Contractors Say Quality Trumps Costs

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 building products.

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.”

Distribution Methods
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 contractor services.

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. Consulting.
www.lek.com

DWM
© Copyright 2011 Key Communications Inc. All rights reserved.
No reproduction of any type without expressed written permission.