“Other” Factors Influencing What You Think Increases Sales
| Check out the remaining segments of this six-part series |
|---|
| Part 1: Setting or Following Construction Trends to Build Your Business |
| Part 2: Cutting the B2B Gordian Knot |
| Part 3: Adopting an Anticipate, React, Adapt B2B Strategy |
| Part 4: Et Tu Trends? |
| Part 5: “Other” Factors Influencing What You Think Increases Sales |
| Part 6: “Other” Factors Influencing What You Think Decreases Sales. |
Regardless of where you are in the discovery of who your customer really is, how your base has fragmented or the influence of trends on that base, you have to realize that there are myriad “other” factors that influence what you think you are seeing if your sales are going up. It helps your overall strategy development to consider them, so here they are.
Economic Growth
Most people believe that if the economy grows, consumer confidence and disposable income grows, leading to higher spending on products such as home improvements, recreation, travel or other goods. Part of the problem companies face is the divergent views about the economy.
For example, in a recent survey AIM conducted, 64% of the manufacturers believed their sales will increase in 2024. But is this true of all manufacturers or other types of companies, distributors/suppliers, retailers or others? Are companies just trying to be positive about their future position?
The answer to this question will always depend not only on the bottom-line actual sales your company is experiencing, but on what people are doing in the actual markets. Again, “who” is the customer and how are they influencing economic forecasts and our own judgments about how the economy will affect our businesses.
A USA Today survey, for example, found “Homeowners spent $463 billion on home renovations in the first quarter of 2024 — projections indicate that home renovation spending will continue to decline by $12 billion in the first quarter of 2025.”[1] And since the median sale price for an existing home in the U.S. hit a record-high $419,300 in May 2024, according to the National Association of Realtors (NAR), it’s probably safe to say people are going to continue to invest in their current homes, kitchens being the most room people will commit to remodeling.[2]
Based on that, the 64% feeling increases makes sense in that business. In fact, when the COVID-19 pandemic struck and lockdowns ensued, Americans found themselves with more time than ever to focus on their living environments. As a result, home remodeling in the U.S spiked. Annual spending on improvements and repairs to owner-occupied and rental properties between 2019 and 2021 grew 23% to $495 billion, according to a new study from the Joint Center for Housing Studies of Harvard University. That’s compared to the market’s historical 4.4% average pace of growth.[3]
We know one contractor in Kansas who when COVID hit, went out and bought every bidet seat he could lay his hands on. When he saw the run on toilet paper, he realized quickly that people want to “feel safe.” He sold out his inventory in two weeks and made a handsome profit.
When a disruption in air travel occurred, we saw a coffee vendor bemoaning his fate as people waiting helpless in lines to get their tickets changed or board a plane, and no one was taking a chance of leave the line. We told him, “Bring the coffee to them,” and he looked at us like we were crazy. Today, you can see this happening sometimes when lines are created, with smart retailers offering people in line samples of what they sell.
The point is don’t always believe everything economists predict. They don’t live in the world you inhabit.
Housing Market Boom
An active housing market with increased new home constructions and home renovations can drive up demand for many types of products. However, rising prices of homes can constrain the boom. As of the second quarter of 2024, American households have a record high of $17.796 trillion in debt, averaging $104,215 per household. This is a 4.8% increase from the third quarter of 2022 to the third quarter of 2023. Who can afford a house?
Molly Grace and Laura Grace Tarpley make a good case in Will the Housing Market Crash in 2024 piece in Business Insider point out “The US is currently between 2.3 million and 6.5 million units short of a healthy housing supply…so even if something happened that caused a lot of homebuyers to drop out of the market, demand likely still couldn’t drop low enough to push prices down significantly.”
That’s assuming a lot. And that’s probably why manufacturers indicated that the two most important challenges in their businesses are interest rates and inflation. It’s always been about the money.
Besides, these “30,000-ft” level observations never bring the reality into the picture. There are so many adjustments to these numbers over time that the reality is never known[4] – except at the business level wherein the manufacturer operates. Perhaps the questions to be asking is within our own reach – that is, the sales databases within each manufacturers’ grasp. Examining your customer file with RFM (recency, frequency, monetary) analysis in mind can reveal fresh insights into the future. Doing this type of analysis never fails to bring in additional ways to think about your strategies.
Home Renovations
Another factor influencing business strategy is home renovation, driven by an increased focus on home aesthetics and functionality, seen as a way to boost sales. This goes beyond what happened during COVID.
When it comes to consumers, the markets for several of the major product categories involved in kitchen remodels, for example, are expected to decline in 2023 and 2024, and then rebound from 2025 to 2027. This is according to the Home Improvement Research Institute. It includes paint and preservatives; plumbing fixtures and supplies; kitchen cabinets and countertops; and doors and molding. So if you are in that business, what should you do?
Since people are drawn to trends for a variety of reasons[5], one of the ways companies might take advantage is to become the trend setter and not just the trend follower.
For example, manufacturers may consider sponsoring a design contest that uses their products. Or consider partnering with one of the designers and set a trend yourself? Partnering with a designer (i.e., naming a line after the designer for example) might just be what the market is looking for!
This is true whether you play in the commercial OR the residential markets!
Partnering with a local media outlet to produce content for that outlet is another way to set the trends. Whether you know it or not, every manufacturer is in a content war not only with other competitors, but with the consumer themselves. Media outlets are desperate for content, and negotiating for example a monthly column on “trends” or sponsoring a blog on a particular topic or activating an aggressive social media blitz might be a way to boost your own visibility.
Sustainability and Green Building
An increased emphasis on sustainability and eco-friendly building materials might lead to higher sales if the company offers green or environmentally safe certified products (see previous discussion, Sustainability and Corporate Responsibility).
