Gontractors change their buying habits

[.lon rHE sEcoND vsRn in a row, I-' L.E.K. Consultins surveved more than 500 contractors across the U.S. While most are cautiously looking toward the future, they are changing how and where they shop in order to remain price-competitive.

"For the first time since the recession, contractors are planning for growth," says Chris Kenney, an L.E.K. vice president and head of the international firm's North American basic industries practice. "There's an opportunity to capitalize on growth by promoting trusted brands, introducing product features that will command a premium, and reevaluating how to reach customers across traditional and

Contractor Reaponses to Price Pressure

online channels."

Other key findings for LBM dealers, distributors. and manufacturers include:

Pricing pressure continues despite market optimism. A third of respondents said they lost bids last year due to price-double the percentage in 2006. Contractors responded by looking for their preferred products at competitive prices.

Brand loyalty remains higher than channel loyalty. Contractors are loyal to trusted building product brands, not the channels through which they buy. Contractors are twice as likely to channel shop rather than trade down and purchase less expensive alternatives. This indicates that strong brands have significant pricing power and should examine distinct pricing strategies for different channels.

Loyalty

To Big Boxes

declines. When respondents were asked about their loyalty to sales channels, big boxes remained at the bottom for the second consecutive year. Contractors said that big boxes under-perform on the three most important channel selection criteria, other than price: delivery speed, stock on-hand for immediate purchase, and contractor services. Contractors' loyalty to twosteppers increased the most from 2OlO to 2011.

It's time to re-focus on the pro channel. Manufacturers typically surrender significant profit margins in exchange for large sales volumes generated via big boxes. It might be ber ter to sell new and premium products throu-sh pro channcls. where profits afc traditionally higher ancl cliflcrcntiation o1'pnrducts is sustainablc. For this strategy to u,ork. manufacturcrs lnlrst have clclr pricinn rh'ute gies among channels and establish prograrns to support distribution partners.

Online purchasing continues to grorv. Nearly 507 o1' contractors said thcv lrave used thc Internet firr priee errruparisons. uncl 1OC/t' expcct to conduct murc pulchasing onlinc durin-g thc ncxt thrce ycars.

Social media affects purchasing. Along with the Internct, social nrcclia plays a growing rolc in contractols' clecision making proccsscs and pulchasing clecisions. Alnrost a third of thosc surveyed said thcl,are using social mcdia rnore than thcy wcre a year aco to firllolv supplicrs and blancls, and 35% expect to be morc active on social nrcdia this ycar.

Product selection criteria are changing. Encrgy cff icicnt and sustainablc products arc bcconring incrcasingll, important factors in ploduct sclcction. Morc than hall'of contractors indicatecl a .,r'illingncss to pay a l0% or highcr prcmiuni on both product typcs.

Hovn'cvcr. thc impoltancc ol' thcsc two lcaturcs varics significantly betwcen rcsiclential ancl conrrncrcial contlac tors. Residential contractors arc willing k) pav a prcrnium 1'or energy-e1'ficient products and consiclcr it thc sccond rnost irnportant purchasing criterion behincl pricc. But thev lure gcnerally unwilling to pay r.nore fbr sustuinable prod tucls. Ir-t contnrst. conrnrcrcial contractor purchasin-t decisions arc cqually influcnced by both cncrgy efficiency and sustai nabil ity.

According to L.E.K.. contrilctors will havc rnole flexi-

E K 5 Conlractor Beniilor Sururv

>ource L *{s'*J& April 2012 I The fvlerdrant Magazine r 19 bility to rcturn to thcir prcf'erred purchasing habits as the construction nrarket slowly begins to oxpand. However. the f irnr belicvcs that thc winners in thc industry five years fl'or.n nou will thosc that pursue new strategies now.

By Carla Waldemar