The last 12 months for the construction industry have been challenging. Companies have collectively moved from concerns around finding enough projects to pursue, to chasing too many projects in order to capture one or two. While price pressures abound in many markets, not all have been as significantly impacted as construction. Depending on market segment, positioning and capability, many organizations have been affected negatively, while others have weathered the recessionary storm very well. A few have even grown and become stronger. This market has generated both winners and losers.

The bottom line for all firms is the need for new ideas from their get-work activities. The winners want to protect their market position, and the losers want to diversify and expand into new areas where success is more of a possibility.

Business Development Strategy

The recession brought on a strategic reset in the industry. Firms that traditionally negotiated found themselves competing head-on for the first time in many years. Others that traditionally enjoyed a market of limited competition found companies lining up for an opportunity to win work.

Growing Markets

Health care, power, alternative energy and, in some cases, higher education, have each demonstrated market reliance for the commercial sector. Health care will continue to expand into more renovations, clinics and smaller projects as many new hospitals have already been built. The current market is exhibiting a shift in work mix from new to improvements. Owners are expanding and upgrading current facilities rather than investing in or securing funding for new projects. Hospitals, offices and educational facilities are strong examples. For the general contractor, it is an opportunity to establish relationships with new customers by demonstrating performance on a smaller job and positioning for the next cycle. For the subcontractor, it is an opportunity to build direct relationships.

Residential

The residential market remains challenged by an oversupply of single-family homes, foreclosures and financing, encouraging residential contractors to stay engaged in the commercial market. The residential market, with its gradual improvement, will slowly entice the traditional residential contractors back into this market. Expect many to keep a foothold in the commercial market as a diversification strategy.

Federal

Federal markets, traditionally served by a limited field of competitors, have become extremely competitive. Several of the large federal owners have staffs that are challenged to stay on top of all the proposal responses. Many contractors are shifting their market efforts into the federal space. A word of caution is needed. The anticipated federal budgets for 2012 will be challenged by the slow economic recovery and overall level of debt in the country. Expect the federal market to cool again in 2012 and into 2013.

Need for New Answers 

Contractors are responding with strategies to help them win more work with their streamlined staffs. Operations, estimating, preconstruction and even select field leaders find themselves engaged in helping to support the get-work efforts. Companies are working hard to find the right strategies to stay competitive today and ready to take advantage of changing markets in the future.

The second half of 2010 found contractors waking up to the need to make strategic investments in order to be successful in the coming market. After downsizing for survival, industry firms are looking at their strategies, engaging their staff to find new answers, getting close to customers and building plans to win back market share and backlog. Simply put, organizations cannot save their way to prosperity; they will have to invest to win in the 2011 and 2012 marketplace.

Fact-Based Market Research

Market research is becoming a staple when creating business development strategy to ensure that limited resources are targeting the best opportunities. Leading firms are relying more on primary market research today to find opportunities and to mitigate the risk of bad decisions, such as wrong market, customer profile, geography, culture and/or missed windows of opportunity.

Customer Engagement

Reaching out to previous customers and contacts remains a top strategy for winning work. Companies are getting many feet on the street to help reengage customers and rekindle past relationships. The competition bombards a company’s existing customers with aggressive offers. Organizations must build strategies to grow customer loyalty and make it difficult for competitors to gain a foothold.

Researching customer perceptions in the context of how they view their competitive alternatives is essential. Today, many customers have the biggest and best competition challenging each other on projects that, three years ago, they would not have pursued. Organizations should use customer information to create actionable strategies to build genuine relationships and secure work. This information helps to identify and prioritize potential customers that fit one’s target profile. 

Market Environment

Gathering information on the market helps challenge existing assumptions and find new answers. Companies should challenge their thinking and strategies with key questions about sizing, growth, drivers, funding and competition.

Sizing

• Will the volume of the market justify theinvestment?

Growth

• Does incremental growth in targeted market segments support growth objectives?
• Conversely, are you investing in a declining market?
• Are you planning to capture volume in an expanding market, or will you need to fight others to win share in a shrinking or stagnant market?

Drivers

• What key trends and drivers will shape the future market (economics, technology, regulation, labor, consolidation …)?
• What key trends and drivers will affect the existing market?
• How do you best position your firm to take advantage of drivers working in your favor?
• How do you position the firm to minimize drivers working against you?

