Marketing to Construction

The recent slowdown in residential construction-specifically new housing starts-has garnered a lot of press and has been seen as a key harbinger of a weak economy as 2006 comes to a close. However, some experts say that the housing slide of the past year is nothing to be concerned about.

Although the annual start rate for 2006 is projected to have decreased by almost a half a million from 2005, it still marks the fifth best year ever for residential construction. It has been predicted that $622.00 billion will be spent on residential construction in 2006, down from $630.70 billion in 2005. Expectations for 2007 include a considerable drop to $602.00 billion in spending, but also a quick rebound in 2008 to $626.00 billion. Experts agree that the market should come back to trend in mid- to late 2008.

However, the residential market represents just a fraction of the overall construction industry. Both nonresidential building and public works-including such projects as roads and sewage systems-are expected to increase significantly in 2007 and beyond. Spending in nonresidential construction-including offices, schools and commercial space-is expected to rise from $350.50 billion in 2005 to $384.90 billion in 2006 and $419.90 billion in 2007. Similarly, public works construction project expenditures are projected to increase from $136.50 billion in 2005 to $149.10 billion in 2006 and $159.80 billion in 2007.

Despite the slip in the residential sector, insiders forecast that construction industry spending will continue to show steady growth, moving from $1.110 trillion total construction in 2005 to $1.160 trillion in 2006 and $1.180 trillion in 2007.

Trends to watch

Because of this optimism about the construction industry's growth, there are many opportunities for marketers and vendors to take advantage of it. Three major trends that should have long-term traction are:

Green construction. Being environmentally friendly and energy conscious is becoming a serious part of the construction process. It is being required to some degree in all government building and within five years will be the standard across the industry. Incentives to go green will push the process. Companies that stayed away from the trend a couple of years ago are now looking for ways to go green.

Building information management (BIM). With BIM, all parties-owner, architect, engineer, contractor, subcontractor and suppliers-sit down at the beginning of a construction project to optimize cost and process controls. Jobs that have made use of BIM have significantly reduced costs and construction time. A totally integrated BIM environment results in the elimination of bidding that translates to a savings for the contractor, eliminates shop drawings (thereby speeding up the process and improving profit), prevents cost escalation, eliminates punch lists and finger pointing, minimizes errors and omissions, and facilitates online payment of requisitions.

State and local public works projects. Due to increased tax revenue at the state and local levels, there has been an increase in building and road construction at these levels. In some regions, the local governments have grown tired of waiting for federal [money] and have tackled projects on their own, some with creative financing.

Best marketing practices

Best practices for companies that market to the construction audience appear to be changing significantly. The industry is dealing with factors such as increased demand, major increases in the costs of materials and labor, the impact of technology on the planning and building process, and the stability in the financial markets. These factors greatly affect savvy vendors' marketing tactics.

For instance, many marketers still have blue-collar perceptions of construction workers and find it hard to believe that one of the best places to reach them is on the Web. Contractors and their labor use the Internet every day in the course of their jobs to do research, check on deliveries, verify plans and schedules, and communicate with each other. In some trade categories, the incidence of Internet usage during work hours is an astounding 100% and, on average, construction people use the Internet more frequently for business than they do personally.

This need to be connected on the job means the construction industry will be one of the most lucrative markets for mobile b-to-b marketing once it comes into its own. Motorola is one major company that recognizes this reality and is accelerating development of mobility products that will service institutional, commercial and governmental construction areas.

Tried-and-true tactics

Regardless of the tactics used, online or off, construction audiences prefer to invest in tried-and-true products and services rather than the latest ones, regardless of the benefits touted. Innovative products-highly valued in other markets-are eschewed in favor of products that ‘work like they always do.’ Even great and well-respected brands have trouble launching products that are deemed ‘too new.’

To get over this sizable hurdle, marketers need to get products into the hands of end users. Demonstrations, free trials and sampling are more important than ever. Construction audiences need to use the equipment and services to accept, trust and, ultimately, buy them.

Public relations and viral marketing add an overlay of trust and credibility to any marketing effort and are extremely effective when targeting construction industry decision-makers. The two disciplines used together dispel any concerns about lack of tenure as a brand or capabilities of newer products, and let your happy customers do the marketing for you.