A tale of two markets

Dinner at the annual Greater Ottawa Home Builders' Association boat cruise. Events like this allow trade contractors and builders to "connect" and develop relationships, which ultimately lead to business opportunities.

On Thursday, I had conversations with two sub contractors, one in Ottawa and the other in suburban Washington D.C. Their stories are like night and day.

(I can't name the contractors here because the successful contractor doesn't wish publicity, and I have a policy not to identify anyone in this blog in a less-than-positive manner.)

The Washington-area contractor is struggling. His daughter-in-law phoned me to ask my advice; she had seen my blog postings about canvassing, but they were having little success.

The contractor, in business many years, claims on his website to be excellent at rapid framing and described success with the hotel and hospitality sector. Now the commercial business bidding opportunities the contractor is receiving bids so low that he cannot hope to make a profit.

"Many residential contractors are getting into the commercial space," he told me. So he decided, since his business can do "anything", that he would embark in the residential market where hopefully the margins could be higher.

I scratched my head. How can someone who has specialized in commercial framing in a bid-for-work environment succeed in the residential space, when (as he said) his residential-side competitors are moving into the commercial markets?

Could he have any chance at success with cold call canvassing for framing services, with a web site touting his company's great work on hotel projects?

"Do you know of any good leads services," he asked, saying he was considering one of the major brand names in the leads services business. I told him the leads would be a waste. 'If the competition is killing you now among commercial clients you know, how will a leads service which sells the same information to dozens of competitors help you?"

A couple of hours later, on the Greater Ottawa Home Builders' Association annual (Ottawa River) boat cruise, I met a sub contractor who specializes in crown mouldings. That is his business, and his only business. And business is good.

"I make a fortune off of the Yellow Pages," he said. This immediately caused my ears to perk up.

What is a contractor whose business is mostly with tract builders doing in the Yellow Pages?

It turns out that the residential clients responding to his Yellow Pages ads are impressed by his service, and his highly competitive prices. "I don't need to bait and switch. My materials are much less expensive because of the volume purchasing for all the home builders I work for. And I tell my Yellow Pages clients that they will have to wait a week or two for service -- then use "fill in time" to accommodate them."

As well, for him, the Yellow Pages aren't a complete waste from an Internet marketing point of view. He has a simple website and a logical URL, so it doesn't take long for people searching for crown mouldings in Ottawa to find him.

Now, lets look more closely at these two businesses. Both are contractors straddling the consumer and commercial markets; both have websites, and both are in cities where the construction market, while greatly diminished by the recession, has not been totally destroyed.

(Certainly, GOHBA boat cruise attendance dropped by 50 per cent from last year, but the builders say they know things are much better here than Toronto or Montreal. Ditto for Washington, compared to the Carolinas and other U.S. markets. Capital cities almost always fare better in recessions than most communities).

But why is one contractor succeeding and the other failing?

Focus

Crown mouldings is a clear niche. Whether you are a home owner, a tract builder, or even a commercial business, if you want crown mouldings, you are not going to go to a generalist who can do "everything". Of course the Washington area contractor had a niche as well, "rapid framing" which is perfect for the high-velocity and tight schedule of hotel construction (I'm writing an article on that sector this month for our Canadian publications). But it doesn't convert very well for the residential market. Are you realistically going to call a renovation contractor whose claim to fame is "rapid framing?"

Rational synergies

The crown mouldings contractor takes his materials volume discounts from home builders and combines it with blocks of "off time" to convert Yellow Pages listing calls to solid revenue. The pieces fit together. Can a "fast framer" used to bid-for-work speed adjust to the pace and cycle of residential renovation without a major business rethink. I think not.

Rational marketing

I believe Yellow Pages advertising is a waste for most contractors, but would never question the crown mouldings contractor's decision to continue using them. They work. And the Yellow Pages advertising requires virtually no management effort, other than writing cheques for the services.

Canvassing can be cheap and fast, at least in terms of hard cost, but how would you respond, as a homeowner, if a canvasser from someone whose website proudly proclaims "fast framing" and hotel work knocked on your door to sell you on "we can do anything around your house?"

