Here We Go Again!

Many of us in the building materials business have read this book before. Housing starts and permits plummet, sales drop and it is time to start the belt tightening. Often times this involves position executions in the following order:

1) Training
\r 2) Market Research
\r 3) Marketing Programs (Dealer / Consumer / Builder / Remodeler)
\r 4) Sales Support (Customer Service)
\r 5) Sales Staff
\r 6) Production Staff

Generally you are safe if you happen to be in the following functions, presented in no particular order:

Accounting (If things turn around we need you)
\r Operations Management (If things turn around we need you)
\r Logistics (If things turn around we need you)
\r New Product Development (We are depending on you to turn things around)

So now what? Let\'s play the scenario above out for several months or years and see where practitioners of the above generally end up.

Many company managers believe creating new products will be the savior and allow them to garner a bigger piece of a smaller pie (which is a really good plan in a down market), when in reality the opposite is generally true. Why is this?

Most new product development reverts from the market back to the factory forward. That...if we build it they will come... theory. Market research is expensive and really we can\'t afford it, but the new tooling and line set up may only be $500,000 or more. We are no longer training our reduced sales team to be knowledgeable about and sell the new product, and we have cut marketing and promotional activities, hoping the core people left can get the word out about the new product.

We have devised a self fulfilling downward spiral which will lead to plant closures and a reduction in production staff, all during which we don\'t monitor our customer satisfaction to check and recheck how are moves are being perceived by the market.

Consider for a moment if a company took a far different approach. As competitors cut their training, market research and customer sales and support teams, a company is there ready to prey on the disenchanted customers left behind. Many customers depend on well created sell through marketing programs to help them sell to their customers. If suddenly their main supplier deletes these programs, and they feel it will affect their ability to sell, they begin looking to find new suppliers. In fact, they are easy prey for competitors, especially those offering more.

If only 1,000,000 units as opposed to 2,000,000 units the year before are going to be sold, would one rather sell 500,000 units or the year before 750,000 units? Clearly one would rather have the market share than 1/3; especially when the market comes back.

When a pie gets smaller it gets smaller by the same radius all around. So should your company. Be ready for the next expansion or it could put you under. Certainly it will cost your firm future market share.

John Cashmore is president of Market Resource Associates, Inc. A Minneapolis, Minnesota based full service market research and marketing consultancy specializing in the building materials, kitchen and bath and lawn and garden industries. john.cashmore@mraonline.com 800-795-3056 from the US and Canada.

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