Precast Consulting Service
Finance, Marketing &
For the producer that
is heavily reliant on commodity products, there is an opportunity to substantially
improve profit. Product lines that have a 5% net profit margin or
less can be improved, or replaced. You can raise your average margin
by about 2% due to product development.
Precast products often sell like commodities in an auction market, with
feast or famine demand, and low margins. Why does this happen?
Supply exceeds demand and the price is therefore equal to the break even
cost of the high cost producer. Commodity means that the product
is undifferentiated and interchangeable.
Most producers have a good many products that
fit this definition.
The market needs large volumes of product
Market Strength Bill
Ray's rule: Successful new products build on what you are already
doing. Your precast is on the job because of its inherent advantages.
You wouldn't be on the job if you couldn't deliver the basics. The
key is to use this strength to differentiate your product, broaden your
product offering, and broaden your service. Your commodity products
are a strength to build on, not a weakness to overcome.
Is gasoline a commodity? You bet. Does the name brand gasoline sell
for a few pennies more than the off-brand? You bet. Take stock
of your unique quality, service, and special features. Promote them.
Excel in them and be the best. Collect data to prove your case.
Brand your product. Toot your horn.
A 7-Step process for new
Broaden your service We
know that the customer and precaster are both best served if the work is
design build and negotiated. Ask yourself, how much of your work
comes from plan takeoffs that you have never seen before? Break out
of the cycle of responding to RFQ's and visiting the plan room. The
desired state is called consultative selling. The result is
Set goals. The starting point
for change is to set a target for design-build work. Track progress.
Call on specifiers. If the project
is already in the hands of a GC, you are probably too late and will be
reduced to bidding alternates nobody ever though about. Identify
the key specifiers; 20% of the firms probably account for 80% of the
work. Set goals. Track progress.
Sell your services. VE suggestions.
Additional products and product enhancements. Timely submittals.
On time delivery. Quality product. Erection schedule. Attentive
Review staffing to separate the order
takers from the sales consultants. There is a place for order takers;
but you need to make sure you also have sales consulting skills and that
such a person has a proper role or territory.
1. Find new products
where you are doing business now.
What can Precast Consulting
do? You have competent
and experienced managers. But they already have a full platter.
Working closely with you and your management, we bring experienced resources
Survey your jobs. On jobs
you supply, what's being done by cast in place, masonry, tilt-up, steel?
Design a replacement product. Figure out a way to install it with, just
before or after your commodity.
Survey your architects. What
would they like you to supply that is now being done in some other building
Enhance your product with special mix
design, paint, color, coatings, special rebar, special cast-ins, the list
is endless. These value added features have high margins and take
you right out of commodities. Don't look at enhancements as a bother,
they area gold mine!
2. Evaluate potential
new products This requires the rigor or a structured look at
Benefits to the owner Examples:
strength, plant quality, durability, fire resistance, appearance
Benefits to the Architect, Engineer, Specifier
Examples, engineering services, design envelope, job cost savings, speed
of construction, reputation of the specifier.
Benefits to Contractors Examples:
Turn key contract, risk reduction, all weather construction, reduction
of trades on the job, reduction of job supervision and overhead.
3. Design the product
Come to the specifier with a hard design with three specifics.
Written product description, attractively
presented. With today's PC software, that is doable.
Drawings. Prepare some dimensioned
Specific price point That
means rigor in estimating, and a margin decision.
The purpose of all this is to improve margin. Most commodity producers
use formula pricing with a nod to expected competition job by job.
That is not the best guide for the new product, in my experience.
Here are some pricing guidelines.
Product enhancements such as cast-ins,
color, etc. should always be priced at a premium. Such opportunities
present themselves all the time. This would be a good time to review
Product innovations incorporating substantial
new features such as paint, a new section, radical mix design, and the
like, need some partnering with the owner or GC. Avoid introductory
New products that will displace conventional
methods and materials on the job will probably require some introductory
pricing. Seek out a GC partner in addition. Never price
a job at estimated break-even; it will always cost more than you think
the first time. After a job or two, price the new product at what
the market will bear. That should be a nice premium. If it
is not, that's a signal.
Bidding After it is accepted,
don't let the customer put it out to precasters for bid. Here is
where it takes sales finesse to insure you are bidding against other building
systems, only. For example, point out that your design is a proprietary
5. Patent Protection
Protect unique designs and materials. Market forces will inevitably
try to turn your new product into a commodity; write a spec., get other
precasters to bid, encourage over capacity.
Examples: Special designs, connx
details, dimensions and proportions.
Pat. Pending Protection
during application and appeals; 2-3 years. This time is important,
even if the application is ultimately rejected.
Variations Draw the application
broad enough to cover all the reasonable variations. Engage a patent
attorney and have your engineer follow his advice.
6. Give it time
Bill Ray's rule: It takes two years to fully develop
a new market. You need an early success as a reality check and
as a reference to get more such work. If there was a new product
out there that would quickly fill your plant, somebody would be producing
it already. Persistence is the most important trait. Go for
a small early success, and build on it.
7. It's ongoing
New products become commodities. New product development should be
a way of life. You need to have a new product or two in each
stage of development to grow your business and maintain superior margins.
I presented this 7-Step Plan recently
>Click here for New
Product Development PowerPoint presentation..
Note: It will take several minutes to load this PowerPoint presentation
with a telephone modem.
Facilitate the process, keep it going,
set milestones and objectives
What's worked elsewhere Feedback
on success stories, investigate other markets
Market studies Survey your market
size and requirements
Product requirements Cost estimates.
What will be required to produce and deliver.
Program description What is required
and when, from marketing materials to staffing
for the Precast Industry