The Future of Electrical Sales to Production Builders?
Recently we spoke to a few purchasing people from large builders (production types like Ryan, Pulte, Centex, Toll). While they are suffering, all are doing some building. The goal of our discussion was to better understand their purchasing decision drivers as it relates to electrical products.
Their input was interesting, and disconcerting.
Yes they are focused on cost, seeking the lowest possible installed cost from their contractors. Most prefer a “turnkey” solution from their contractor rather than purchasing materials from a distributor and labor from a contractor (liability and call-back concerns).
The part that was disconcerting is their focus on price and quality. All admitted that they are brand-focused, albeit only for brands that have preference to potential homeowners!
Essentially they said, “If it goes behind the walls, I don’t care about the brand. I want ‘acceptable’ quality products at the lowest costs. If the brand helps me sell a house because the consumer is aware of it, I want that brand.”
What does this mean for electrical distributors and manufacturers?
If you are a manufacturer, you need brand preference at either the contractor (if your products go “behind the walls”) or at the architect/consumer if your product has some aesthetic benefits.
If you are a distributor, you should identify ways to have the lowest price (or packaged price) for products that don’t offer much value to the builder. This could involve reviewing your price matrix for the preferred contractor, considering Tier 2 or Tier 3 suppliers for these products (or unbranded products), or, depending upon volume commitments, seek SPAs from your manufacturer.
From a marketing perspective, distributors can also consider customized services or take a page from the building supply industry and consider contractor and builder incentives/rebates.
Custom builders represent different opportunities and challenges, but since they don’t represent comparable volume benefits, your strategies would be somewhat different.
Creativity in pricing, purchasing, sales strategizing, supply chain logistics and joint marketing are needed to prosper in the challenging residential market. Manufacturer success will depend upon partnering with distributors; otherwise success may be sans profit.
What’s happening in your market?