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Friday, September 18, 2009

The Races and Construction Marketing

Members of the Ottawa chapter of Construction Specifications Canada at the Rideau-Carleton Raceway. My only bet, a $2.00 ticket, lost. Of course I didn't actually purchase the ticket.

Although the local racetrack and slot machine emporium is close to my home, I've never visited the facility since it opened in its new and "modern" form several years ago. The idea of putting coins into machines in hopes of winning big when you know the odds are stacked against you from the start hardly excites my sense of rational business awareness.

More significantly, I know enough risk and chance in day-to-day business ownership. Compare this time last year to where things are today, and I would say that anyone who thinks business planning and assumptions can truly predict your future is dreaming in some very bad form of colour.

The difference between business risk and gambling risk, of course, is that the business owner has some choice in the outcome. I suppose horse racing gamblers have a form of choice -- they can review the handicaps and statistics before placing their bets -- and card game gamblers can try to count cards, but the gambling business has solutions to these risks: Odds adjust automatically as bets are placed, so at the races the house takes its cut (about 25 per cent, I estimate) no matter who wins, and card counters are banned from the casinos.

The world isn't fair, it seems, especially for those who think that dumbly playing the game is the way to win.

Fellow members of the Ottawa Chapter of Construction Specifications Canada are not dumb, however. We know that casinos and racetracks offer enticing deals on meals and entertainment, if you don't gamble. So we didn't. Instead we shared stories of how games are set.

Here is a good example. One member explained the simple convenience store owner rule for "pull tab" games -- you know, those little cards where you pay a dollar and hope to win a jackpot. Convenience store operators fill the jars with these tabs, and watch whether anyone wins as the jar empties. The CSC member explained that if the big winner didn't appear by the time the jar had reached 1/4 empty, the store owner "purchases" the entire remaining jar. Of course, at this point, a win would be inevitable. Knowledge certainly helps stack the odds in your favour.

In fact, in business, our knowledge, instinct and gut feelings, combined with an understanding of the rules and some genuine luck are all essential for success.

One person at my table, who insisted on not being identified or publicized in any way, spends $5,000 annually on a well-known leads service, for example. He then assesses the information and sends out information packages, seeking to sell concrete products to contractors.

He said: "I can't be identified because in fact the products I distribute are also sold by the company's other divisions, and if they have the information, they will compete against me." It turns out the end-user may purchase the same thing from the same company, but the distributor at the race track wins or loses depending on whether others know he is looking for the work and opportunity.

"Could the original supplier save some money by simplifying and consolidating its sales force and arrangements," I asked the distributor. "Sure, in theory," he said. "But the seeming inefficiencies actually spur competition and create more business for the manufacturer."

In other words, by allowing different players to compete in selling the product, the manufacturer actually sells more, at greater profit. This may not make much sense to the bean counters, but it certainly works in the marketplace.

Then the distributor relayed a story which shows how things evolve. A few years ago, before electronic equipment replaced mechanical methods, tolerances of up to 10 per cent were permitted for cut stone. These tolerances remained in the contract language for a major, high-profile project, even though then-recent technology advances had eliminated the need for them. One contractor bid the job, then creatively arranged to have the stone cut to the minimum tolerance, which of course guaranteed a 10 per cent gain -- and possibly even 20 per cent. This certainly improved the margin.

As some of us left early (after the fourth race), and walked through the slot machine section, we felt a sense of rational superiority over the fools playing the machines. They simply don't get it, and are poor as a result. The world is not fair to the dumb and the passive (and sometimes bad luck can bring down even the brightest and most honorable).

But when we are play the business game, we can choose our strategy and change course when we need to find a new direction. We enjoyed our inexpensive, information-sharing evening at the race track. We had found a way to win, sure-fire.

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