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Blog/June 11, 2019

A Strategic Framework for Your Building Product Market Research

The most successful companies in the building product manufacturing space are constantly monitoring the market and staying abreast of the most recent trends. They try to best prepare for what the future will look like in the market and how the company will compete. One of the lessons we have learned at FMI is that market research must be placed in a proper strategic framework to guide your thinking and ultimately increase your ability to make the right decisions for your company’s future success. Without this framework, it is simply a collection of data points without a unified purpose. As seen in Exhibit 1, the strategic framework we suggest to our clients for implementation is the 4-C approach of climate, customers, competitors and company.

Exhibit 1.

Below is a brief overview of each of these areas and what is typically involved in the research process. At the conclusion of the process, this approach merges the external market analysis with the company’s internal value drivers and core competencies to help ensure the business is positioned to succeed.

CLIMATE

Over the years, FMI has developed hundreds of forecasts at the national, segment and local levels to assist clients in gaining an appreciation for a market’s size and growth potential. Climate research tries to uncover what the opportunity or demand is for a company’s products. This involves a collection of historical and projected construction spending figures, in terms of size and growth, as well as an analysis of the underlying market trends and drivers that most influence related spending. Typically, these market factors fall into four primary areas, including political (e.g., legislation, tariffs), economic (e.g., industry employment, commodity prices), sociocultural (e.g., population) and technological (e.g., prefabrication/ modularization). Once these factors have been identified, it often can be beneficial to rank them based on two criteria, which include: 1) the likelihood to occur and 2) the potential impact. By completing this step, you can prioritize those factors that will have the greatest effect on your company’s business.

CUSTOMERS

FMI works with clients that are focused on expanding their market presence and growing their business. Growth strategies may include an end building segment (e.g., commercial), a geographic market (e.g., Canada) and/or a new product line. They will ask us to provide them with a climate analysis including forecast opportunity, but overlook a significant component, which is the end market. We have found that in today’s market understanding the end market is more important now than ever. Customer research begins by identifying who the leading active buyers are in a particular market and what the key criteria and stakeholders are that influence specification and, ultimately, selection. For example, are stakeholders who previously had little influence in design and specification growing in importance and shifting procurement toward lower-cost alternatives during value engineering? Or are owners becoming more sophisticated and examining total life cycle cost when determining which products shall be utilized in their facilities? Through FMI’s decades of working exclusively in the construction industry, we have found that the answers to these and other questions can vary significantly by segment, geography and end user category, which results in a need to conduct very specific market mapping of the target opportunity.

COMPETITORS

Perhaps the most challenging component of this research approach is the competitive analysis, due to the sensitivity of the information involved. Marketing research helps in ascertaining and understanding competitor information, such as its identity, perceived value proposition, key differentiators and channel positioning. By speaking with stakeholders in the market, competitive research can allow you to gain an appreciation for a competitor’s perceived strengths and weaknesses, product advantages, distribution channels, etc. This helps in managing and, in certain cases, even exploiting the competition. Moreover, with market research, you can also better understand the underserved segments and end customer needs that have not been met. Likely there may be a situation where your company has advantages that can be leveraged.

COMPANY

Finally, once the external analysis has been completed, which includes the climate, customer and competitor research, an internal analysis is conducted to examine the company and determine whether it is advantageously positioned and structured appropriately to exploit these opportunities. This analysis involves looking at the company’s internal capabilities and ability to address the market’s needs. This includes examining areas such as salesforce effectiveness, distribution channels, pricing, marketing collateral, supply chain, etc.

Market research will help to determine the underlying forces and trends that are driving your customers, your competitors and your business. In addition, analysis of the data and information can allow you to prepare for shifts in the market before they happen and increase your chances for success. FMI has found the most successful building product manufacturers root their strategies in deep market research, which equips management with the power to make better business decisions, increase revenue and maximize profit.

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