Assuming they reached my door, I'd sit outside and try to give them a free lesson in marketing, but they certainly wouldn't get my business.

Can we learn anything from these two stories? The crown mouldings contractor doesn't need any marketing advice from me. He's doing everything right. Even as he earns profitable revenue from the Yellow Pages ads, he is doing the right thing to maintain his business within the tract home builders' market. Remember, I met him on the home builders' association boat cruise as he conversed with current and potential clients.

I spent about an hour on the phone with the Washington-area contractor. His business volume and scope are large enough that he could theoretically qualify for my publishing marketing services, which have a minimum $1,500 fee. But I couldn't in good conscious push him to take up my offer (which includes guidance, consulting, and support far beyond the service itself). The reason: He simply had so far to go to get to the basics of getting it right that my services would be a waste of money for his business.

I told hm he needs to change his website and URL, and he needs to focus on his current clients and learn what they need, and what they read/view and study, and that he needs to learn a lot about focus and niche marketing. (I suggested to his daughter-in-law that she go to the library and look up the book Positioning: The Battle for Your Mind by Al Ries and and Jack Trout.) If he wants to do residential and homeowner work, he will need to ditch the hotel website, or at least set up another business presence focusing on the residential market.

Reaching first place by starting first

One of the cornerstones of marketing success is being first. First in heart, first in mind, first in the mental position of your market.

To be first you do not need to be best. And you do not need to be inspired -- because first is within a niche, specialty, or geographical area.

As an example, about two years ago I became the first blogger to focus on construction industry marketing. Certainly, back then, I was far from the first blogger -- word about blogging had spread around, and many people were starting blogs. I searched around the Internet for compatible blogs relating to the topic, and found a few local/regional and association-related initiatives and granted them free hyperlinks (and continue to provide the free links to anyone with a relevant blog).

Today, other excellent blogs are published relating to construction industry marketing, all of which receive free links from here (no reciprocation required). It hurts me a little, but some of the other blogs are actually better than mine -- in technical skills, design, and often in content (the last is a hard admission to make). However, the can never be the first construction industry marketing blog. I own that space (and will only sell it for a price only a fool would pay -- if you are a fool, feel free to contact me and provide your certified cheque.)

What are the advantages of first place?

• You own the 'mind space' of your prospects. When people think about your speciality, they think about you first.
• This means you don't have to work nearly as hard to win trust, respect, and the opportunity to bid work;
• Once you are in first place, even if your technical or practical knowledge isn't as great as the contenders, you are in a much better position to defend yourself from competition -- the analogy is the military strategy of having a place on top of a hill with excellent supply routes to bring in reinforcements if necessary.

Note that it isn't hard to be in first place, no matter what your business is. You simply need to think "niche" and define your niche within your market segment or geographical service area.

For example, you may not have the first roofing, or drywall blog (you might for some of the trades, even nationally), but you could have the first roofing or drywall blog within your community -- relevant if you have a younger or technologically oriented market (or simply enjoy blogging enough that you don't mind if few people care, at least initially).

You could be the first roofing contractor in your area to use video or Internet estimates, or the first to actively support a local charity or community group with influence or respect within your market. You could be the first to offer a free maintenance or follow-up package, or the first to hold a client appreciation/referral night. You could steal dozens of ideas from this blog and other places, and still be first within your market segment.

(If you aren't first, you could be second or third, and play the Avis 'we try harder' concept -- it works, especially if your product or service are truly better than the first place contender, but still, make sure your marketing within your segment stands out first in mind.)

The ideas here are lifted from Positioning: The Battle for Your Mind probably the most influential marketing book I've ever read.

Any time you follow the "be first in your niche" rule, you will succeed. Anytime you defy that rule, by being better, cheaper, or simply copying a local/niche competitor, you will struggle to gain traction, respect and business opportunities. So make sure you are in first place from the start of your marketing plans.

Your difference

A core concept in marketing and branding is to ensure you are distinctive, and have the number one place in your potential clients' minds. You should read the classic marketing book, Positioning: The Battle for Your Mind by Al Ries and Jack Trout to understand this concept. Then put it to work in your business.

You cannot be everything to everyone. You must be unique and special and if another business already occupies that space in your marketing universe, you lose, unless you have mega-bucks to waste.

