Building materials companies face the challenge of how to position themselves in such a dynamic market environment. At the same time, these challenges are offset by significant opportunities created by the construction boom of the past decade. The key question is how companies can benefit from this boom over the long term while responding effectively to ongoing change in the construction sector.
Challenges in the building materials industry
The golden decade for construction, fueled by residential construction and low interest rates, is over. Although total industry sales rose by more than 20 percent between 2010 and 2020, soaring material and labor costs and weakening demand are now placing significant pressure on this once highly stable sector. Meeting these challenges requires new approaches and a clear commitment to the opportunities of digitalization.
Price adjustment complicated by transparency
Due in part to raw material shortages, many building materials companies are facing rising procurement costs while having relatively limited negotiating power. In this situation, companies must decide how to pass fluctuating raw material prices on to their customers. A further challenge arises from changes in the sales landscape driven by digitalization and the boom in e-commerce. In many cases, products and prices can now be compared online with very little effort. This increased price transparency is intensifying both competitive and cost pressure.
Outdated customer segmentation and sales channels
The Covid crisis led to a sharp rise in DIY demand. As a result, private customers continue to source more building materials through large-format retail and DIY channels. At the same time, professional products are increasingly shifting away from traditional field sales toward new B2B e-commerce platforms. In this environment, many building materials companies are finding that their legacy customer segmentation no longer matches the evolving sales landscape. This raises a further question: which products should be sold through which channels? At the same time, companies must avoid cannibalization effects between channels.
High complexity of big deals
Big deals are are a common occurrence in the building materials industry. Key customers and large-scale projects often make a critical contribution to business success. Yet the complexity of these deals makes it difficult for many companies to manage them systematically and close them successfully. What is often missing is an end-to-end view of the major-deal process, leaving substantial profit potential unrealized.
Success factors for building materials companies
To ensure that customers are not confronted with unexpected price increases when procurement costs fluctuate, possible price adjustments should be agreed contractually in advance and communicated in a transparent and understandable way. Price escalation clauses are particularly well suited for this purpose. These clauses allow suppliers, for example in the building materials sector, to adjust prices when their own costs rise.
![Segment customers to target them in the building materials industry.]()
Adjusting the customer segmentation
Adjusting the customer segmentationTo respond effectively to the changes described in the sales landscape, companies should first bring structure to their customer base through a consistent customer segmentation approach. This makes it possible to target customers more effectively based on their purchasing behavior. To avoid cannibalization effects, systematic fencing must differentiate not only prices, but also the associated value proposition.
In addition, customer segmentation can serve as a starting point for deciding which products should be sold through which channels. The objective is to establish channel steering that systematically captures different willingness-to-pay levels while avoiding cannibalization across sales channels.
Systematic strategic alignment
Big deals should be approached separately due to their high relevance for the success of the company. Big deal management must go beyond negotiation alone and take a holistic approach that aligns each deal consistently with the company’s overall strategy.
The big deal process thus extends from customer processing to the preparation of the offer and the conduct of negotiations through to the conclusion of the deal. In many cases, the groundwork for success is already established during the earliest stages of deal origination.
Experience and project examples
Prof. Roll & Pastuch has extensive experience in the building materials industry. R&P has supported numerous companies in addressing complex challenges. The focus areas of our projects in the building materials sector include, among others, the following topics:
Building materials manufacturer for plaster, facade systems, tiles, and bitumen
Development of target pricing guidelines for sales – based on regional factors, customer characteristics and product attributes.
Prefabricated house manufacturer
Redesign of the entire list price structure based on customers' willingness to pay, competitive pricing, and cost developments.
Window manufacturer
Value-based recalculation of list prices and performance-based optimization of distributor discounts, including target discount guidelines.
Architectural hardware manufacturer
Simplification and harmonization of the multi-channel pricing and discount structure, followed by implementation of the new commercial terms in the German market, including sales team training.
Locking and access control technology
Development of pricing for new products and a bundling strategy for newly developed hardware, software, and services for a German lock manufacturer.
Learn more about your potentials of pricing and sales
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Gregor Buchwald
Gregor Buchwald is Managing Partner of Prof. Roll & Pastuch. He has over 20 years’ specialist industry knowledge and consulting experience. His focus is on the areas of strategy, pricing and sales. His customers include multi-national companies as well as medium-sized B2B customers. Mr Buchwald has also written numerous publications about strategy, sales and pricing and speaks at numerous events.
