The next time you review your marketing strategy, consider expanding into the often-overlooked residential market. Many electrical contractors have chosen to concentrate on the cyclical commercial, industrial and institutional niches. Before you decide that residential work lacks challenge or the potential for sufficient profits, take a look at the economic impact of the largest sector of the construction industry.
At the McGraw-Hill Outlook 2005 Executive Conference last fall, Robert Murray, vice president of economic affairs, used single-family housing as the pivot for his growth predictions in 2005 construction markets. Even though this sector may face a slight downturn in the coming year, it experienced double-digit growth during the previous three years. Reed Construction Data predicted $384 billion in new residential spending (down 4 percent from 2004) and $138 billion in residential improvements (up 7 percent) for 2005.
The National Association of Home Builders (NAHB) has always promoted housing volume as a key economic measure. Even though single-family housing volume will dip slightly this year, its recent growth spurt has boosted the national economy when other sectors were sliding.
With homeownership reaching 70 percent by 2010, accompanied by a 10 percent increase in home prices, residential electrical contracting presents an attractive expansion opportunity. The largest home construction projects now surpass smaller commercial and industrial jobs in both square footage and complexity of detail. If you think the quality standard is lower for residential work, compare the tolerance for small errors in your latest commercial hotel project with the demanding punch list inspection of a high-end home.
Marketing to residential customers and creating loyal, profitable relationships, requires an understanding of what drives the American homeownership dream. Mortgage rates, a key influence on home buying, have been lower in recent years than any time since the 1950s and the related post-World War II suburban housing boom.
American families are spending higher percentages of their income on mortgage payments than ever before. Changing family structures, creative financing, gentrification of city neighborhoods, population shifts and multiuse development projects have expanded the range of homeownership and the variety of available products and services.
Building a market niche in residential work involves a change in perspective, enhanced relationship-building skills and greater empathy than what is needed to serve business customers. Remember all purchasing is driven primarily by emotion and a home is usually the largest asset someone owns. Customers may fear being cheated by unscrupulous contractors.
The expansion of home improvement media outlets, such as HGTV, is creating new, semi-informed consumers who may be overconfident in their knowledge level. Contractors who were accustomed to wielding the power of implied expertise are now confronted with customers who argue the finer points of methodology without substantial training.
Dealing with these nouveau “experts” requires respect for all styles and tastes, and the ability to correct and redirect without apparent condescension. Your customers still need your expertise-it is just harder for them to admit it. At the same time, you have the chance to educate them on the latest products, offer creative design ideas and help them understand safety issues and cost-effective product choices. Preventing owners and their interior designers from making disastrous mistakes is one of the best marketing methods you will ever learn.
Communication skills are essential for everyone in your company who deals with residential customers. On a large commercial or industrial project, your installers might be able to get away with blending into the crowd-who would notice a little bad language, some sloppiness or a lack of proper speech construction? In a residential environment, however, the customer may be standing closer, expecting the qualified electrician to communicate intelligently and willingly. Customers expect electricians to converse respectfully and answer questions confidently.
The diversity of residential customers offers another chance to build relationships and referrals. It surprised and concerned me that I was able to gain a considerable marketing advantage simply by relating to my female customers as equals. They were so accustomed to being patronized by contractors who assumed that women could not understand construction materials and technology, that they were overly grateful to see a female contractor who treated them as capable decision-makers.
Control of funding and decision-making is now distributed among a range of genders, age groups, ethnicities and family members. Treating all types of customers as competent decision-makers, while subtly helping them to make informed decisions on product, design and safety issues will produce more referrals than you can imagine. The same is true of design professionals, who find it difficult to keep up with electrical products and methods, and have trouble admitting voids in their knowledge base.
Emphasizing reliability, integrity and promptness will alleviate some common negative expectations held by residential customers as well. This includes providing technicians who ask permission to use the bathroom, do not help themselves to food or drink and respect the property. Even on new construction sites, homeowners develop a proprietary feeling about the premises and will not tolerate disrespect for their property.
If you are providing suggestions or solutions, make sure you know who has the power of choice within the family. If you are working on lighting a child's room, the child may be making some of the selections. Also, look for signs about what motivates the members of the household. Does the home represent security, comfort or status? Knowing the hot buttons of those who will be living in the environment will help you suggest more creative technology, high-end fixtures or user-friendly controls.
With the range of electrical products and systems now being used in residential projects (home theaters, smart home systems and wireless networking), your ability to assist with the details has the potential to expand the electrical budget and improve your profit on any residential project.
Take the time to work with design professionals before plans are finalized and with customers who are purchasing homes through the sales office of a developer. If you understand energy flow as well as electrical energy, you will be even more valuable as a consultant to all of your clients.
For example, the potential of the light emitting diode (LED) to replace incandescent or halogen bulbs in many everyday applications is an attractive choice for the residential developer who wants to market environmentally friendly homes with a reasonable maintenance cost. LEDs consume 30 percent less power than incandescent bulbs, may last as long as the fixture itself, do not contain mercury and emit little heat. Since lighting accounts for 7 percent of all energy use in this country, suggesting LEDs can provide a welcome alternative choice for developers and homebuyers and enhance your status as an expert in your specialty.
Get creative with residential niche opportunities, such as temporary lighting for events, parties or holidays. Some homeowners are hiring these services seasonally and will appreciate your artistic suggestions, while your installers have a little fun on the job. Landscape lighting is also a growing field. Having a lighting designer on your staff will further expand the range of services you can provide to designers, developers and end-users.
Marketing for new business does not have to be expensive. Reaching the public is easy if you are willing to explore several additional methods of publicizing your availability. Form partnerships with building supply stores and present workshops to their customers on electrical products and methods. Teach classes at community colleges. Write articles for local print media, and call your radio station's version of “Mr. Fix-it” to offer your expertise.
If you are asked to do a spot on an HGTV series, as I was, welcome the opportunity to gain this exposure. These shows are often repeated and potential customers will track you down from the program's end credits. For the cost of a short trip to the studio or film location and the time you take to do the segment, you gain nationwide exposure.
Make sure to provide educational material for your clients, and use these materials in direct mailings to prospects. Homeowners, homebuilding contractors and developers appreciate short, easy-to-read pamphlets on electrical safety and efficient energy use, as well as troubleshooting suggestions. They are also grateful for manuals on product operation and maintenance.
If you are willing to provide maintenance or remodeling services (especially emergency house calls), you can build return business as well. Give your most ambitious, qualified technicians positions as service technicians who handle geographical territories, prospecting, estimating, installing and invoicing small projects. The chance to earn incentives will prod them to expand your business.
Satisfied residential clients are terrific sources of referral. Finding reliable, honest, qualified contractors is a nightmare for most homeowners, and they rely heavily on their friends and neighbors for the names of reputable firms. Also, owners of high-end homes remember you when their companies are building new corporate offices or manufacturing facilities.
If you are a resource, you will gain customers. Most important, be honest about what ideas or methods are correct. If you explain the advantages and disadvantages of specific choices, your customer will often demonstrate an unexpected level of sophistication and the ability to choose the most valuable option, not necessarily the cheapest. When you know your customer, and have provided valuable service and created a relationship, you will get paid faster and earn more profit. That is the best reason for seeking a new niche, isn't it? EC
NORBERG-JOHNSON is a former subcontractor and past president of two national construction associations. She may be reached at email@example.com.