U.S. Market Inches Forward In 2012 Despite Fragile Economy

While 2011 may not have produced the dazzling numbers we were all hoping for, they did show some improvement from 2010. Industry experts expect the same for 2012. According to the McGraw-Hill Construction 2012 Dodge Construction Outlook, the level of construction starts is expected to inch forward to $412 billion dollars, up just $2 billion from the expected $410 billion predicted for 2011.

The fragile U.S. economy, as well as growing concern over economic distress in Europe, Japan, China and India, continues to diminish funding from federal and state governments for construction projects. The 2012 Dodge Construction Outlook predicts that in 2012 the top numbers are not expected to show much change, but some gains are predicted for housing, commercial building and rental, giving the industry hope for a future resurgence in construction across the board.

Commercial

• Commercial building is predicted to grow 8 percent. Warehouses and hotels will see the largest percentage increases, but improvement for offices and retail stores will be modest.
• The institutional building market will slip an additional 2 percent in 2012, after falling 15 percent in 2011. The tough fiscal environment for states and localities will continue to dampen school construction and the uncertain economic environment will limit growth in healthcare facilities, however, some regions are experiencing significant health-related construction.
  

Residential

• Single family housing in 2012 will improve 10 percent in dollars, corresponding to a 7 percent increase in the number of new units to 435,000.
• Multifamily housing will rise 18 percent in dollars and 17 percent in units, continuing its moderate, upward trend.
  

Infrastructure

• Public works construction will drop 5 percent further, after a 16 percent decline in 2011, due to spending cuts and the absence of a multi-year federal transportation bill for highway and bridge construction.

Sustainable

• According to projections from McGraw-Hill Construction, the green building market size is expected to reach $135 billion by 2015.
• Green construction growth is largely due to the increasing number of green building programs and rating systems, as well as the financial support that it is receiving from local state and federal governments.
  

Rental

• A Baird/Rental Equipment Register survey showed that the initial 2012 rental revenue forecast estimates a revenue increase of 6.9 in 2012, while rental rates are estimated to increase by 4.3 percent.
• Most geographic and end-market segments appear to be benefitting from economic uncertainty with increased rental vs. ownership. It seems that general trepidation about purchases is driving more companies towards rental.

Create Loyalists Through Focused Parts/Service Programs

Every manufacturer sells parts and service. However, most fail to fully capitalize on their efforts. They get calls, take orders or requests and follow through. Given the ongoing opportunity, margins and value to the entire customer relationship, most companies are missing the real payoff—building a base of truly loyal customers not driven by price alone.

BMG has worked with one company that has more than doubled its monthly parts sales by giving more focus on parts and implementing a program that rewards its customers. Another company focused on selling wear components has achieved more than a 25 percent increase in sales despite the competition and weak markets. Lastly, a unique parts program has effectively identified and reclaimed many of its older customers that were lost when a competitive manufacturer acquired the key market from them more than a decade ago and the agreement had recently expired.

All three companies have one common element—they specifically designed and implemented a long-term program to build loyalty in wear and replacement parts. The beauty of their programs, and others BMG has developed, is that they are far reaching, offer strong value and can be employed with customers in many ways, including helping assuage customers that experience problems.

Make It Work For You

One successful approach involves providing redeemable cash coupons that customers can apply to future parts and service needs. While it is a discount, it eliminates discounting at the order stage and ensures that future orders will come back again. This approach can also be used as an added incentive on new equipment orders as part of a bid package, a give-away or a prize to customers at events and trade shows and can be issued under guidelines set up by any department within a manufacturer, including customer service, to reward valued customers and after an on-site service call is completed.

Cash coupons are great because there is no limit to how they can be used in the immediate, short- and long-term. They also allow manufacturers to obtain key customer information and track their level of involvement and loyalty to the company. Strong long-term and evolutionary programs like these do more for customer goodwill and relationship building than you might believe.

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