The challenge is to find and define your 'first'. You can do this by narrowing your speciality or geography, or both, or (more difficult but effective if you can pull it off) develop some signature uniqueness in the way you sell and/or deliver your service.

I learned this lesson the hard way some years ago when I tried to publish the best business publication in my region. Someone else occupied the space. The business flopped. Now we publish the first regional construction industry publications in distinctive regions and are careful not to rush into the space if we can't immediately obtain the number one position in potential clients' minds. This is the first Construction Marketing Blog.

Perception and marketing

If you only wish to read one book about marketing, Positioning: The Battle for Your Mind is the one you should read.

Marketing is not always what it seems to be. In the world of marketing, perception is often more important than reality -- at least at the front end -- and the preconceived notions of potential (and current) clients carry far more weight than what might, in scientific terms, be described as the 'true' picture. This is important because just because you have a better product, better service, better price -- in objective reality -- you may find that your potential clients just don't seem to care, or refuse to get it. Their frame of reference and perspective is defined by other values.

If you haven't already read the classic marketing book, Positioning: The Battle for Your Mind by Al Ries and Jack Trout, you must do it now. (It is inexpensively available in paperback at your local bookstore or Amazon.) The ground-rule of successful marketing is that unless you have extremely deep pockets, you need to be first in the mind-space of your potential clients. This is usually achieved by finding a niche, a small segment not occupied by others, where you can 'own' the space. So, say you are a general contractor. Your niche may be a small, rural geographic area ("We build everything in ... name of community); or you might just do fourplexes, and only fourplexes, in Minnesota.)

On a higher level, Sonny Lykos observed to me in an email that no one seemed to care on another forum about his system for ensuring back-end client satisfaction, as a key component of marketing. (See this thread on Contractortalk.com and my final thread posting, suggesting Sonny's approach to budgeting. Then silence.) People were more interested in advertising flyers, canvassing, and the like. Their perception of marketing is defined by their preconditions and expectations, and they cannot see beyond it to the alternative he encourages.

I got my first impression about the power of preconceptions in 1978-80 in Africa.

Before arriving in Rhodesia near the end of the 15-year bush war, I learned that if I entered the country as a "journalist" I would be put on the next plane or train out. So, with scraggly hair and youthful exuberance, I declared myself a "student" on entering the country.

Then I went to look for work, knowing the country -- with military call-ups at high pitch -- had a serious labour shortage for 'whites' jobs. I ended up with a job offer at the Bulawayo Chronicle -- I then went to the immigration department and said I had good luck in being offered a job as a "trainee journalist" (a little lie, of course). The result: I received immigration papers and a work permit marked "journalist", legalizing my presence in the country.

For the next 18 months, I spent my life watching the story unfold --and living it in real time. Notably, most of the whites said the "world press has preconceptions; they think we are all bad, and nothing we do good ever gets reported." They predicted horrors under black rule. They all cited the same mantra, seemingly without thought. They had their own "preconceived notions", I thought.

I filed several stories to a Canadian news service. Newspapers across the country could elect to use or ignore my stories. The wire service, along with a modest cheque, sent me clippings to show where the stories had been published. And I noticed something interesting.

At the beginning of my time in the country, many papers picked up my 'conventional' writing. But as the war ended, and I saw things through a deeper and more complex perspective, fewer and fewer papers picked up my more balanced articles. These weren't blindly supporting the whites or blacks, they were simply looking at the issues from a deeper perspective. Editors across the country didn't care, however. The stories didn't meet their "preconceived notions".

Today, Zimbabwe is a basket case and the whites ignored by the media appear to have been correct -- on the surface. But delve into this issue more deeply, and you would not draw such a simplistic conclusion. I think the mess in Zimbabwe is largely because the whites clung to power longer than they should have.

So what does this have to do with construction marketing? Perception is deadly important; and you will not succeed in breaking into a market by offering a 'me to' service. You need to differentiate yourself; and stand out from the crowd. But you also need to know how the crowd thinks-- at least the crowd you are trying to reach. At the same time, going off the deep end is risky -- it might work, but I would take a more incremental approach to change. (No one else may be cold calling businesses to sell commercial construction services; so you would be unique in your approach -- but I'm afraid you would fail and irritate rather than encourage business by trying that; unless you have a truly innovative way of selling yourself.)

