How to market to construction

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Complex, ever-changing industry requires marketers to prove cost, time benefits

To the casual observer, the $915.3 billion U.S. construction industry looks to be booming. After all, low interest rates have driven up the demand for new home construction and home improvements, and there doesn't seem to be any lack of orange barrels on our highways. Both these observations are indeed true, but they paint only a fraction of the overall picture.

Overall, the industry is expected to grow in spending by 7.0% to $979.3 billion this year and 4.2% to $1.02 trillion in 2005, said Michael Catalonello, senior VP-chief sales officer for Reed Business Information.

But, he said, the construction industry is actually three separate markets that run in opposite cycles, making the industry complex.

New home construction and residential improvements comprise one market. Census data show that new residential construction spending totaled $351.6 billion in 2003, an increase of 15.5% over 2002. Spending is expected to continue its climb by a projected 13.7% to $399.6 billion this year, according to projections from RBI's September 2004 "Reed Construction Forecast Monthly" report. However, in 2005, RBI forecasts new residential spending to drop 3.8% to $384.4 billion.

The second market is nonresidential or commercial construction. Though not hurting, this market is running a course counter to residential. It spent $270.8 billion in 2003, a slight decrease of 1.5% from the previous year. But RBI forecasts it will grow 4.0% this year to $281.8 billion and another 12.6% to $317 billion in 2005.

The third market is heavy engineering, or nonbuilding construction. Spending last year was down 5.3% to $162.1 billion, but is trending upward, with a 4.4% projected increase to $169.3 billion in 2004 and a 6.8% increase to $180.8 billion next year.

Despite their inherent differences, all three markets face a serious crisis moving forward, said John Favalo, managing partner in the Syracuse, N.Y., office of marketing communications agency Eric Mower & Associates, including a shortage of labor and raw materials.

"Because demand has been so high on the residential side, it has really hit new home builders hard," Favalo said. "They're having a difficult time getting such things as wood, steel and concrete for their projects."

One way for builders to deal with a labor shortage is to reduce the amount of time on a work site, Favalo said. "It's no wonder why there's so much research and development activity going on to create new products-for example, spools of wire that pull easier and faster-and services that reduce the amount of construction labor needed."

Additionally, Favalo said, builders are constantly on the lookout for any product and service that: cuts costs, such as office software that keeps close track of project schedules; improves safety, for instance, protective gear that minimizes worker injury or reduces liability; or adds value for the buyer, such as premium material finishes.

Marketers that have something new or novel designed for the construction industry shouldn't be afraid to approach even the largest company, said Gary Rosenfield, VP-professional markets for Timberlake Cabinet Co.

"Product decision-making, even with national firms, usually rests on a regional or even project level," Rosenfield said. "So you don't have to be ready to market something on an enormous scale to get your foot in the door."

Marketers with commodity items, however, should be prepared for an uphill battle, Favalo said. "You'll need to be aggressive, because it took a long time for a great idea-and now industry staple-like the magnetic tip screwdriver to be accepted by this group." M

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