Marketing sustainability, encouraging recycling or other environmental practices that benefit both the environment and the communities can add a boost in business for any manufacturer. In today’s environmentally conscious world where many companies have strong ESG (environment, social and governance) policies, it is important for a company to aggressively promote their involvement with any green or sustainability program. Participation in these programs can pay dividends in marketing your company.
In research AIM participated in, most often companies indicated they were involved in product recycling/re-use programs. This was followed closely by a manufacturer’s involvement in the local community service or charity programs.
Ashley Reichheld, John Peto, and Cory Ritthaler conducted research and concluded in a Harvard Business Review piece that after surveying more than 350,000 U.S. customers aged 18 to 98 to gauge their perception of brands’ intent and competence, “Only sustainability stood out as a critical driver of intent.”[6] Other companies align with this conclusion (i.e., Bain & Company, McKinsey, PwC, etc.). Therefore, promoting your involvement in sustainability only stands to benefit your positioning.
Here are just a few ways to think about promoting the sustainability side of your business.
- Highlight Sustainable Practices. Transparent Sourcing: Clearly communicating the sustainable sourcing of your products means identifying and emphasizing where and how materials for your product are produced or cultivated. Do you showcase energy-efficiency or material sources used in the manufacturing processes on your website? Have you communicated your waste reduction initiatives? What about the use of non-toxic materials? Or your recycling efforts? All of these efforts help position your company in the minds of your prospects and customers.
- Certifications and Standards. Obtain and prominently display certifications from recognized environmental organizations. Ensure compliance with such environmental standards and regulations, and make this information easily accessible to customers. There are several organizations that are actively involved in “green building” efforts.
- Educational Content. Creating content that educates consumers, customers and prospects about the benefits of the company’s sustainable efforts is an excellent way to “spread the word.” For example, you can publish detailed reports on the company’s environmental impact, sustainability goals, and progress toward those goals. Send these to your local community media outlets, as well as customers.
These are just a few ways to heighten awareness about your sustainability initiatives. Finally, encourage and act on customer feedback regarding sustainability, showing that you value and respond to their concerns.
Government Incentives
Tax incentives or subsidies for home improvements and energy-efficient renovations could stimulate demand for many products. For example, updating a kitchen can save money on taxes as this is considered a capital investment. The tax break from a kitchen remodel will come in the form of a tax basis. That is, consumers won’t see savings on a home improvement until they sell their home. But, as the Cabinet Coatings of America points out, not seeing a return until the home is sold shouldn’t stop the investment in home improvements.
The Inflation Reduction Act of 2022 empowers Americans to make homes and buildings more energy-efficient by providing federal tax credits and deductions that will help reduce energy costs and demand, as we transition to cleaner energy sources. Through 2032, federal income tax credits are available to homeowners, that will allow up to $3,200 annually to lower the cost of energy efficient home upgrades by up to 30 percent.
The National Association of Realtors lists 7 Types of Tax-Deductible Home Improvements for your review – all giving you ideas to consider in your own positioning of your company.
Supply Chain Improvements
If the company has improved its supply chain efficiency, leading to faster delivery times and better customer service, it might see increased sales due to higher customer satisfaction and repeat business.
During COVID, Just-in-Time became Just-in-Case, where people bought excess inventory because of the extreme uncertainty of that era. Having products when people want and need product is the secret of W.W.Grainger’s success. They charge a premium price for items that you really can’t find anywhere else. And while you may think any “product is just a product”, the fact is that it is marketing that makes the product more than a product.[7]
How many case histories do you have on your website? How many interviews have you done with satisfied consumers WITH their designers? And while you might ask, “what has this to do with supply chains,” the answer should be obvious: everything.
Giving people what they want means having the resources to do that, which is the central issue with supply chain. And while only 5% of manufacturers surveyed considered supply chain a “big challenge” it doesn’t mean you can’t keep it in mind in your strategic planning. Things change, and disruption in the chain can cause more harm than you might suspect.
Find out about these factors in part 6 of this series: “Other” Factors Influencing What You Think Decreases Sales. And thanks for reading! And by the way, if you want a convenient single pdf of this entire series, email inquiries@a-i-m.com and request it.
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[1] Home renovation statistics and trends: Our 2024 report by Rebecca Henderson Updated Jul. 19, 2024
[2] Housing market predictions for the rest of 2024 by Mia Taylor and Michele Petry, Bankrate.
[3] Home remodeling exploded as a result of pandemic by Dylan Croll·on Yahoo Finance, March 27, 2023
[4] Witness the recent 818,000 adjustment downward in job numbers for the Bureau of Labor Statics. In other words, almost a million jobs were reported but didn’t exist.
[5] Reasons for liking a trend include social acceptance, fear of missing out, desire for novelty, status, sense of belonging and more.
[6] Research: Consumers’ Sustainability Demands Are Rising by Ashley Reichheld, John Peto, and Cory Ritthaler in Harbard Business Review, September 18, 2023.
[7] At the time of this writing, reports of vessels continuing to use the Cape of Good Hope as an alternative global shipping route in light of Red Sea disruptions have appeared. Shipping lines are re-routing towards the Cape of Good Hope and will continue to do so until the Red Sea becomes safe to transport goods again. Due to the ongoing conflict in the waters, commercial vessels are being forced to take longer routes to avoid disruption. In March 2023, shipping a 40-foot container cost around $3,162, which was almost double the price from the previous year. By January 2024, the price had increased to around $3,964, and in June 2024, it reached over $5,800, the highest price ever recorded. However, as of July 25, 2024, the price had decreased to $5,806, which is still 268% higher than the same week in 2023.
