Ways to profit in the Pressure treated market

By William H. Plant Managing Partner HCS Woodtech Houston. Ti.

rLU M BE R dealer canbest decide his market positioning strategy for pressure treated wood products by describing his market from two perspectives: (1) the geographic or physical market determinants and, (2) the economic market determinants.

To define your geographic market, it is helpful to use current demographic statistics for the areas around your location. Although these reports can be confusing if you are not trained in statistics, they do provide important factual information. Do You know, for instance, if your market area is exPected to develop primarily as a residential, commercial or industrial area?

I am always surprised at the large gap that can exist between our assumptions, and the facts which evi' dence themselves in demographic research. You will save costly inventory and advertising mistakes by having these statistics available when you make decisions on your geograPhic market.

Because of the expense involved in transporting pressure treated wood, it has become a high PrioritY to clearly define both the geograPhic areas and minimum order levels required for you to utilize your trucks effectively for deliveries, The transportation or delivery service can be a large percentage of the invoice. However, the cost of that service must be controlled tightly or you will have a much smaller gross profit at the end of a month than you had anticipated.

Careful thought must also be given to service after the sale. Nothing is more costly than making a large sale outside of your geographic area and then finding that followup service is needed. You are almost guaranteed to lose money on an order outside of your market area if a Problem develops. When you are deciding on your geographical market area, You must make sure you can service it effectively.

Tiaffic flows and highway development are imPortant asPects of geographic market determination. The traffic flow around Your store affects the number of PeoPle who visit it. Advertising can be wasted and opportunities missed if traffic flows and the infra structure development in your location are not considered carefully. We advised a dealer who was 50 miles from the nearest water to advertise bulkheading and piling because he was located on a major highway to the beach. He found a profitable new market with the minimum of advertising cost-it just took a roadway sign.

Our cities and towns change rapidly and we will always benefit from carefully analyzing the effects of that change on our businesses. Therefore, knowledge of your geographical market will help not only a new loeation, but also if You are a new manager taking over an existing location, and even if You have been at the same location for many years.

Having decided on the PhYsical dimension of your market, You must now decide on the tYPe of customers you want to attract and the Product and pricing strategy that will be most successful.

Let us first look at the tYPes of customers that are available to dealers of pressure treated wood. Under broad headings, theY are: (1) The retail customer: the do-it-yourself homeowner and the small contractor or installer, (2) The residential and light commercial credit customer: builders and equipment manufacturers involved in a wide range of projects using pressure treated wood on a regular basis, (3) The heavy industrial/commercial customer: "big" manufacturers and building contractors involved in multi-million dollar projects who buy pressure treated wood in a highly specified and/or structural oriented manner.

It is fashionable nowadaYs for retailers to report percentages of "contractor business" and "d-t-y business." This is not a valid differentiation of the economic markets. The real fact is you have cash customers as a market segment and credit customers as a market segment, whether theY are contractors or d-i-y.

The third economic market segment can be described as the "big credit?' segment, buyers who demand extended credit terms, such as 45, 60, or even 90 daYs. These customers are not necessarily risky credit, however a dealer must carefully weigh the advantages and/or disadvantages of selling this market segment.

Typical groups of pressure treated inventory for the major market segments would include, but not necessarily be limited to the following:

Story at a Glance Ways to position Pressure treated wood in a market bY determining geograPhical area, identifYing customer group. .typical inventorY ielection. .advantages of segmenting market.

Cash Customers:2x4 and 2x6 #l grade, selected lengths of 2x8, 2x10, and 2xl2 f2 grade, 4x4'7' to 16' and 4x6-8 ' and 12' ,4'x8' sheets of lattice and deckboard with eased edges, lx6-6'notched topped pickets, and water repellant.

Credit Customers: 2x6 #l grade and 2x4, 2x8,2x10, and 2xl2 f2 grade in all lengths 8' to

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