Tag Archives: economics

Debt and Other Economic Factors Affecting the Building Product Industry

23 Dec

Keeping an eye on the recovery of the economy is important for building product CMOs to consider as they make long-term strategic marketing plans.

As you know, building products and the housing market have easily been the segment most effected by the economic problems of the past couple of years. Recently released statistics and news from across the industry show a promising yet realistic view of the slow recovery.

Consumer Debt Decreasing

Consumer debt is decreasing, according to the Federal Reserve Bank of New York’s article, Consumer Debt Falls in Third Quarter, “ household debt in the July to September period fell by .6% from the previous quarter to $11.66 trillion.” This is especially relevant for the building products industry as the main decrease was in mortgage balances, according to the article. Excluding mortgage balances, household debt actually increased by 1.3%. This means that households are decreasing their home-related debts and spending more as their finances stabilize. Home buyers enhanced caution to ensure they don’t go further in depth on their homes is an important factor to consider in your marketing plans. Making sure that your consumer-facing sales team is aware of this price and debt sensitivity can help them to understand the customers and how best to sell to them without pushing them further into debt.

New Mortgage Debt Decreasing

Also according to Consumer Debt Falls in Third Quarter, new mortgage debt is “…at it’s lowest level since [the year] 2000″ which is due to:

  • Depressed home values – Lower home values means consumers mortgage value is also lower
  • Tighter lending standards – As set by the major financial institutions
  • High unemployment and stagnant wages –  These reduce the level of home buyers

Home Equity Increasing

When looking at the history of home ownership and mortgages, it’s important to note that as the recent recession progressed, the average homeowner owned less and less of their house due to higher mortgages. As you can see from this chart, used in a speech by William C. Dudley, President and CEO of The Federal Reserve Bank of New York, equity levels have been starting to work their way back up from a low of below 40%.

As shown here, "the average homeowner still is substantially more leveraged than before the crisis and has lower net worth".


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New Building Product Industry Report Points To A Flat 2012

11 Nov

How You Can Make Big Changes Despite Small Changes Ahead 

So what should building products marketers do during 2012 to weather the flat forecast? Spend! And BusinessWeek agrees. Research from the 1981–82 recession showed that companies that increased advertising during the downturn saw a 250% increase in sales just a few years later.

It appears that 2012 won’t feel much different from 2011 for the building product industry, but that shouldn’t mean another year of waiting. The report conducted by McGraw-Hill suggests 2012 construction starts will be $412 billion—that after a 4% decline in 2011 to approximately $410 billion.

Some of the report’s highlights for the coming year:

  • A moderate 10% increase in construction dollars and a 7% increase in units (435,000)
  • An excess supply of homes due to foreclosures continues to depress the market
  • For multifamily housing, look for an 18% increase in dollars and 17% in units, continuing a modest an upward trend
  • Commercial building is anticipated to grow 8%
  • The downturn in institution building continues with a 2% decrease
  • Manufacturing buildings should increase 4%, adding to the 35% gain in 2011, thanks to a weakened U.S. dollar and increased exports

While certainly not the best news we could get, after years of witnessing steady—if not dramatic— decline, even a hint of stability or that “the worst is behind us” is welcome. And for those across the building products industry working with compressed 2012 budgets, anticipating at least levelized sales is an important step.

Some suggestions to maximize your brand awareness with a minimized budget:

  1. Strengthen “Social Marketing”—Customer engagement efforts have the ability to build awareness and buzz around your brand like no other marketing tool. Thanks to sites like Facebook, you can turn your customers into your greatest advocate.
  2. Boost Your Search Marketing— Search Engines are vastly becoming the means by which people find goods and services they need, as well as recommendations and reviews. Pay-per-click (PPC) ads can definitely provide an ROI for leads.
  3. Go Viral — A video is at least 50 times more likely to show up on the first page of a Google results than text only. It doesn’t have to be a Hollywood production to be worth viewing. Keeping it relevant and engaging is the real key.

Rather than looking at a flat year as another weak one, take advantage of the stability it’s likely to provide, shoring up the weak points the past few years have highlighted in your marketing and pushing your brands ahead while your competitors continue to keep their heads down.


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