Marketing in the Cloud Age

You may be familiar with “database marketing” – the way companies sort and prioritize customers so as to target their prospects most effectively.

In construction, this becomes particularly important as companies must continually search for new projects leads in order to stay in business.

Construction companies have a head start in that their customers are generally the first to initiate a request for services. This is what happens when a project goes up for bid. This means that contractors are saved the step of convincing prospects of the need for the service in the first place.

However, they face the challenge of convincing customers that they are the right company for the job. Once a project goes up for bid, they must be one of the first on the scene. And they must be able to perform that project with less cost and at as high a standard as their competitors. So it pays to have many prospects, and to have a way of quickly gauging your suitability for the job.

Traditionally, project lead gathering has been done through a combination of marketing methods. Companies may rely on word of mouth and previous interactions with customers to win them new bids. They may subscribe to project news bulletins like this one from Reed Construction Data. They may also promote themselves through paid directories such as The Blue Book. Yet many have not yet been able to benefit from database marketing.

Why is this? Database marketing has historically been reserved for larger companies with access to data warehouses. The larger the company, the greater the access to resources, the greater the likelihood of success.

Think of owning a personal library of 100 books. Now picture a public library with 10,000 books. Now multiply that by 10 libraries with an inter-library loan program. That is a 1000-times greater likelihood of finding the resource (or the prospect) you want.

Despite the Cloud being a nebulous and often-misunderstood tool, it will soon be changing the face of the market by opening this capability to smaller and larger companies alike.

In an effort to keep construction managers current, we’re breaking down the six main strategies of database marketing into their traditional and Cloud-enabled roles.

Segmentation	Sort customers by category; prioritize by potential	Search customer database by desired characteristics
New customer acquisition	Track acquisition; focus on high-ranking segments	Find customers not currently in your own database
Customer penetration	Compare total purchases to purchases per customer; increase purchases among existing customers	Receive real-time updates on customer needs; be first to reach out to fulfill those needs
Customer retention	Identify customer loss/inactivity; introduce loyalty-building strategies	Keep abreast of news on key customers; participate in social media conversations
Marketing intelligence	Gather qualitative information on customers	Customers add their own details to prepopulated profiles
Measuring results	Test effectiveness of programs & strategies	Track progress against competing companies

What does this imply for the construction industry?

For one, smaller businesses may receive more project leads as they are able to tap into the data-storage abilities of the Cloud.

There is the chance that marketing budgets may go down, at least in the area of data acquisition and storage, as this falls into the public domain. However, construction companies will find the need for new areas of expertise as they learn to promote themselves through these emerging channels.

A $20 Billion, 2000-Ton Problem

Today I'll be taking look at an industry that generates 160 million tons of waste annually[i], 70-80% of which is destined for landfill. You guessed it: the construction industry.

Some facts: The average new construction project yields 3.9 pounds of waste per square foot of building area, or 97.5 tons of waste for a 50,000-ft² building.[ii] Every year in the US, approximately 5 billion square feet of new construction is built.[iii] That’s 9.75 million tons of waste from new construction each year.

Now you may be saying to yourself, “That's one industry that could benefit from an overhaul,” and this is probably true. But for now I’d like to look at one area of the industry that is often hidden from the casual observer. This is the way information is transmitted during the construction process.

Ever wonder how building plans get from an architect’s drawing board to the construction site? If you’re like me, you may have had a quaint idea of rolled-up blueprints being hand-delivered, unrolled, and voilà! And it turns out you wouldn’t be far off.

Construction file-sharing still operates much as it did over the last century. Architectural plans are now drafted in CAD programs, yet being too large to email, are usually printed through a process called reprography (think “photography”) and delivered to the numerous parties involved. With the advent of “modern” technology, plans can now be sent from headquarters by CD, or an information-sharing platform known as an FTP (File Transfer Protocol).

