The question that more and more contractors are asking is, “To brand or not to brand.” Retail branding has attracted cutting edge contractors for more than a decade and today it's at an all time high. The reason? Contractors want to avoid the commodity trap.
The commodity trap occurs when buyers perceive no difference between one company's offering and the next. Points of differentiation and preference diminish. Prices settle at the level set by the lowest priced provider. Buyers choose one seller over another based on chance or perhaps, the seller's salesmanship.
I witnessed the perfect commodity trap during a recent trip to Istanbul. I was invited to Turkey to speak about branding at an international construction materials conference. It seems everyone in the world is interested in branding.
Istanbul is renowned for its spice market, which represents nearly perfect commodity pricing. If possible to physically walk inside a yellow pages trade classification, it would be like walking into the spice market. Instead of one yellow pages ad after another shilling the same products and services, the spice market is characterized by one stall after another hawking the same spices.
All vendors make the same promises and present merchandise the same way. Prices settle down at a uniform level that's the minimum required for survival. Getting a jump on the competition means shilling louder, longer, and more persistently than the next guy. Everyone is stuck in the commodity trap.
A commodity trap was sprung in the HVAC Industry when the 13 SEER efficiency standard raised installed prices while further commoditizing equipment. The credit crisis, housing market, and economic uncertainty piled on to exacerbate price sensitivity, making things worse.
Contractors who brand escape the commodity trap. Branding is the commodity's polar opposite. Branding is all about positioning. Branding contractors create points of differentiation, generating preferences that people are willing to pay a premium to receive. They wrap a brand that's uniquely theirs around the differences.
Branding contractors report closing more sales at higher margins with less price shopping. They increase the real value of their companies with every installed system that bears their brand, not a brand owned by another, or offered for less by competitors down the street.
Yet, branding is not for everyone or even the majority. Contractors dependent on manufacturer marketing and support are ill-suited for branding. Branding requires market independence and self-determination.
While most manufacturers will sell equipment to contractors who want to brand, and will provide technical and warranty support, the sales and marketing support ends.
Contractors who brand on their own must also develop marketing on their own. Manufacturers won't help promote brands they don't own or license. Say goodbye to group advertising, co-op, and incentive trips.
It's hard for most contractors to figure out where to start. There are scores of details. Someone must create cut sheets, art work, literature, warranties, direct mail, equipment webpages, internal training, etc.
The list of requirements can seem insurmountable. For most, it is. It's also expensive. Developing literature, marketing, sales support material, training, logos, etc., not only takes man-weeks of time, it easily costs five figures, using professional graphic designers and copywriters.
Until recently, these hurdles barred all but the largest and most progressive contractors from branding their systems. Now, a group of contractors led by Ben Stark (Stark Air, Hurst, TX) and Steve Miles (Jerry Kelly, St. Charles, MO) formed the Retail Contractor Coalition (ContractorCoalition.com) to pool resources, provide mutual support, and reduce the time and costs of developing a branding program. Variations exist with the national franchises, some alliances, and third party groups that offer their own national branding programs to their members.
Branding systems makes sense. After all, there's more variation in contractor system design and installation practices than equipment. If the contractor's name is the most important name on a system, why not brand it?
Matt Michel is the CEO of the Service Roundtable (ServiceRoundtable.com) and a firm believer in the idea that The Contractor IS The Brand. You can reach Matt by email at [email protected] or by phone at 214.995.8889. For information on the Retail Contractor Coalition, visit ContractorCoalition.com or call toll free 877/262-3341.
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