many manufacturers don’t want to deal with the channel conflict this is going to cause, especially with distributors and dealers.
When I talk to leaders in this movement, they are looking for suppliers who are serious enough to have their senior management involved. They are looking for companies who want to learn about their needs before they start selling.
Change #2: The Customer Is Moving Online
The second reason many companies are going to see recession-like effects no matter how the economy goes is that they’re not recognizing just how deeply and quickly their customers are changing the way they select products.
Customers are moving online, and they expect companies to provide easily accessible information and a good online sales model. But for the most part, they’re not getting it.
Most companies are stuck in the old mindset that equates selling with making personal sales calls. Don’t get me wrong, personal interactions are still valuable, even in today’s world. In many cases, it’s going to be an essential part of finalizing a sale. But personal sales calls are incredibly expensive and inefficient.
If their sales strategy is outdated, you can bet their online presence is outdated, too. Their sites usually look like digital versions of their catalogs – more like an information dump than anything the customer will find useful. That’s because they don’t think of their website as a critical sales tool. So, when it’s time to build one, they don’t put in the kind of investment it really needs. They don’t interview customers to find out what they want from a building material website. They don’t understand social media or the importance of content marketing.
It’s not about how much you spend for a new website or other online tool, it’s about how it meets the needs of your customers.
In each product category, there will be an online leader who will out grow their competitors. You can’t afford to let the other guy have a better online presence than you do.
As the customer moves online, the salespeople at these companies find themselves working harder and harder but getting fewer results.
What It Really Means When Your Customer Moves Online
You’ve heard that your customers are moving online, but that doesn’t just mean they’re using the internet to find you or look up your phone number. It’s a much bigger change than that.
Customers are getting used to the convenience and independence of doing things online in their personal lives.. Now, they expect everyone – even building materials companies – to deliver that kind of experience. They don’t want to sit around waiting for a sales call or pick up the phone to start calling on companies.
They prefer doing the preliminary legwork themselves: looking up companies, checking out their websites, learning about their products. Once they gather enough information, they’ll narrow their list of candidates down to a few products they’ll consider and a few companies they want to talk to.
In other words, by the time they reach out to you, they’re already way down the purchase path.
Lots of companies miss out on sales because they build a website assuming that the prospective customer will reach out to them at the very first step of their customer journey, not midway through it.
What It Really Means to Sell Online
So, what does it mean to sell online?
Well, for one thing, it doesn’t mean making a digital version of your catalog. It also doesn’t have to mean selling products from your website.
What it means is making it easier for the customer to get the information they need without too much friction. It means making it easy for them to find it on their own, without having to contact anyone.
And notice I said “the information they need” – not the information you want them to have. You need to give them information they can use, not a sales pitch. You won’t get far with blog posts with titles like “3 Ways to Use Our Product in Your Next Build.” Instead, you should be aiming for information they could use, even if they didn’t use your product. Sales doesn’t have to be salesy. Instead of “5 Reasons Our Flooring Product Is the Ideal Choice,” give them a download like “5 Mistakes Most Builders Make When Specifying Floor Tiles.”
Another salesy mistake I’ve seen on a lot of websites is asking for too much commitment. Selling online is like dating: you don’t want to seem too eager or come on too strong. “Give us your contact info and we’ll send you a quote” is too much, too soon. Something like “Click here for a free download” is a better way to capture contact information and leads without making your prospect feel like they’re signing up for more than they want.
If your website isn’t educational enough or is too eager to get the customer in touch with a rep, you haven’t figured out what the customer wants yet. It might be time to start asking them what they need from you before they start looking for a competitor that gets them.
Avoiding Your Own Personal Recession
These two changes are already happening – and they’re happening fast.
If you don’t see them coming, or you’re sitting on your hands instead of doing something about it, your company is at risk. It’s like you’re walking yourself into a recession.
Making these changes won’t be easy. You can’t just bring in an agency and buy yourself some efficiency or a great online presence. Many companies will try to convince you otherwise but there are no “off the shelf” the solutions. It’s going to require some deep thinking at the senior level of your company, and a willingness to do something a little bold.
These are profound shifts. They’re intimidating. But if I told you that you could avoid a recession by making them, you wouldn’t bury your head in the sand – you’d spring into action.
This is no different. You don’t want to wake up one day and realize you lost your biggest customer and that you’re losing more and more big sales because you haven’t figured out how to meet your customers’ needs.
Another risk is that your biggest customer is affected by these changes and becomes a much smaller customer.
So, think of this as your own personal recession, because the threat is just as big as if there was one.
What Others Are Saying
“Mighty fine piece you’ve written here, Mark. Mighty fine indeed.” – Matt Gorsuch, President, Loftus Ventures