So, say you are a general contractor whose business is slipping. What sub-set of services can you offer that would work for you? Perhaps you can offer a maintenance service package to existing clients; or you have proven an experience within a specific sector, and can build out from that.

Note as well that you may not need to change your product or service to achieve great results -- it could just be an exercise in positioning and perspective; in changing your client's mind frame. And, finally, if you are successful at branding, you reach the holy grail of marketing -- clients and potential clients form a positive preconception about you and this 'sticks' even when you don't quite get things right, or they know you little. So, if you want to get the branding right, consider again the Brand Harmony concepts. They work.

Being first

The classic book "Positioning" by Al Ries and Jack Trout should be on your list if you know little about marketing. You can purchase it inexpensively in paperback at your local bookstore.

One of the cornerstones of marketing is you never want to be second (or certainly third, fourth or fifth) the market -- you will almost inevitably lose in "me too" games, even if your product/service is truly better than the competition.

I learned this lesson some years ago when I set out to publish a better local general business newspaper than the existing (and struggling) competitor. So I took my existing construction and real estate news titles, and turned them into sections within the new business publication, produced with much higher technical standards and content than the other guys. I even set out enhanced distribution to create real value for advertisers and readers alike.

It didn't take me too long to discover that I had created a very weak general business newspaper with a relatively strong construction and real estate section. I lacked 'position' -- this spot was owned by the general business publisher -- and nothing short of its failure would allow me to occupy the space (and even that didn't work, because someone in business too close to me for comfort swooped in and snapped up the title with a little creative accounting.)

Eventually, I gave up the ghost -- selling my business (with a couple of, in hindsight, truly major exceptions), to my former competitors for a pittance -- with a modest down payment and series of progress payments that would allow for a year or so's salary equivalent.

When I resumed my business less than a year later after an important (and restful) sabbatical, I set out to build the brands within my niches; and the construction title roared back to life.

Oh yes, what about the exceptions?

The purchaser of my existing business didn't want a title called the OCHBA Impact!, a tiny product for the local home builders' association (now named the Greater Ottawa Home Builders' Association). He also didn't want a small contract I then had with the precursor to the Ottawa Chamber of Commerce. These two little projects barely paid their way, but with a part time salesperson and contract production people, they allowed me to 'stay in business' and have the infrastructure when the purchasers of my business decided they didn't want to continue the modest payments to me and thus voided our non-compete agreement.

The Impact! now remains our longest-standing product; and represents an important area of business expansion potential. It provides a valuable and important connection to the industry.

We had fun with the Chamber of Commerce/Board of Trade publication when non-competition restrictions were voided. Suddenly, we grew the thing from 8 pages to 48 pages; packed with highly profitable ads; especially since we didn't try to circulate the publication to non-members. However, that experience taught me some things about litigation and court fights; topics for another set of stories.

Eventually, I realized that our business could best be focused within a specific niche -- regional construction industry publishing -- and that is where we are today.

So, you are a general contractor, a sub-trade, an architect, engineer, or consultant. You need to find a place where you are 'first', not just better. This isn't as hard to do as you may think. Just consider your strengths, and define your uniqueness, perhaps by geographical or topic speciality, or some special service offering. Focus is good -- the minute you say you can do everything for everyone, you lose. I recommend you not spend too much time thinking about your competition; think instead about your special strengths, and unique offer that will allow you to be first in your clients' minds.

This is generally the most important marketing lesson you can learn. Be first, in your potential clients' minds, be smart, and you'll retain the lead.

See this Wikipedia entry on "positioning".

Re: Posiitioning -- Selling. It's All About Relationships, Right?

Someone at Francis Marketing in Grand Rapids, MI signed up for our newsletter. Good enough. When I checked back to their site, I saw something brilliant -- giving a clear indication of why much well planned and co-ordinated selling effort doesn't really work.

This entry from their newsletter Re: Positioning -- Selling. It's All About Relationships, Right? is worthy of reading. Then reading again.