In the dance between customer and branding or reputation, current business marketing theory breaks down the experience into three stages – before, during, and after – purchase. Research shows the advantages of considering the customer journey more holistically, and the proven benefits of ensuring that experiences stay consistently positive and improve over time; are punctuated by a moment of joy, and end with a bang of delight (think Disney’s end-of-day fireworks display).
[Harvard Business School Market Research]
The Construction Transaction
At the very heart of the construction transaction at the point-of-sale is the signing of a performance contract. Over time we contractors have allowed this transaction to evolve into a restrictive agreement that limits us to low selling prices and tight margins. Borrowing a tip from the Harvard Business School marketing gurus, let’s take a closer look at what happens before, during, and after construction contract signing.
Before…
First-rate business management skills are required before the contract is signed. We will never be able to significantly improve margins until we change our attitudes towards the contracts (forced upon us) and learn to interpret and manage them as the work progresses. It is well past time for our industry to take a more active role in participating in the contracting process and stop leaving it entirely up to the owner or designer and signing “boilerplate” contracts because we are told “they’re standard in the industry”. The constructor of the future has no choice but to learn to approach contracts at the outset much more aggressively and not be reluctant to hold project owners to their end of the bargain.
During…
Expecting a contractor to perform as agreed does not seem unreasonable to either the contractor or the owner. However, expecting the owner to perform as agreed seems to be considered bad manners. It is almost like we accept that the construction contract binds us but not the owner. Below are just two examples of owner’s responsibilities that too many contractors are willing to overlook because they are expending all of their efforts trying to get along with the customer and to get paid. Not paid in accordance with the contract – just paid “eventually”. (There are too many examples to fit into this space.)
- Owners have a responsibility to the contractor to pay on time, fairly, without unreasonably contesting payment by finding technical fault or simply delaying payment.
- Owners are responsible to use retention appropriately. Unreasonable delays in releasing retainage should not be used to force contractors into additional work because the designer calls it “corrective work” that should rightly be paid for as extras. And retainage is not a “bargaining chip” for final payment.
Personal Story to Illustrate the Point
When I first went into business my brother and I began a large project in which our contract stated clearly that payment was due by the 20th day of the month. Intending to be paid on time I always hand delivered the first month’s invoice right on time with a notice to the designer (copied to the owner) that we expected payment within 20 days or we would stop the work in accordance with the contract disputes clause. That same day I received an indignant call from the architect telling me that I was either naïve or crazy and that no one was ever paid within 20 days. Being well prepared, I responded that I fully intended to stop the work on the 20th day.
As expected, an uproar ensued with their lawyers talking down to me and telling me that I didn’t know what I was doing and that I was crazy. “You can’t do that. Nobody does that. You just can’t stop work. You have a contract.” I did not relent and on the 20th day we were paid, and payments were never late for the life of the project. Note: This only works on the first payment because after accepting late payment several times you in effect have modified your contract. I never had payment problems because I did not accept the prevailing wisdom that you have do whatever they want to get along with the designer and owner. (I had learned the hard way that “Nice guys finish last”.
After…
Too many contractors see business as running a hundred-yard dash when it is actually a marathon. For example, worrying about the next contract sometimes causes us to take the first job that comes along rather than waiting for a project that fits our expertise.
- Successfully completed projects are opportunities to enhance a company’s reputation for expertise in a particular segment of construction.
- If you see yourself as the “best” at something, it is an opportunity to leverage that “best-in-class” self-image into higher prices and enhanced profits by projecting to potential customers that they need you more than you need them.
- Resist projects you have never built before. If you must change your project acquisition profile start small with risks you can afford. It takes patience and capital to grow a construction company and contractors who stick to what they are best at are consistently the most successful in their field.
Before – During – After
The marketing of a construction concern happens before, during, and after the “point of sale” which occurs at contract signing. To increase profit margins, we need to actively participate in the interpretation of our contracts, insist on owner compliance with the same vigor owners insist on our compliance, and don’t under-value the good reputation you earn from successful (and profitable) completions.
For a deeper look into getting paid, read more here: PROMPT PAYMENT
For a broader view into construction contracts, read more here: CONTRACTS
To receive the free, weekly Construction Messages, ask questions, or make comments, contact me at research@simplarfoundation.org
Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you.
