As the building industry evolves, suppliers and retailers must understand the latest trends to meet customer demands. To this aim, the latest Building Products Customer Guide (BPCG) report provides an in-depth look at how builders, remodelers, and general contractors use different shopping and purchase channels and the common problems they encounter on projects.
Our market research team at The Farnsworth Group surveyed Builders, Remodelers & General Contractors across the United States to compare continuity to shifts in how Pros research, find, select, and purchase building materials and home improvement products.
By understanding these trends highlighted in the BPCG report, manufacturers and suppliers will be better equipped and informed to understand the nuances of different Pro customers in order to inform go-to-market strategies and increase building material sales.
A handful of key purchase drivers have emerged from responses by Builder, Remodeler, and GCs about how they shop for and purchase building products in 2023:
- There is a sense of urgency to sell completed inventory
- Price sensitivity is increasing
- Product availability is still a challenge
- Pros are looking for value over brand
Current Business Conditions Create a Sense of Urgency to Sell Existing Inventory
In general, due to the high risks and financial penalties for missing deadlines, commercial builders are more likely to switch products based on availability to meet their timelines. This creates an opportunity for supplier and product shifts in commercial and multi-family projects.
But, according to the U.S. Census Bureau, both multi-family and residential construction starts are down month over month and year over year as of January 2023, creating a sense of urgency among residential builders to sell existing inventory as well, for a couple of primary reasons:
- Supply of new residential construction remains high, with 9 months worth of new construction supply as of December 2022. Existing home supply is short, at 3 months supply, creating pricing pressure on new construction inventory available for sale. For builders and developers operating in low- and mid-tier new construction, this is a troubling reality. Custom home builders are not feeling the same negative consequences, however. Similarly, remodelers have strong demand from homeowners as home equities remain elevated and homeowner mobility remains low.
- Housing affordability is very low, at 101.2 in December of 2022 according to the National Association of Realtors Housing Affordability Index. For residential builders especially, the smaller pool of home buyers due to increasing interest rates and high home prices means that they need to get projects under construction completed and listed for sale quickly. In order to avoid loss on the sale price of homes, residential builders are racing the clock to complete homes in progress and sell existing inventory before more potential buyers are pushed out of the market by anticipated Federal Reserve rate hikes.
Pros are Becoming Increasingly Price Sensitive
In 2023, pricing will be critical in winning and retaining customers for businesses across all industries. While in 2020 through 2022 Builders and Remodelers knew they had negotiating margin on project costs and sale price of projects, that advantage has shifted on the field.
Builders are operating within a buyer’s market, and remodelers are facing demands from prospects to find ways to decrease overall project costs. Since labor costs remain high as labor availability and access to quality labor remains low, material prices continue to be volatile, and lending rates are increasing, Pros are beginning to reduce material costs where they can.
View Up-To-Date Data on Pro's Current Business Challenges and Causes for Project Delays >>
With increased competition, changing consumer behaviors, and inflation, Pros must analyze their pricing strategies, and that change in buyer behavior passes upstream to necessitate that you, the manufacturer and supplier, also adjust your pricing strategy in order to maintain and gain market share.
According to our study, the percentage of residential and commercial builders, remodelers, and general contractors reporting a significant increase in project costs grew by 50% year-over-year due to rising material prices.
As we’ve been saying since Q3 of 2022, price is the new availability.
One strategy is to refine your "good, better, best" model by de-engineering products to reduce costs while still delivering critical features, articulating value propositions more clearly to justify higher prices, and offering products at various price points through different suppliers. This enables sales reps to take a value-based approach, where-in they showcase how a builder will get exactly what they need, without paying for unnecessary frills when competing for the sale.
Your team may also consider reintroducing existing “good” and “better” SKUs that were able to be taken off the market in 2021 and 2022, but can now create a competitive advantage as Pros are price sensitive and willing to make trade-offs in features and brand in order to reduce costs.
Pricing is indeed the new availability. If you want to keep your current customers and win more market share, you need to examine your pricing strategy for 2023, no matter which audience you are trying to target.
Remodelers Seek Pricing Information Online More Than Builders Do
Remodelers and general contractors are more price sensitive than residential and commercial builders.
69% of remodelers go online for pricing information compared to 51% of commercial and 50% of residential builders.
This is likely due to their need to quickly assess material costs while drafting project bids, especially in the current environment where material costs are fluctuating. Manufacturers and suppliers must ensure that their websites have all the necessary product information, including pricing, in a prominent area to meet the expectations of remodelers.
By neglecting to include pricing information, you drastically increase the odds of losing potential leads and sales to competitors who do offer transparent pricing.
Alternatives to transparent pricing include enhancing your website with a "Get a Quote" form for customers looking to purchase products from local retail stores, or create gated pricing information sheets and gather contact info from prospects for a sales representative to share one-to-one pricing in a timely manner. Doing so can help you drive more sales while gaining valuable leads simultaneously!
