Don’t Get Caught Flat Footed with Market Changes

Watching industry trends is more than just a pastime. On the upside, it’s key to uncovering new product and business opportunities. But, it can also alert market watchers to changes that might spell doom for a product category.

Keeping abreast of market trends in home building products typically means a company monitors its own sales data, collects feedback from sales staff, watches industry publications closely, attends forums and conferences, and tracks publicly-available industry activity data, such as new home permits or remodeling expenditures. Frankly, using only these traditional approaches might be sufficient for a business to stay afloat in good times or in a less-than-dynamic market; however, as we all know, neither has been the case for the U.S. building product and materials market in recent years. The main problem is that, with the exception of your own company sales data, all of your competitors have access to the same information. This has led to massive “group think” in some segments of this industry, which, in turn, tends to discourage true innovation.

Who could have predicted the speed at which vinyl siding shares fell in new homes leading up to and just after the mid-2000’s housing collapse, or its rapid resurgence following the recession? Granite countertops, on the other hand, took the opposite course and skyrocketed until the recession, then fell 20 percentage points in a few years before resuming its climb. Or what about the recent rise in popularity for new home applications for vinyl windows, now claiming more than 60 percent market share, and surpassing their popularity as a replacement products? And who would have thought the percent of homes using foam sheathing would have remained relatively flat while energy codes have required more insulation in walls? Under the same energy code changes, spray foam insulation share in new homes has grown from about 3 percent in 2008 to 11 percent in 2012.

In hindsight, these few market changes — or lack of change — aren’t all that surprising when you consider the factors that drove them. Rapidly falling housing demand led to a highly competitive market and gave homebuyers the edge in new home negotiations. Free upgrades, like stone exteriors and granite countertops, were commonplace. The first-time homebuyer tax credit led to more starter homes in the new home mix at first, and fewer starter homes later — favoring vinyl siding at first, and then disfavoring. The tough industry conditions over the past decade have driven builders to simplify and shorten the home building process, leading many to specify building materials that can be installed in fewer steps to avoid the add to cycle time.

But while predicting future market change is, at best, an uncertain activity, savvy marketers and product managers are looking for clues about the future by spotting change when it’s beginning to happen. Home Innovation Research Labs produces a series of market demand data reports, based on our Annual Builder and Consumer Practices Surveys, precisely for this purpose. These reports measure changes in market size, market share, and usage patterns for specific home building products and materials. You can see how this data helps paint a picture of what’s to come in our recent "Trends" section article on the home insulation market. Of course, once you spot suspected change, you’ll need to investigate the cause to determine whether it signals a threat, an opportunity, or if it’s just the result of some temporary blip on the market landscape that is likely to change back soon. Major product manufacturers have also used our data to monitor the effects of their advertising and PR campaigns and those of their competitors.

It’s important to base your assessment of market change on reliable data and not the latest industry hype—just because people are talking about it doesn’t mean they intend to do it. If you’d like to discuss how we can help you keep tabs on your markets based on robust, credible, actionable data, let me know.

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