Happy New Year !
This post marks our 1 Year Anniversary of this blog. We have been averaging over 100 hits per month which is great because of the specificity of this blog geared towards this niche industry of manufacturers.
Over the past year I have gotten a lot of compliments on this blog and one of our articles were published in Surface & Panel Magazine. The article was about selling 3D Laminate Thermofoils for high end Kitchens. In 2008 I was also offered to be a guest speaker at the Decorative Surfacing seminar in Austria. Unfortunately I had to pass on this due to a conflicting schedule.
For this post I would like to write about how your customers are changing. You can feel it right? I'd like to examine deeper what opportunities may arise as a result of the economic challenges we face.
Factor 1: Poor economies force us to increase our customer base in order to maintain revenue
Factor 2: Poor economies change the motivations for purchasing by the end user
Factor 3: When companies go out of business you can pick up their clients by taking on their colors.
Factor 1: We have all witnessed the building slowing down for a two straight years. Certainly for it to pick up to the previous levels it would stand to reason that it would also take a few years to rebound. Should we wait for this rebound or should we reposition ourselves for the new and existing market opportunities?
Several years ago it was so easy to obtain new business that many door companies had few sales people and were able to take orders rather than chase orders. If a customer was too difficult you could price them out to go away or just not return their calls. You can bet that some of the customers you inadvertently chased away were very good potentials had you been able and willing to handle them differently. Now that the market has declined you probably have found yourself calling more potentials. If you or your sales people are succeeding you may actually find that your client list is expanding even though your sales revenue is continuing to decline. Is this a bad thing?
What is happening is that you are being forced to look at business you would normally turn away. Lets look at the cons... First you be even more busy, have more stress on customer service, more sampling and more hidden costs of doing business. Doesn't sound too good.... But on the bright side, your company is now making an investment in a new client base. Could one of these small accounts become your number one account in five years? Its possible and I've seen it happen.
Yes in a down economy you should be increasing your client list, increasing your colors (if you have the capital) and making the investment towards the future.
Factor 2: Poor economies change the motivations for purchasing by the end user. Your customer will tell you that price is what matters now. But they're only half right, please let me explain.
If you produce components for a wide variety of company types you will notice some go out of business, some remain the same and others will order but much less. Please don't jump to conclusions that the market alone will determine your fate. Put the thought into your customer's new and changing needs.
Lets assume that you have a closet customer called ABC Closets. Two years ago a lot of his or her business was driven by new home sales. ABC Closets was either working with the builder, a designer or a home owner to install a new closet into that new home. When they came to that closet company they selected from one of the 5 or 10 colors available and had it installed into their new home. With all the color decisions and budget being spent throughout the home the decision was made in the most efficient manner possible. Today however, the atmosphere of the buyer has changed. The type of person deciding to remodel a closet today is more likely to be doing so because they have decided NOT to move into a bigger home. This new consumer will have more time to decide and will put more focus on the color choice. This new consumer is rewarding themselves with a new swimming pool, a closet or other interior furnishings rather than moving up into a larger or more custom home. So how does this change the buying factor?
It is my estimation that you will have two types of buyers increase their size demographic in the current market condition. There will be an increasing divide in to "Value Buyers" or "Status Buyers" as it relates to ABC Closet type business.
A. Value Buyers will be ones looking for a deal. I'll call this consumer Bargain Betty. Certainly , Betty figures that if ABC Closets is hurting for business she should be able to get a good deal. And we both know that Betty is right. She will be OK with Hard Rock Maple, White or Summer Flame as long as she can get a good deal. ABC Closets will react to Betty and will give her the best price they have because they need the work. This will in turn make ABC Closets look much harder at their door buying to squeeze their vendors for their profit. This will send the message to the door manufacturers that price matters! In the case of Bargain Betty Value Buyer, the price of the market standard doors will continue to drop in 09'.
B. Status Buyers are a second type of customer that will emerge in 2009. Status buyers have always existing however there will be a new status buyer demographic emerge this year. I'll call this status buyer "Jane" for the purpose of this story. Both Jane and her husband have been employed in a secure company for 15 years and they have always dreamed of buying a larger home. But what if Jane or her husband gets layed off from work? Certainly taking on a larger mortgage would not be a smart move in today's economy. Feeling trapped in their current home they will look to make it better and improved. What better way than to increase your space than to invest into a closet. Jane will go to ABC Closets and look for a closet system that is truly unique with a color that is rich, warm and special. Jane will feel that she deserves something new or special because she is sacrificing the upgraded house. Jane is willing to pay more but will expect something special. For that reason, a new market will emerge in 2009 whereby new colors and high end looks will flourish.
Factor 3: When companies go out of business you can pick up their clients by taking on their colors. In one specific market I noticed that a company went out of business but nobody approached the owner to buy his customer list or to work out a deal. In difficult markets its the ideal time to take over your competitors business. This new opportunity will require you to increase a few colors that your competitor had to service those old clients. You may even be able to buy his tooling.
In this post I have examined the fictitious company ABC Closets needs as they relate to Bargain Betty the Value Buyer and Status Buyer Jane . Both customers will change the nature of the market and it is important to see the market from a macro level rather than only at a micro level. We could make similar observations to the Kitchen or Store Fixture markets as well. I may write another article specifically catered to the changing needs in those markets later. But one thing is for certain, the market you knew is gone and you can either wait for it to return or react to the market that is given to you.
For 2009, DACKOR will be increasing its color offering and expanding our stock. We hope you'll join us in making both Bargain Betty and Status Jane happy so we can keep ABC Closets in business.
