Words "Construction & Building Technology" surrounded by construction workers, delivery trucks, construction site and BIM image

High pressure to change despite full order books

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For years now, the construction industry has been benefiting from a sustained upswing. However, construction activity is currently weakening noticeably – driven by macroeconomic uncertainties. A backlog of orders, shortage of skilled workers and a reduced willingness to invest are having an effect. The disruptive effects triggered by the course of digitization are also causing turbulences: Should one follow that path? Or is it too late, already?

These issues present the industry with various challenges: For many manufacturers, the shortage of skilled workers makes it necessary to find and adopt modern approaches to pre-assembly and modular construction methods as well as intelligent logistics and service concepts. The increasing price transparency, driven by digitization and consolidation processes in trade, is raising the pressure on margins and makes modern answers in price management necessary. And even though multi-channel management has been a familiar approach in the industry for years, the harmonization of sales and pricing across sales channels and national borders will continue to gain importance, and with it the need to adapt sales strategies to these new developments.

In the construction supply industry, it is becoming increasingly difficult to offer a differentiation using physical products. This means that services are increasingly gaining significance. However, services are seldom part of the manufacturing companies’ DNA, yet great economic potential nearly always lied in developing them. Hence it is absolutely essential for many industry manufacturers to optimize their route-to-market and to firmly embed service concepts in their overarching market strategy.

In Germany, basically two factors are shaping the HVAC market factors: high concentration on the trade side and a trend towards prefabrication. Both result in market-related challenges for the companies in the sector. In addition, there is a new customer journey and increasing (price) transparency: End customers no longer solely rely on the recommendations of their specialist tradesman. Instead, they do their own research, compare prices and influence the purchase decision. High price differentials, which allowed margins to be reached for many years, often turn into major risks.

The increasing automation of buildings supports the sustainable growth of the industry. Opportunities especially arise for companies that focus on the correct target groups when developing their markets, as these are often no longer the same buyers of the past. A systematic examination of how market access is developing and changing is crucial to ensuring that companies do not position themselves outside of the market demands.

Intelligent buildings or, more broadly speaking, intelligent neighborhoods are promising for the future, but nevertheless require a different route-to-market than most companies pursue in practice. They are often not created in the course of traditional planning & tendering processes, but in new approaches such as IPD (integrated project delivery). What still sounds like the distant future today may, in fact, revolutionize the industry soon.

Do it yourself & gardening are absolute on trend. Manufacturers face a high degree of concentration on the retail side, particularly in the DIY market segment. It is thus all the more important to bind craftsmen and DIY enthusiasts to a brand via pull marketing approaches directly and without intermediate stops and to use the value thus created via value pricing and value selling approaches. Services and solution concepts focusing on Smart Gardening, Easy Gardening, City Gardening and sustainability represent future areas with great potential. Many companies in the sector have not yet sufficiently developed these areas.

Decision-makers are concerned with fundamental questions: How will digitization affect the roles and relationships between manufacturers, stationary and online retailers, architects and planners, processors as well as investors and end users? Which role will three-stage trade play in the future? What are the strategic implications? Will platform organizations also turn the construction supply industry upside down?

A few obstacles, lots of opportunities.

A continuous trend towards urbanization can be perceived around the world. With it comes a steadily increasing demand for living space in urban agglomerations. But not only the construction volume is increasing – the demand for climate-friendly and healthy construction materials is also growing.  Manufacturers who expand their product portfolio in that direction and market them across the appropriate channels can look forward to promising opportunities for growth. A precondition: consistently questioning the current market strategy and its orientation on current needs and demands.

Lots of data, little information

The power dynamic between manufacturers and retailers is changing. Customer data collected from smart home devices or on manufacturers’ websites, for example, create new realities: For the first time, many manufacturers know more about their customers than retailers do. And the new knowledge has become indispensable: Target groups and their wishes have become more differentiated than before. Traditional DIY buyers are joined by new end customers who prefer buying products online directly from the manufacturer. This is a promising potential. In practice, however, many companies in construction-related sectors are not yet fully benefiting from this potential.

The path to success lies in a precise knowledge of one’s own customer segments and their needs as well as (digital) marketing measures to address them directly and to convince them of one’s own brand – along all points of contact. These need to be designed in a specific way to offer an optimal user experience for one’s target groups- craftsmen, architects, retailers, end users and investors.

Same goals, new paths.

Companies today have countless data points at their disposal to design their customer journey: Digital marketing and sales channels will become even more important in this regard. The need for digital transformation in sales is driven primarily by customer expectations: they are the crucial drivers.

As a consequence, the digitization of the supply chains of major customers means there is a growing need for new sales skills within your own team. Sales experts need to learn how to master digital channels and tools. Otherwise they risk being marginalized in purchasing processes. In addition, new business models and forms are becoming part of working together: For example, it is important to identify relevant platforms at an early stage where customers and providers can network. These kind of platforms have the potential to completely change market access and customer relations. At the same time, producers are increasingly becoming knowledge partners for craftsmen: They increasingly expect manufacturers to support them in organizing their own business more efficiently and to provide detailed product information, as they face more questions from their end customers at the construction site than previously.

The overall challenge is to identify one’s own potential through intelligent route-to-market concepts in order to find the ideal strategic positioning for one’s own brand and services. New ways of approaching customers and a changed purchasing behavior among B2B decision-makers require a redesign of one’s own sales approach. A modern, data-driven and highly efficient sales organization ensures that companies can secure a valuable market advantage – and maintain it long-term.

Constant margin pressure, growing transparency.

Margin pressure remains high: Product and service quality alone are often no longer sufficient to differentiate from the competition and achieve a high level of customer loyalty. Volatile raw material and logistics costs add to this, thus further underlining the urgency of proactive margin and price management. Concepts are needed to counter the rising competitive pressure and the increasing interchangeability of manufacturers, products and brands.

The pressure is also rising in other areas: The price & conditions systems of manufacturing companies are often based in a time when a high degree of differentiation and a certain lack of pricing transparency was common. However, the increasing pricing transparency is forcing companies to rethink in this area:

The focus on the customer’s benefit (value pricing), automation of transparent pricing processes (dynamic pricing) and the pricing of services separate to the product (service pricing) promise great potential for profit: They represent levers which companies can use to adapt their pricing strategy to the changed market situation and gain competitive advantages over competitors who act more slowly.

Our Construction & Building Technology experts

Our team offers comprehensive methodological and industry expertise to adapt your company’s market strategy, sales and pricing to the new circumstances. We supply tailor-made solutions that result in measurable progress for your company and offer lasting advantages in market development.

Porträtbild unseres Geschäftsführers Dr. Sven Kühlborn
Managing Director & Partner

Dr. Sven Kühlborn

sven.kuehlborn@homburg-partner.com
Tel.: +49 621 1582-0

Porträtbild von Jens Wagener
Principal

Jens Wagener

jens.wagener@homburg-partner.com
Tel.: +49 211 598929-63

Tobias Müller Principal Homburg & Partner Unternehmensberatung
Principal

Tobias Müller

tobias.mueller@homburg-partner.com
Tel.: +49 621 1582-137

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