Volume 9, Issue 3 - March 2008

Trend Tracker

Competing in a Down Market
Developing Innovative Green Products is the Way
by Michael Collins

The debates regarding whether green building is merely a fad have come to an end. While published estimates of the size of the green building industry vary widely, there is widespread agreement that these markets are growing rapidly. All door and window manufacturers would be well-advised to try to win their share of these large and growing markets. Companies that don’t already offer green products must examine the economic benefits to manufacturers of doing so.

There is a strong case to be made for the environmental benefits of green building in areas like energy and water use, creation of landfill waste and pollution. However, these reasons alone are not likely to spur companies that have not already done so to invest the effort and money needed to develop green products. It is more likely that such late adopters would find the economic benefits of green products to manufacturers much more compelling.

Standing Apart 
The first benefit of offering green products is that it allows for differentiation from competitors. Many times, industry trade shows become the embodiment of “me too” thinking that is a problem in many industries. One can walk from booth to booth and see that some manufacturers’ product lines are so similar that they could switch booths in the middle of the show and hardly miss a beat. Investing in the development of a green product line that is, first and foremost, more energy-efficient, gives companies the ability to differentiate a portion of their product lines from that of competitors. Another benefit of a green product strategy is that it allows for continual improvements in energy efficiency, the use of sustainable materials and other areas that become ideal topics for press releases, advertisements and new brochures. 

Companies that offer green door and window products also help builders and architects achieve LEED certification for their homes and buildings. Obtaining LEED certification is a newsworthy event for these customers and the types of products that contributed to the certification typically are mentioned in the press coverage. All of this creates opportunities for word-of-mouth and referral business for the manufacturers whose products were used in the building.

The last and, many would say, most important reason for offering green doors and windows is that, if they are sold properly, they should command a premium price and offer manufacturers higher profit margins. For example, manufacturers of impact-resistant products offer a product with unique and compelling benefits and they expect and receive higher prices on these products. There is no reason that companies producing environmentally superior products that meet important needs of their customers should not expect to command a similar premium. Having a unique product line that carries a higher margin also makes a manufacturer more attractive to potential capital providers or acquirers. Acquirers, in particular, frequently are motivated by the desire to round out their product offerings. For such buyers, a “me too” manufacturer would be of no interest.

It’s All in the Sales Pitch 
The true challenge is in selling those products properly to customers. Every company’s sales force must be taught to focus on the cost of the product over its lifetime, rather than its initial cost. Past studies have found that, for large commercial projects, investments in green products can produce returns of five to ten times the money invested (even when future savings are discounted back to the present). If it can be determined, for example, that a given door or window product should be expected to pay for itself over a measurable number of months or years, then that must become the mantra of the sales force. 

It is easy in a time of market softness to tighten the purse strings and limit investment in areas like developing a green product line. The scarcity of door and window manufacturers exhibiting at the 2007 GreenBuild show indicated that this may have happened. It is reasonable to cut costs in a down market, but the great companies of the world did not cost-cut their way to the top. Most often, innovation was a driving factor behind their success and innovation requires investment. 

Michael Collins is with Jordan, Knauff & Co. He may be reached at mcollins@jordanknauff.com. Mr. Collins’ opinions are solely his own and do not necessarily reflect the views of this magazine.



DWM

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