Dealers don’t generate demand
When was the last time you went into a builder’s merchant, or a shop, or a car dealership, and asked for something that you’d quite like but they didn’t stock? If you haven’t – try it.
Start-ups and new market entrants may be able to get their target market interested in their products, but large-scale availability comes much later (and at a price). Even when you can get channels interested, it’s usually the wrong deal and almost always counterproductive.
CASE STUDY – FERMACELL HIGH PERFORMANCE BUILDING BOARDS
The Product
Fermacell is a high-performance alternative to plasterboard. It has better impact, fire and moisture resistance, is far better acoustically and can carry significant loads. Using drywall techniques with Fermacell creates walls equivalent to solid blockwork in a fraction of the time, with more flexibility in design.
BUT
It’s three times the price to buy (less when installed, although the installation process is more specialised), designers don’t understand how to utilise it, contractors don’t like it because it’s different and they see it as a threat to established trade practicies.
It’s also not available in your normal builder’s merchant.
The fix
(spoiler alert - wrong)
Whilst Fermacell is more expensive than plasterboard, it’s significantly cheaper than cement-particle board – a product widely stocked by merchants for use in fire-lining public buildings. The sales pitch to the merchant community was that it would cover 90% of the applications that cement-particle board was used for, and make them more profit.
This worked insofar as it got the product into widespread distribution and made it geographically available nationwide. However, quite apart from the potential for mis-selling by the merchant counter staff into safety-critical fire applications, they didn’t stock the critical accessories that made it work as a dry lining product.
This further disincentivised installers who tried to use alternative fittings because the proper ones weren’t available and bodged it – making them look incompetent.
Dealers were left with slow-moving stock, designers and architects with burnt fingers and professional contractors with a nasty taste in their mouths.
The (German) manufacturers (then Fels-Werke GmbH), initially buoyed by early orders of lorry-loads of stock from merchant distribution centres and looking forward to continued follow-up supply deals, soon realised something was wrong when the orders dried up. A change of management was called for…………..
The Long term solution
De-stock 90% of the merchant community to the small number who (after training) understood the product and were comfortable selling it. This had the secondary benfit that their stock turn and gross margin rose dramatically (albeit over an larger geographic area).
Start creating downstream demand by using the appropriate sales techniques and channels communicating with innovators and early adopters – in this case architects, self-builders, specialist main contractors and the modular and off-site community.
Create new sales material aimed at an immature market. This is probably the most common mistake that most overseas principles make in assuming that the marketing material that works in their home (mature) markets sends the right message to immature ones – it doesn’t
Ensure you have a service/installer network capable of supporting the product to your satisfaction. This often requires some form of incentivisation.