Does Product Availability Still Matter?
The BPCG report suggests that the influence of product availability in a Pro’s purchase decision will continue to vary based on product type, project needs, and seasonality.
Out of all surveyed residential remodelers and general contractors, 9% reported experiencing 'very frequent' availability issues. By contrast, 25% of homebuilders reported experiencing ‘very frequent’ availability issues. Even more commercial Pros (31%) reported experiencing ‘very frequent’ availability issues.
Beyond these Pros, an additional 1 in 4 residential and commercial Pros reported experiencing ‘frequent’ availability issues, on average.
Further, here’s what you can expect various buyers to do when a product is unavailable:
Despite existing challenges, building product manufacturers and suppliers can achieve strong, top-line sales deep into 2023 as long as they anticipate changing customer needs and understand their customer base and the evolving housing market.
Expanding partner networks, stocking in-demand products, and proactively forecasting product needs will ensure that customers can access necessary materials, building trust between supplier and customer.
Pros Conduct Research to Varying Degrees Before Making a Purchase
Overall, Pros are looking to strike the right balance between quality and cost, sticking to what they know and taking strategic risks with new options, and all in all seeking to attain the right value exchange as their profit margins are facing market pressures. Enter, product shopping and project research behaviors.
Online and in-store research is equally important for builders and GCs. The amount of research depends on whether the products are low-cost consumables or high-cost durables.
Only 37% of building industry consumers perform online research for low-cost consumables compared to 70% for high-cost durables.
However, more research can lead to confusion, so manufacturers must focus on producing a singular message that addresses core problems and solutions. In categories such as Smart Home Automation, Major Appliances, and Outdoor Living Products & Furniture Pros tend to conduct 3 to 5 searches online and an additional 2 in-store searches before making a purchase. With a potential for 7 or more marketing and sales touch points along the buyer’s journey for these categories, manufacturers have a strong opportunity to educate buyers and incentivize channel partners to win the sale.
Retailers and manufacturers who realize that shoppers don't view the research process as a linear progression but tend to bounce between online and in-store resources will continue to win market share in 2023 and beyond.
To maximize your online presence and in-store success, creating unique content tailored for each platform is essential.
Think outside the box - consider informative video tutorials, amping up efforts to collect positive customer reviews, providing transparent pricing information, enhancing accessibility to certified installers and creating ease of delivery for bulky items.
Digital Marketing Channels Increasingly Influence Pros’ Path to Purchase
An increasing number of builders and contractors are turning to online sources for product information, with 82% of remodelers and general contractors visiting websites such as HomeDepot.com for information, compared to only 74% of residential builders.
Social media and design sites are also becoming popular resources for commercial builders, with 30% of commercial builders using these platforms to find desired product information compared to only 13% of home builders and 5% of general contractors.
Social media platforms like Instagram and Pinterest can boost brand recognition and provide additional opportunities to convert customers who don't regularly use a predetermined set of products.
Pros’ Perceived Risk of Switching Brands Has Decreased, as Has Brand Loyalty
Commercial builders are 2-3 times more likely to try new brands for plumbing fixtures, paint, windows, insulation, drywall, and flooring than are residential builders and remodelers.
Further, younger Pros and larger companies are more likely to try new brands; those under 40 are more inclined to purchase a new brand than those over 40.
Even though both commercial and residential Pros identified availability and cost as motivators for trying a new supplier, price is now the primary factor for builders, remodelers, and contractors when seeking new vendors.
Of the 45% of commercial builders who tried a new supplier, the price was the top reason at 58%, followed by availability at 44%.
Of the 36% of residential builders who tried new suppliers, 66% reported price as their primary consideration, and 60% cited availability. For remodelers and general contractors, 46% stressed price, and 51% noted availability.
As we have studied this question since the 2020 edition of the Building Products Customer Guide, of those who tried a new brand, the vast majority were “extremely satisfied” or at least “somewhat satisfied” and this trend has continued year over year.
We will continue monitoring this trend as price becomes of greater impetus and availability concerns change.
Finally, manufacturers should strive to be trusted partners so customers are confident in the reliability and quality of their products. Brand recognition is still essential for securing strategic channel partnerships and maintaining shelf space during PLRs.
Working to be a trusted partner stretches beyond channel partnerships with retailers, though. Enable marketing and sales teams to foster a partnership mentality directly with Pros. Manufacturers and suppliers may consider offering or refining contractor discount programs to ensure they are easy to understand, simple to track discounts earned, and create value to contractors. By doing so, manufacturers will encourage loyalty among existing customers and to increase market share among “not-yet” customers.
Understand Your Best Next Move
Our team at The Farnsworth Group will provide you with over 30 years of home improvement industry expertise and specialized market research knowledge to ensure you get the valuable insights you need to make data-driven decisions for your brand. Commission market research to understand your best next move.
