If you’ve managed to keep the doors to your kitchen and bath firm open, then you will likely be one of the survivors of the Great Recession. It is also likely that you have had to make some difficult decisions over the past year, lost some good people and had to tighten your belt personally.
By late 2009, there were accumulating signs that the economy had turned a corner and that prospects for 2010 were much improved from the outlook a year ago. Most of us have expended a great deal of time and energy dealing with survival and not spent much time planning for the future. It’s time for us to take a look ahead and develop a plan to take advantage of the changed circumstances.
This month we will take a look at markets, our organizations and customer expectations as they relate to the “reset” economy.
The advertising industry would have us believe that when markets are shrinking and sales are falling, it is then that we should step up our spending on advertising. While this makes a certain amount of sense, few of us are in a position to increase spending of any kind when revenues may be falling by 30-50%. One look at the fate of local newspapers and the thickness of magazines will confirm that there are few businesses that have been able to adopt this strategy of increased marketing expenditures in a down market.
One of the significant changes that we are witnessing is the increased awareness of, and interest in, “green” products, which is being driven by both climate concerns and a much greater sense of the necessity for conservation. The old “bigger is better” approach to product promotion no longer fits with this new awareness.
The current watchword in the marketplace is value. We have seen this phenomenon most strikingly in the automobile business over the last couple of decades, as consumers have gravitated toward smaller, more fuel-efficient cars and shunned the gas hogs that once were prized. The smaller cars were not necessarily less expensive, and were often loaded with extra features and equipment that buyers were happy to pay for. The reason these products sold was that the buyers perceived a value in the entire package and were not just buying “price.”
Value marketing in the remodeling business should focus on the fact that updating a home allows owners to remain where they are while being able to enjoy current amenities without having to move or build. The process of updating can include many of the desired energy-saving features (insulation, sealing, etc.) and efficient appliances. Additionally, the significant costs associated with moving to a new home are avoided.
In dealing with 2009, it’s likely that you have had to consolidate positions and responsibilities within your organization. When business is slow and times are tight, the members of your team have likely been working at their capacity in order to help the company survive. As things begin to turn around, you will need to be able to strike the correct balance between supplementing your staff and keeping your staff motivated and efficient. Beware of a false start in the economy; make sure the turnaround is real and don’t get ahead of the actual market conditions.
Begin the re-entry process by restoring reduced-time employees to full time and restoring pay to those who have been willing to accept reduced wages. Adding staff before you have taken this step will probably result in declining morale and decreased productivity from those who will feel that their sacrifices have not been appreciated.
When you’re ready to add staff, look over your organization to see if you have members who have taken on responsibilities that they are overqualified for, just to help the company through. Plan any additions to staff so as not to trap current members in positions that they will resent going forward.
Look at where you expect your business to go as the economy returns to a more normal situation. Most of us let the booming housing market carry us into areas that seemed to provide the least resistance and the most profitability.
Before you start rebuilding your organization, map out a plan of what kinds of businesses you think will be the most beneficial to you and your organization in the future. Once you have made those decisions, you can project an organization chart that will best suit that market.
Finally, as the economy starts to move forward, you will be faced with a dilemma. On the one hand, you don’t want to get ahead of the economic growth with your hiring and, on the other, at the early stages of recovery, the most talented people will be available to add to your staff.
Over the past year and a half, most of the population has learned that their investments, particularly their homes, do not always go up in value. Many homeowners bet that home values only went up when they borrowed 100%, or more, of their home’s equity. They have since watched a major asset turn into a liability. For this reason, our customers will be much more careful about spending money on their homes than we were all used to.
There is still a large portion of the population made up of those who have owned their homes for some time, or made substantial down payments when they purchased them. Those who have owned their homes for some time are going to be the most likely customer base for remodelers, both because of the equity they enjoy in these homes and the fact that the homes, appliances and fixtures are wearing out and dated. Expect this group of customers to be extremely careful about receiving value for any investment that they make in their homes.
While there will probably always be a group of remodeling customers who are in a position to spend any amount for the things they want, most of our clients are likely not in this position right now. Therefore, we will need to listen carefully to what is important to them (hint: Have a note pad and take notes when they talk). Be prepared to explain why a certain product or design solution is going to be of more value to them and will enhance the value of their most significant asset.