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Five Tactics Your Competitors Are Using to Survive the 'New Normal'

February 23, 2009
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I live and work in the rather sickly Detroit metropolitan market. Every time I drive by a flooring store, granite shop, plumbing showroom or contractor’s truck, I wonder how they are doing. What steps have they taken to cut costs? How long can they keep going if conditions don’t improve?

Most markets are not as tough as Detroit’s, but all are suffering. I heard an interesting term that describes our extended economic downturn: the “new normal.”

How do construction pros navigate in these “new normal” conditions that have lingered way past temporary? Clearly, this downturn is not a “dip,” “correction” or “slowdown.” Like an unwelcome, messy houseguest, these conditions are here to stay for a while.

Rather than continue hoping for an economic rebound to save the day, many pros are changing their businesses to reflect the reality of our “new normal” conditions. But how they are changing? I asked Clear Seas Research to conduct a survey* among our Building Materials Panel, a cross section of pros who read BNP Media’s construction trade magazines, Web sites and blogs.

This survey garnered 364 respondents, so it definitely touched a nerve. After analyzing the results, I identified five tactics construction pros are employing to survive the “new normal.”

1. Cut Overhead. 38% of respondents say they reduced staff, 28% say they reduced hours, 16% cut benefits and 16% cut compensation. Interestingly, 38% also said they are “not focusing on reducing overhead.”

2. Reduce Benefits. The 16 % who are cutting benefits are hacking 17 different areas: 401k plan, 43%; medical insurance, 39%; holiday pay, 32%; dental, 29%; personal/sick pay, 29%; supplemental benefits, 23%; vacation pay, 23%; family medical leave, 21%; flexible spending accounts, 21%; employee assistance programs, 20%; life insurance and AD&D, 20%; bereavement time, 14%; and five forms of COBRA or disability coverage, 12% each.

3. Minimize Work Vehicle Expenses. These motorized workhorses won’t be receiving the same pounding they endured when times were good. 40% of respondents are improving route mapping; 39% are driving less; 30% are seeking fuel discounts; 21% are using GPS to improve driving efficiency; 17% are investing in vehicle maintenance; 13% will stock less inventory; and 13% will switch to smaller vehicles.

4. Increase Marketing. We asked this open-ended question: “What changes will your company make in light of the current market conditions?” 38 respondents wrote that their company is increasing its marketing and advertising. Another 14 indicated they would tap into new markets with new services/products, seven said they would “get more aggressive,” and four wrote that would increases sales efforts. While some respondents are focused on cuts, it was energizing to see that many are being proactive in attacking their “new normal” market.

5. Employ New Services. Another open-ended question provided more inspiring results. We asked, “What new products or services will your company offer to become more competitive?” Respondents’ answers demonstrated a high level of creativity, flexibility and resourcefulness. Here are some of their comments.

“Switched to more green products.”
“Bid smaller projects.”
“Add cleaning services after installations.”
“Bid more services in our quotes.”
“Selling service contracts.”
“Switched to IP phone services.”
“Offering incentives to customers for purchases.”
“Adding a handyman division.”
“Bought our own delivery truck.”
“Offering radon testing.”
“Added apartment remodeling and insurance work.”
“Bring in a new line of siding”
“Added solar installations.”
“Added midnight electricians.”
“Added engineering services.”
“Added IAQ, UVC lights.”
“Add certifications for geothermal, solar.”
“Added hardwood repairs and services.”
“Developing Web site.”
“Adding drain, jetting, video inspection services.”
“Adding cork, bamboo and laminates.”
“Expanding to regional clients instead of local.”
“Adding fireplace units.”
“Installing outdoor wood furnaces.”
“Adding granite installations.”

The list of services being introduced by construction pros this year was quite amazing. For those of you proactively developing new skills and business opportunities, the future (albeit scary) looks very exciting.

Carpe diem!

*To obtain a copy of the survey results, contact Kelly Clinton at clintok@clearseasresearch. Results from this study are copyright © 2009 by Clear Seas Research. All rights reserved.
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Percentages don't seem to add up.

Scott
February 27, 2009
I am trying to make sense of the numbers.. In the category "Cut overhead" the percentages add up to 136% while the category "Minimize Work Vehicle Expenses" adds up to 173%. What is the deal?

