Boston, MA – December 13, 2012 – Renewed optimism has residential contractors projecting revenue growth during the coming years, which is changing their strategies for how they bid jobs, select products and where they shop for building products. L.E.K. Consulting’s third Contractor Behavior Survey finds that shifting contractor behaviors will have an impact on building products manufacturers and the channel.

With the building and construction market improving, more U.S. contractors are walking away from jobs that won’t provide appropriate margins (39% taking lower margins on jobs in the 2012-2013 survey, a 5% decrease compared to the 2010-2011 survey). Residential contractors’ purchasing behaviors also show diminished price sensitivity.

When selecting products, contractors prefer to remain loyal to trusted brands and high-quality products rather than trade down and purchase less expensive alternatives or lower-grade products from a popular product line or less trusted brand. Most contractors (72%) said durability was a key purchasing driver, followed by price at 69%. Reputation (66%), manufacturer guarantees (63%) and energy efficiency (57%) also ranked high in importance.

As the importance of price becomes slightly deemphasized among contractors, survey findings indicated that purchasing frequency at the big box channel has plateaued and is subsequently expected to decline over the next three years and shift to pro channels including specialty independent stores and specialty chains. While price was the major factor driving contractors to spend more at big box stores during 2010 and 2011, this year more than half of contractors said that convenience was the major factor. Contractors are also decreasing their searches across multiple retailers to purchase preferred products at the lowest prices.

“It’s difficult for pro channels to trump big box stores on the convenience factor; but what they can offer contractors in terms of reliability, guarantees and staff knowledge are favorable attributes that will win customers over the long term,” said Robert Rourke, Vice President and Head of L.E.K. Consulting’s Chicago office. “Building products manufacturers can gain share by refining their pro channel sales strategy – where profits and differentiation are more sustainable than in big box channels – to sell new and premium products that contractors highly value, with factors such as durability and energy efficiency.”

Ranking the Highest-Performing Manufacturers
For the first time since the inception of the L.E.K. Contractor Behavior Survey, contractors were asked to identify the highest-performing manufacturers across 14 product categories. The ranking centered on four attributes: product breadth, quality, price and service level.

“The winners in these categories have the right mix of innovation, quality and price that attract contractors to their products instead of the alternatives next to them on store shelves,” said Mr. Rourke.

 

Category
Highest Performing Manufacturer
Highest Performer Score
Difference to the Avg. Overall Score
Carpentry
American Woodmark
5.7
0.4
Concrete/Foundation
Lafarge
5.8
0.4
Drywall
USG Corporation
6.0
0.3
Electrical/Lighting
GE
5.5
0.2
Flooring
Anderson Hardwood
5.4
0.4
Framing
Georgia-Pacific
5.4
0.2
HVAC
Trane
5.3
0.2
Insulation
Owens Corning
5.6
0.2
Paint
Sherwin-Williams
5.6
0.2
Plumbing
Toto
6.0
0.7
Roofing
Owens Corning
5.9
0.3
Siding
James Hardie
5.6
0.3
Tile
Dal-Tile
5.5
0.3
Windows/Doors
Andersen
6.0
0.6

The L.E.K. Contractor Behavior Survey: Optimism Creates New Openings for the Building Products Industry report was written by Robert Rourke, Thilo Henkes and Aaron Smith – all Vice Presidents in L.E.K. Consulting’s North American Industrials Practice.

About the Survey
L.E.K. Consulting surveyed more than 650 residential contractors across the United States to examine their purchasing priorities, preferences and future strategies. Contractors surveyed for the study, fielded in fall 2012, each had at least five years of experience, worked at companies with at least three peak-season employees and were involved in purchasing decisions for their company. The survey provides a nationwide barometer of contractor sentiment across multiple contractor trades.

About L.E.K. Consulting
L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and analytical rigor to help clients solve their most critical business problems. Founded nearly 30 years ago, L.E.K. employs more than 1,000 professionals in 20 offices across Europe, the Americas and Asia-Pacific. L.E.K. advises and supports global companies that are leaders in their industries – including the largest private and public sector organi¬zations, private equity firms and emerging entrepreneurial businesses. L.E.K. helps busi¬ness leaders consistently make better deci-sions, deliver improved business performance and create greater shareholder returns. For more information, go to www.lek.com.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2012 L.E.K. Consulting LLC

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