Contractors Say Quality Trumps Costs
• 44 percent took lower margins to win business.
• 30 percent say homeowner influence in product purchasing has increased.
• Nearly half perform extra services while on a job.
A recent survey of more than 500 residential contractors across the United
States revealed that they saw a sharp increase in a loss of bids based
on price between 2006 and 2010, but have found several ways to cut costs
without cutting quality, revealing a continued strong emphasis on quality
For example, many contractors reported that they prefer to purchase trusted
brands at promotional prices, rather than trading down to less expensive
brands, as a way to lower their costs. Likewise, trading down to lower-grade
product options was seen as one of the least desirable ways to respond
to price pressure. To remain competitive, nearly half of contractors revealed
that they have performed extra services on their jobs while 44 percent
took lower margins to win business.
The study also found that homeowners may be playing a growing role in
product selection, as nearly 30 percent of contractors reported that they
feel homeowner influence in product purchasing has increased since 2006.
As such, L.E.K. Consulting, which conducted the December 2010 survey,
suggests that manufacturers complement contractor-focused programs with
homeowner marketing initiatives that raise brand awareness with consumers
and underscore brand differentiation through education.
"To drive growth,
OEMs should continueto invest in contractor affinity and education programs
while ensuring the highest performance on key product features such as
reliability and durability."
—Robert Rourke, L.E.K. Consulting
According to the study, the Internet plays a large role
in both brand awareness and sales, and should be addressed accordingly
in future programs.
“L.E.K.’s findings clearly show that building products manufacturers with
strong brands have more pricing power than originally thought,” said Robert
Rourke, vice president and head of L.E.K. Consulting’s North American
Building & Construction Practice.
“To drive growth, OEMs should continue to invest in contractor affinity
and education programs while ensuring the highest performance on key product
features such as reliability and durability.”
The study also looked at contractors’ purchasing methods and found that
more contractors are loyal to brands than to specific sales channels,
which is driving sales at big box stores in many cases. Despite the seeming
lack of channel loyalty, however, L.E.K. reports that some degree of channel
preference remains, and, as the housing market improves, contractors expect
to shift away from big box and back to their historically preferred pro
channels to take advantage of value-added offerings such as delivery and
When asked about their purchasing decisions by channel, contractors say
they anticipate that their purchasing patterns in 2013-2014 will trend
back to more pro-orientated channels, particularly in the case of doors
and windows, according to the study.
“Channels that combine the right balance of brand and product line exclusivity
with differentiated services will be well-positioned to enhance loyalty
with their core customers and have the opportunity to replicate this success
with other segments in the future,” says Lucas Pain, vice president, L.E.K.
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