By Malcolm Campbell, President and Chief Tile Guy at Midwest Mosaic
Midwest Mosaic, Inc. provides skilled ceramic tile installation labor in the tri-state region centered around Toledo, OH. Serving the residential client directly and the commercial markets through general contractors, MWM sells its skilled labor with a dual strategy, “Market Prices; Superior Performance” – a difficult yet necessary and balanced approach for these times where customers get more for less. While I own and manage MWM, I spend the majority of my time on my knees installing the tile.
I’m thinking about two marketing channels; b2b and b2b2c, and I will discuss these in two posts.
In this post, I will discuss our b2b approach; what’s working, why it’s not enough, and how we are going to make MWM’s b2b a better fit for its two prong strategy. Next post, I’ll discuss my thoughts on b2b2c still in the development phase. Hopefully, I can get you to think and leave your comments below. Who knows your participation below may lead to an engagement with Mosaic, Inc.
B2b, or business to business, is working for us right now. That’s a good start but it is no end state, because our b2b approach is strictly low bid – no comfort for Superior Performance. Still but a dream, B2b2c, or business to business to consumer is the networked approach. Effective networking compels other businesses who are in closer proximity to our target to suggest us as the preferred service provider. Awards in b2b2c are based more on reputation than price; hence, prices reflect a preference other than low bid. However, this being Toledo, OH and not New York, NY even affluent Toledoans are relatively price sensitive.
On MWM’s B2B
Midwest Mosaic employs a classic Plan and Spec Bidding tactic to build a pipeline of projects. A tactic I have employed successfully with various commercial construction concerns for over 15 years.
In a nutshell, we subscribe to one or many project news services. Serving the commercial sector, the news services provide detailed leads on upcoming work; project names, owners, location of the work, date of the bid, plans, specs, and list of general contractors (MWM potential customers) on the project, etc. We use this information to advertise tile pricing to general contractor prospects on any given project.
Q: What’s the first thing an estimator asks when he learns he won a bid?
A:”What did I leave out?”
Think of the tactic like an inbox/outbox. General contractors dump detailed information into an inbox for analysis. Our analysis yields our best low price for tiling a project. We place our best low price on a proposal in the outbox for the general contractors’ information and use. And so goes the life of a low bid commercial construction estimator, regardless of the skilled trade or contracting tier. Plans in, bids out. Little feedback, lot of silence. Few winners, and all the screw-ups you can handle.
How’s b2b working for us? Fantastic! About a year ago this month, I subscribed to BidClerk.com with a goal to double my sales year-over-year. By August 31, we will have billed 2x in 2012 with four months to go.
How’s the margins? So far so good, margins continue to exceed what is customary and usual in the trade. I owe this principally because I am still a significant part of MWM’s production team.
Will it scale? No. As MWM grows, my cost advantage on production will subside unless I can effectively train the culture to be clones of me. Not likely, and even if I did, they would deserve better pay than me, because most of them are or will be better installers than me. In short, I’m making margins because I work hard for cheap and it rubs off the right way with the guys.
MWM’s plan and spec bidding tactic is a pure low bid approach. At volume, MWM will fail or have to abandon its Superior Performance aspirations. Here’s why. The marketplace resembles perfect competition. It treats us like a commodity; my competitors may enter/exit the market with ease, together we are price takers based on our collective lowest best price. Too often my lowest best price is shipped to my competition unless I am stupid low; hence, MWM gains a disproportionate share of marginal to unprofitable work, meanwhile our labor cost structure escalates as we scale. Unless we assume our competition’s pure low bid repose, we will die.
I’ve seen our competition, and they ain’t pretty.
While they may give lip service to quality, I can assure you Superior Performance does not become them. I could go on about how they; cut corners, treat their workforce, and forego timely payments to vendors – but I won’t. Point is they are trainwrecks in the making, one big screw-up from bankruptcy (BK). On their way to BK, they enjoy being somebody’s preferred service provider. Somebody’s homeboy if you will. That somebody is our potential customer, but for the fact they keep giving our best low price to their homeboy – unless, of course, our best price is so stupid low (via our screw-up) that their homeboy says, “Hell no! Let Mosaic choke on it!”
Put it this way, I could be everybody’s homeboy if I bid every job for a buck (Larry, Daryl, and Daryl?), and I could give them all Superior Performance until I ran out of money.
Quickly, that would be that.
I could extend and pretend for a while longer if I dumped the guise of Superior Performance; and, cheated my employees, cut every corner possible and stiffed my vendors – in effect become the trainwreck I disparage.
(Side note: Strategy dictates what activities you can and cannot do, and low bid is the domain of poorly paid and poorly served organizations one wrong move from bankruptcy. My competition typically has a marginal point of differentiation. They are good people and not the trainwrecks I make them out to be. It’s just that I needed the strawman for the editorial point. If it were this simple, it would be easy; and if it were easy, everybody would become tilers or plumbers or electricians.)
Nonetheless, I have seen it possible to deliver Superior Performance using the Plan and Spec Bidding approach.
So it is Worth the Risk.
Enter the Million Dollar Tile Guy, John S. of New Jersey. In 2005 his tiling business was doing so well, he drew a salary…A SALARY…of $1M. You don’t pay yourself a salary, let alone a $1M salary, unless you you are confident about your sales and production teams, and together you have demonstrated consistent results over time. Million Dollar Tile Guy ($MTG) succeeded where so many failed, because he meticulously collected and utilized the data about his pricing efforts in a way that compelled his potential customers to choose him instead of shipping his best low price to their homeboys of the moment. His process, which I dub Plan and Spec Marketing, transcended the ineffectiveness of the Plan and Spec Bidding.
$MTG systematized his process in the 80’s, then paid a programmer to create a database/CRM program (DOS days folks) to make the grunt work simple and easy, so even a clerk could execute it. Subsequently he and his estimators were relieved to focus on doing good bids and closing them. They could afford the time to do so because they were converting more deals on fewer bids. And, his deal pipeline was not skewed to the stupid low bid; consequently, he could afford to deliver Superior Performance, because; his employees were treated well, he cut no corners (w/o sharing the savings), and he sent his vendors timely payments on volumes of business.
While Plan and Spec Bidding is effective in securing work for MWM, the quality of its deal pipeline is expected to be marginal to unprofitable while costs escalate with scale. Disaster awaits failure to change. The time is now to begin implementing a data intensive Plan and Spec Marketing approach to plug-in to its tried and true low bid approach. Superior Performance is at stake along with all its spoils; employee well being, great tilework, and timely payment at volume for vendors. Data begets need for; survey instruments, process, survey rewards, communication, and technology. Thinking about CRM here (suggestions?). Given I still need to spend substantial time on direct production, successful implementation will require the right human resources.
What do you think? What would it be like to be in the Million Dollar Tile Guy’s shoes? Wouldn’t you like to be a part of a team which developed an effective marketing service in a seemingly futile and chaotic ecosystem? Let me know, because we at WTR Blog work on problem solutions such as these every day.
Malcolm may be reached on twitter @mudduck if you need him.