Added Value from Lumberyards and Manufacturers

Taking a lunch-hour trip to a local hardware store for a tube of caulk isn’t uncommon for many remodelers. But how much does that errand really cost?

“A lot of remodeling contractors will run out to pick up a smattering of materials they need for the afternoon and not think anything of it,” says Mike Butts, president of LBM Solutions. “That’s all well and good, but that remodeler needs to realize how much more efficient he could be if someone brought that material to him. He could stay on the jobsite and get something done or even spend his lunch hour making a sales call instead of picking up materials. A good lumber dealer can have that material there for him when he gets back.”

As a sales and training consultant for lumber and building materials (LBM) dealers, Butts has watched new-construction business wane and says he sees a trend toward lumberyards looking to remodeling contractors for new business. The LBM dealers that are succeeding with remodelers are the ones that capitalize on value-added services and ensure that they are offering products and services tailored to remodelers. “A number of dealers are beginning to recognize that a remodeling contractor needs the same types of products as a builder but in smaller quantities and faster,” Butts says. “He only needs half a unit of OSB, as opposed to three units, and he doesn’t need that material in a week, he needs it this afternoon at 2 o’clock. Remodelers that build relationships with a good lumber dealer will have a lot of great services to take advantage of.”

Taking Advantage of “Value-added”

Contractor Express, in Oceanside, N.Y., is one lumberyard that services remodelers exclusively. Vice president Greg Failla says that the company posted a modest single-digit sales gain in 2009 despite a lousy economy and compared to double-digit declines seen by other lumberyards in the area. “We think we stayed up because of the services we offer,” Failla says. Among other things, those services include product deliveries to jobsites (often within an hour), full-service design capabilities, educational seminars, a 4,000-square-foot product showroom, online estimating tools and account tracking, and a contractor “courtesy office” that remodelers can use for client meetings or simply to send a fax if they need to.

“We’ve always been competitively priced in our market, but what we try to point out to our customers is that price isn’t just about the price of a product,” Failla says. “By using all the tools that a good supplier has in their arsenal, the remodeler can get a lot more value out of that relationship and can use the education they gain from that supplier as a way to differentiate themselves.”

Some offerings, such as design services, can be incredibly valuable to remodelers in the current economic climate, particularly when many companies have had to cut design staff in order to stay afloat. “Remodelers can take advantage of the design services any time they want, just by calling up one of our designers and saying, ‘I’m sending the McGillicuttys over at 1 o’clock to go through product selection with you,’” Failla says. “Our designers will let the remodeler know what products were selected, so we keep them in the loop but save them time that they can spend on other sales.”

The Price Is Tight

Though Failla notes that Contractor Express’s sales were up last year, he says that the company did see a one-point loss in margin. While value-added services do help contractors get the most out of every dollar they spend on materials, dealers and manufacturers recognize that sometimes price is still the biggest obstacle. “We did have to lower our prices a little in order to keep some sales,” Failla says. “If we totally lowered our prices, we wouldn’t be able to offer all of our services, but we understand that contractors are in a bind and they need to push back on us when they need lower prices.”

Former vice president of remodeling firm Airoom, Seymour Turner is now president of Cubit Partners, a consultant to building product manufacturers. Turner says that remodelers purchasing large volumes of material may be able to finagle discount pricing, but most shouldn’t expect that. “Most remodelers aren’t going to be buying on a scale where there’s going to be a lot of movement on price,” Turner says, “but you may be able to adjust payment terms to your advantage or negotiate elimination of fuel surcharges or other fees.”

However, there are some discount opportunities available for remodelers. For example, CertainTeed has recently brought back its “Show Me the Money” campaign, in which remodelers can get rebates for purchasing certain types of products. “We used this program a couple of years ago, and we’re bringing it back now because we know how much that extra discount can mean to a remodeler,” says Judi Ann Moore, director of fiber-cement business for CertainTeed.

Beyond rebate programs, remodelers should check on other value-driven pricing options from the manufacturers they work with. One example is in cabinetry upgrades. “A lot of manufacturers will do custom changes to a stock product for a certain fee,” Turner says. “By taking advantage of that, you’ve allowed yourself the flexibility to make any change to the box at no extra charge. Instead of $50 for each change, it’s $50 for all changes.” Windows and millwork are other such product categories in which manufacturers are making it easier for remodelers to get the ideal product for their job at a value-driven price.

Turner adds that becoming part of a manufacturer’s preferred contractor program can help remodelers save money elsewhere in their businesses. “Many manufacturers have contractor-matching services on their websites, in which consumers can enter their ZIP code online and view a list of remodelers in their area,” Turner says. “Often, that’s done at little or no cost to the remodeler, so that lead generation is covered by the manufacturer and comes with an implicit third-party endorsement.” Remodelers that are “preferred” by a given manufacturer may also be able to offer extended warranties for that company’s products, which can boost consumer confidence and help finalize a purchase, Turner says.

Hitting the Books

Moore says that CertainTeed has seen interest in its educational programs build over the years as a way for remodelers to inexpensively differentiate themselves from competitors. “We’ve found that education is really a key piece for remodeling contractors because if we teach them and help them find out what their difficulties are, it helps them learn to use and install products exactly right and do an even better job out there,” she says. “We know remodelers rely a lot on word-of-mouth marketing, so when they go out and do a great job in a neighborhood, the leads that can generate are really precious to them.”

Like many manufacturers, CertainTeed offers a variety of educational programs, some of which are eligible for continuing education units for remodelers who need to keep up their industry certifications. Offered in a range of formats, including online, some programs are ask-the-expert-style presentations about a specific product category, such as fiber-cement siding. Others are more formal, such as CertainTeed’s Master Craftstman program, which involves workbooks and tests.

Regardless of how in-depth an educational session may be, Failla says that remodelers keep coming back for more. “We have an advisory committee of remodelers and they’ve told us many times that they need more education to compete,” he says. “They’re finding that consumers are trying to take advantage of the economic times they’re in as a way to get prices down, and then they pit all the contractors against each other. If you can take a class from a supplier, the remodeler can come off more educated and better qualified to offer higher-quality products than their competitors.”

While remodelers will always be concerned about materials prices, looking for ways to add value will be essential to closing sales with quality homeowners. The value of a remodeler’s own time, education, and expertise need to be figured into that, Butts says. “The concept of value will always be the sum of price plus service, and that value is established by the purchaser,” he points out. “That equation will never change, but what has changed is the level of expectation for service and quality, both on the consumer’s side and on the remodeler’s side. A certain supplier may not be the cheapest game in town, but remodelers need to look at the level of service and education that’s offered and determine what that’s worth to them.”

—Lauren Hunter, associate editor, REMODELING.

This is a longer version of an article that appeared in the February issue of REMODELING.