Percentage add up to 100%+ on purpose

Tim Fausch
February 27, 2009
Scott, Thanks for the question. This is something I should have footnoted in the blog. Those questions allowed respondents to select multiple responses (i.e. "check all that apply"). The totals therefore add up to more than 100%. What was clear in the data is that companies are not stopping at taking one or two corrective actions to adjust to their situations. Most are looking over every expense, and slashing a boatload of them. I was more surprised that 38% of respondents indicated they were not focused on cutting overhead. I hope that means these companies are doing well!

Thanks

Scott
February 27, 2009
Thanks for the clarification! I found the results interesting as well. One other point: The ideas at the end of the survey seemed to point toward diversification, which makes sense for a business owner to do to bring in more work. However, with all the layoffs and staff reductions there is now a glut of people in the job market with, "diverse" skills who can and will undercut the prices that their former employers charged. Competition for those diversified fields/opportunities will likely be heavy.

Marketing and Sales

Ray Blake
February 28, 2009
One great way to cut costs and increase sales is with free online marketing. I'm also in Detroit Michigan. I own a surface protection company that manufactures products to protect floors from getting damaged during the construction process. Great for flooring installers. Over the years I've learned cost effective ways to advertise and market my company on the web for free. Some of these techniques include free blogging sites, free article publications, and many other free advertising and marketing solutions available online. Hope this helps Ray Blake www.surfaceprotection.com 586-531-4962

Five Tactics Your Competitors Are Using to Survive the 'New Normal'

rich hilliard
March 1, 2009
I am amazed not one mentioned increasing sales training or undewrstanding clients motives to own.Adding service without knowledge of how to receive the additions does not amke sense.

Marketing and Sales

James Armstrong
March 4, 2009
To quote Ray: "One great way to cut costs and increase sales is with free online marketing." Free Plumbing Company Listing at: http://www.usaplumbing.info

Direct Purchase

Sundar.TRV
March 8, 2009
Yep, they mentioned all, think about direct purchase from Direct Importer who him self a Distributor. If you're requirement is going to be 90+ slabs of various colors try to import directly, rather than purchasing through the so called importers who is in your next door. Try to identify low cost regional areas, and mass producing factories. If your purchases are going to be from Brazil, Spain, Italy, India, Turkey, China; appoint some experienced freelancer, who can take care of your purchase starting from Negotiation till Quality Assurance and Shipments. You can save a lot.

Positive Aproach

Sundar.TRV
March 10, 2009
The whole approach - (Reduced Staff, Reduced Working Hours, Reduced Benefits, Reduced Wages etc.. or adding above said services), by all means either you will save or spent on additional service or features you're going to implement. Think smart and have a positive approach, don't have to panic. It's high time to act, Analyze and again Analyze each and every operations by time study & motion study. Try to reduce the operational time. Implement TPM, TQM and Six Sigma which can helps you tremendously. Implement Japanese 5S system in your shop floor. All the Best Sundar sundar@archigm.com

GPS vehicle tracking

Jeff Smith
May 27, 2009
Many plumbing and HVAC companies use GPS tracking systems for dispatching efficiency and improved productivity. Some companies monitor their vehicles to prevent driver “moonlighting”. Overall, it is estimated that 120,000 plumbing/HVAC vehicles or technicians are monitored with GPS tracking systems/ services, approximately 25% of plumbing companies. Every day you put off implementing a GPS tracking system, you are losing money. We have even seen plumbing companies use our devices for recovering vehicles stolen right from a customers house. www.fleetlocate.com

Clear Seas Research report

Joe Webster
June 4, 2009
Your article is right to the heart. Thanks for the insight! I tried to contact the individual at Clear Seas Research with a request for the survey results, but the address was not valid. What's up with that?

machines

me
June 28, 2009
off topic but you guys in the business need to know. Be aware of these machines(http://www.sasso-usa.com), they are with software bugs & mechanical defects also they have a hidden parameter that can be programed to stop the machine after a number of working hours(illegal) , so you would have to call them for assistance. The pressure rollers jam and the materials slide on the conveyor-belt. Also the rust easily.

Direct Purchase

Paul D Rodriguez, CHB
July 1, 2009
I must agree with Sundar,TRV buying direct from overseas suppliers would help reduce cost. Any company currently importing directly from overseas suppliers should also shop around for better ocean freight rates and renegotiate rates with their Customs broker and local truckers in order to reduce landed cost.

Be an innovator not a copycat

Connie Gal
April 25, 2011
One way to keep ahead of the competition in a downturn is to focus on innovation and how to set your company and products apart from the competition. Too many company owners dwell on dwindling sales and trying to "copycat" competitors rather than looking at their own unique customers, location and opportunties. http://buildsitepro.com/home.asp

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