Funding

• Nationally, about 15% of planned projects are experiencing delays and another 8% are being canceled largely due to unding issues. What can you do to protect your company?

Changes in funding mechanisms

• Bond issues are more difficult to pass; tax revenues are down; 48 of 50 states are running deficits; improvements in state/federal revenues will lag the general economy by a 12- to 18-month collection cycle. What opportunities and threats does this create for your organization?

Competition

• Who are your new competitors?
• What can you do to position against them? 

Changing buyer/customer perceptions/preference

Commoditizing around price has been one of the dramatic current market shifts. It is difficult for market leaders to maintain an advantage over unsophisticated competitors who are focused on buying work. Markets are shifting toward hard bid and away from negotiated work. Project owners hear stories of amazing deals their colleagues and competitors are getting. Many have been tempted to test the waters by using a broader pool of invited bids, or hard bids.

Customers are questioning whether historic relationships still provide fair value in the current market. Contractors and  customers are citing prices 5% to 20% below engineering estimates with hard bids leading the way. Irrational pricing is not a strategy, but it is affecting both equilibrium and expectations in the market. The low prices are due to aggressive pricing, irrational pricing, lack of knowledge within competitors that are reaching into new markets and, in some cases, old estimates that were developed during a sellers’ market.

Customers are starting to learn lessons of taking the low-price contractors, and this should continue into 2011. Primary results include poor quality, change orders and project delays. Struggling to position themselves on value, subcontractors are working around general contractors and building relationships directly with end owners. For one progressive specialty contractor, this has meant positioning itself to manage other trades on-site, where the scope of work is interrelated and directly affecting its own labor efficiency. A “general contractor light” approach is adding real value to the end owner.

Social marketing: Buzz versus reality

The buzz is that everyone is using social media. Companies from all industries with high social media activity averaged an 18% increase in revenue last year, according to the American Marketing Association. The construction industry as a whole has been slow to use social media. However, plenty of firms have started to embrace it and gain success from its use. Architects and engineers have been quicker to adapt and utilize social media than contractors. However, a large number of project owners are already utilizing social media, making it imperative that contractors stay ahead of the curve by also adapting to some forms of social media in their strategic marketing plans.

Uses and applications

Popular types of social media include blogs,
Twitter, Facebook and LinkedIn.

• Blogs offer direct feedback and discussion. They provide timelier sharing of information than the monthly, quarterly or annual approach of formal marketing communications of the past.
• Twitter allows you to become a thought leader in your area of expertise. Constant, quick (140 characters maximum), hard-hitting information can be sent to your followers.
• Facebook is a social networking website that boasts more than 500 million active users and is growing every day. For some companies, it is the perfect platform for communicating to their customers, especially those offering trade products or materials. Businesses can provide instant announcements on new products, embedded videos highlighting services and a place for customers to ask questions and get answers from the company and fellow peers.
• LinkedIn is also a social networking site that is business-oriented and used mainly for professional networking. Professional groups are found here as well as individual groups based on individual interests and business sectors. Check out LinkedIn to join the discussion about Lean, LEED and other industry practices.

 In order to manage social media, companies should make use of the following tools:

• Analytics measure the success of marketing initiatives and their social media activities.
• Outbound feeds include RSS and e-mail feeds for subscription. Weblogs, news-related sites and other online publishers syndicate their content as an RSS feed available to everyone. Users stay up-to-date on sites without having to visit them, allowing companies to keep their clients easily informed on a real-time basis.

Social media offers inexpensive, yet effective, marketing tools that provide excellent new ways to communicate with customers and prospects.Social media helps build and maintain strong, loyal and long-term client relationships.

Technology

Communication is the heart of good business development efforts, internally and externally. Technology plays a key role in leveraging abilities to touch customers, building relationships with targeted clients and rallying the troops internally to meet customer expectations. Technology for business development is in a period of great flux. Technology applications that affect project communications, such as BIM, 3D Modeling, etc., are changing the interactions among customers and construction teams.

