It’s a familiar supposition in B2B publishing: When the economy ebbs lead generation services flourish. This hypothesis has been revived in the shadow of the current and forecasted economic conditions. Not surprisingly Sales and Marketing types from lead vendors are the most voluble on this topic. While these groups may see a silver lining in an otherwise gloomy and unpredictable cloud, what other “bellwethers” exist? Are there measurable indicators — in the construction industry at least — that illustrate marketing behavior in a weakening economy? Do customers, in fact, rely more on lead services and possibly advertising or are these services de-valued and vulnerable to budget cuts in challenging times?

Reed Construction Data (“RCD”) sells, among other things, products and services that provide construction leads to construction suppliers. RCD is in a fortunate position to conduct a quick “industry pulse check” with respect to customer behavior through our well-developed sales, marketing, online product, and customer care channels to thousands of customers.

Under the backdrop of world economic expansion falling from over 5% to under 3% and many North American commercial building categories forecasted to have negative growth in 2009 we looked at three measures to help understand current customer behavior towards lead services:

1. What are our customers telling us?
2. What does the product’s empirical data (traffic, logins) say?
3. What is now happening in historically “tough” sales regions?

To address the first question we went straight to the source: Our customers. An informal survey was conducted over three consecutive business days in late November, 2008 with the following question posed randomly to callers who contacted Customer Care for their own purposes:

In today's economic environment are you more or less likely to use your lead service?

Source: Reed Construction Data Customer Care, 2008

The sample customer group consisted primarily of contractors and manufacturers; however, engineers, environmental firms, and equipment rental companies were also represented. Overall the majority (64.81%) of respondents said they are “much more likely” or “more likely” to use the lead service in today’s economic environment. Less than one third (29.63%) said there would be “no change” in their usage and 5.56% said they would use the lead service less frequently.

For the second measure we looked at product usage and traffic patterns. This data is considered more reliable because it measures actual customer behavior and includes the entire customer (end user) population, not just a random sampling. An internal analysis on November 17, 2008 found that the lead service’s usage (by customers) for the consecutive three weeks had, for each week, exceeded all previous weeks on record. Moreover, Mondays (the product’s busiest day) in October and into November of this year had a 10% increase in distinct users and 15% increase in page hits since the spring. These increases outweigh the net change in end users on the system. The analysis does not determine causality but it does illustrate a clear increase of lead service activity (logins, page views) coinciding with a downturn in the North American economy.

The third measure presented an interesting challenge: Find the most difficult selling environment and see if the tone or prospect activity there has changed recently.

Alberta, Canada has been for RCD arguably one of the most challenging environments to sell into in recent years. Since 2005 that province’s boom in construction has been widely reported and led in large part by the meteoric rise of oil and large-scale energy-related projects (the $10.8 billion Horizon Oils Sands project started in March 2005, for example) and major office building starts. Contractors and suppliers have had, until recently, an abundance of work in Alberta and marketing services such as advertising and project leads have (candidly) not sold as well there in recent years.

Since September the price of light crude has dropped from $120 to just over $50 a barrel. Additionally, the year-to-date number of building permits in Calgary, Alberta’s largest city, has tumbled. RCD’s Journal of Commerce (JOC) published on November 24, 2008 that the City of Calgary reported 19% fewer building permit applications between Jan 1 and Oct 31, 2008 compared to the same period in 2007. Overall construction values are down 27% to $3.6 billion in the first ten months of 2008 compared to same period one year ago.

The cooling of construction activity in Alberta appears to have created new opportunities for lead services and advertising. According to John Richardson, RCD’s Director of Sales for Western Canada, RCD has seen a 20% increase since September in lead generation (from the web) and prospect calls from companies either (i) located in Alberta or (ii) selling into that market. These types of leads are captured from the web in the form of email alerts and are then distributed and managed through RCD’s internal CRM system. Alberta — a territory that has been previously booming and unusually difficult for RCD to sell into — is now “hot” for project leads and advertising prospects.

The observations detailed above are by no means a scientific study on marketing behavior; however, they are accurate, current, and may help explain how some parts of the construction industry behave in challenging times.

How can these observations be interpreted and are they supported by other sources? Many proclamations have been made — from Business Week to Buzzle.com — about the virtues of reliable and actionable information when the economy hits a rough patch. Print advertising is forecasted to decline; however, online subscription services and online advertising should fare much better. Anthea Stratigos, CEO of Outsell, a popular research and advisory firm for publishers and information providers, very recently predicted subscription offerings coming “a little bit more back into vogue” and in September, 2008 Outsell highlighted Seattle-based Onvia, a lead generation and business development leader, as a “rising star” in its 2008 Information Industry Market Size, Share, & Forecast Report. These B2B trends have relevancy for the construction industry as it slowly but steadily embraces technology and especially the internet.

Construction and product specification lead services, trade shows, and advertising are typically large components of a building product manufacturer’s marketing budget. Contractors have for decades used construction leads to find new business, bid projects, and develop partnerships. It has been said that cutting marketing spend for leads and advertising may be giving ground to competitors who are more aggressive and decisive in a downturn. That aside, it is rational and prudent to scrutinize all expenses during a downturn; “cost containment” is a term often used right now. Expenses that cannot be linked to revenue are first on the chopping block. Lead services and online advertising — when implemented correctly — have measurable outcomes making an ROI determination easier. The best vendors are active in customer implementation by assigning resources, facilitating integration, conducting training, and measuring results with customers.

Firms are currently reviewing their 2009 budgets and making decisions; however, if marketing really is “muscle, not fat” (as Business Week’s contributor Steve McKee suggests) and based on observed customer behavior and informal responses, manufacturers and contractors — not to mention equipment rental companies, surety firms, and engineering firms — will likely be cautious before cutting lead services in the near-term.

If you are a Connect customer and would like to get help on how to best leverage your lead service please call 1-800-424-3996 to speak to one of RCD’s Customer Care representatives.

If you would like to learn more about RCD’s products and services please contact us through the web at: www.reedconstructiondata.com/corporate/contact/

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