Technology is a potential point of differentiation. The challenge is that much of technology is being absorbed into normal practices. For example, the knowledge and use of BIM to highlight capabilities in conceptual estimating and value engineering delivers real value to customers. As time slips into the future, BIM is likely to be a standard tool incorporated into the majority of projects. It appears to be going the way of computerized scheduling, computers on-site, etc. It will simply be what good contractors do to manage their jobs efficiently and effectively. In that future, technology will be an  enabler, not a stand-alone point of differentiation.

Project Communications Tools: Project specific tools are tangible examples of how contractors provide value to customers. Real-time access to drawings, documentation, minutes and punch lists increases collaboration and accuracy in enhancing the overall construction experience, helping to capture cost savings and save management time on projects.

Marketing Communications: The use of technology to communicate one’s value proposition is a simple way to demonstrate fresh thinking and innovation. Companies are becoming creative using technology to reduce the reliance on brochures and flat presentations.

Bringing the Experience to Life: Customer testimonials are a strong selling message to potential customers. Why simply include testimonials in writing? Live Web feeds or electronic imaging allows past customers to help sell a company. Letting projects speak for themselves by creating virtual walk-throughs that can be shared in a project presentation helps transport the selection team to the jobsite to experience the quality and feel of one’s construction capability.

Client Relationship Management (CRM): From simple to the complex, CRMs are providing capabilities to capture customer intelligence, organize it and offer it back in a form helpful to contractors and their clients. CRM tools help streamline customer service and meet the individual needs of customers. Expect continued growth in sophistication around these tools as they continue to evolve away from simple databases into complex, two-way communications devices.

The New Superstars

The leaders of business development have always come from varied backgrounds, and new  superstars are emerging. Our industry will always need people who are good at forging relationships with new contacts and companies.

Technical people are the new superstars. Customers want to talk with people with specific skills, such as putting projects together, building the work, etc. Pre-construction and project managers are joining the business development ranks in droves. They are the new face of business development.  Braced with the support of the more traditional relationship person, these new resources are forging deeper relationships with existing customers, engaging with new customers faster and bringing technical skills into the work-acquisition process.

If customers are king, as the old saying goes, then a firm’s people need to be the royalty. They need to be the people that consistently ensure the customer is delighted and keeps coming back to the organization for future projects. This requires a change in culture in many industry firms. If the culture is
customer-focused, the chance of retaining that customer for life increases significantly. The willingness to engage with customers as well as the skills, processes and procedures to deliver on promises, is at the heart of the cultural shift shaking the industry. It is no longer low priority to be involved in sales. Every preconstruction manager, estimator, project manager, superintendent and foreman engaged in keeping customers is key to combating many of the challenges experienced in winning work.

Metrics and Measurements

How does a company know when it is investing too much or too little in marketing, sales or customer service? The question of measurements, both leading and lagging indicators, becomes strategic for contractors of all sizes.

Stylized measurements and metrics form the heart of a business development dashboard. These metrics need to capture the real-time results of the full range of one’s business development efforts (marketing, sales and customer service), while setting performance standards for the team. Measurements might include customer contacts, results achieved, new market development, etc. They might also include hit rates, number of new customer contacts and the amount of revenue generated from past customers. Hit rates alone tell very little about one’s effectiveness of winning work, describing only a portion of the real story. Link measurements to strategy and the results needed to drive the company’s vision of the future.

Firms should keep their eyes on the horizon, watching for signs of a changing construction market.  They should be positioned to take advantage of market changes six to nine months before they become a reality.

What’s Next?

If a company is thinking of relying on the old means of winning work, then it is time to shape up and find new answers. Now is the time to engage the whole organization in finding and keeping customers. Dig into the facts and create a get-work machine that helps win the right work today with the right  customers. Simply chasing more work is not the right answer. It adds or retains too much cost with too few results.

Firms should keep their eyes on the horizon, watching for signs of a changing construction market. They should be positioned to take advantage of market changes six to nine months before they become a reality. But companies must also watch their backsides. Competitors are looking for new customers and good work opportunities too. A company should ensure it is out in front, talking to customers and telling them why it is the right choice, even in these challenging pricing times. It must show its customers that the value that they get far exceeds what the pack of competitors knocking at their door can provide.

Get ready to take advantage of the coming market. Stay focused on being in front of current and past customers and keep those relationships alive. Customers are looking for new answers too. Get creative and come up with solutions that help you both to win.

Written by Cynthia Paul, Randy Giggard, Steve Boughton and Ryan Howsam