Reprography is clunky, to say the least. It requires bulky machinery and heavy-weight paper that often cannot be recycled. Now, if you’re like me, you’re curious how many trees this disposes of and how much waste is produced. Well, I did my research (actually, someone had handily done the research for me) and the 37 million blueprints printed annually in the US alone come to 42,000 trees, or a line of felled trees stretching from New York to DC.[iv]

I calculated the waste that must result. At an estimated 1182 in² of paper per blueprint (paper sizes range from 18x24” to 36x48”) and 187,000 in² per 20-lb roll, this adds up to over 2000 tons of non-recyclable waste each year.

Now, I have some trouble imagining what 2000 tons looks like, so I went online for a visual aid, and came across this video of engineers moving a 2000-ton gantry crane:

Now, truly, in comparison to the 160 million tons generated annually by US construction, or even the 10 million tons generated by new construction, this figure is just a drop in the bucket. A 2000 ton drop, but a drop nonetheless.

Will evidence of this sort be enough to switch the industry to a less environmentally-costly method? I don’t believe so. To be fair, cost savings to the construction companies themselves should be demonstrated first.

To evaluate this, I will use a tool published by Osterwalder and Pigneur in their handbook “Business Model Generation”, called the Business Model Canvas. It sums up the activities engaged in, customers targeted and value generated by a company, all in one picture. A sample canvas for the construction industry might look like this:

Next, Osterwalder and Pigneur propose coupling their canvas with the Blue Ocean Strategy conceived by Kim and Mauborgne. This is a strategy which quite simply advocates reducing and eliminating cost items, while raising and creating new revenue streams.

Put in other terms, what can a company do to deliver the same (or a better) value proposition while incurring fewer costs and increasing revenue?

Right now, the largest delays occur before construction even begins, while project managers send blueprints to subcontractors in order to receive estimates. This process can take up to 1-2 months to complete. Add printing costs at around $30,000 per project, and you begin to see where some cost items might be reduced or eliminated.

Enter new technology. Software exists to take the struggle out of file-sharing. It’s just a matter of putting it into practice.

Andrey Nokhrin and Konstantin Novikov, co-founders of BuildersCloud, a startup I work with, are pioneers of such a technology. Working as a construction project manager for 5 years before starting his company, Nokhrin underwent all the hassles of communicating through outmoded technology. As he says, “$4 billion a year is spent in the US on paper plans alone, $10 billion a year on rework caused by outdated drawings, and $5-10 billion a year in wasted time. Altogether, it’s about a $20-25 billion/year problem.”

Based on his understanding of the biggest barriers in construction file-sharing, their software includes takeoff and estimating tools that allow subcontractors to compile quotes while skipping the printing step. It solves the file-size issue by storing projects in the virtual cloud, and gives contractors and clients an avenue of connection through a Yammer-type networking platform.

Will the industry adopt such technology, even if it promises savings on this scale? It depends: among bidders, who will clients pick? The company with the month-long delay and $30,000 in reprography printing costs? Or the one who has figured out how to eliminate these?

BuildersCloud is banking on the latter. Will software like theirs become the new industry standard? We'll soon see if their instincts are correct.

Construction documents range from 5 MB to several 100 MB[v], too large to be emailed. As it is, hundreds of files per project are printed, or sent by CD or FTP to subcontractors. However, this process can take weeks, and with file changes or corrections, months. With emerging software like this PlanViewer from BuildersCloud, blueprints can be viewed, corrections made and takeoff measurements performed instantaneously from a range of mobile devices.

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[i] “Buildings and their Impact on the Environment:  A Statistical Summary.” US EPA

April 22, 2009 <http://www.epa.gov/greenbuilding/pubs/gbstats.pdf>.

[ii] Monroe, Linda. “Diverting Construction Waste.” Buildings. March 1, 2008 <http://www.buildings.com/ArticleDetails/tabid/3321/ArticleID/5758/Default.aspx>.

[iii] “A Historic Opportunity.” 2030 Architecture. 2011 <http://architecture2030.org/the_solution/buildings_solution_how>.

[iv] Neal, Houston. “The End of Blueprints.” Software Advice. 10 Dec. 2009. <http://blog.softwareadvice.com/articles/construction/the-end-of-blueprints-1121009/>
[v] FTPforArchitects. <http://www.ftpforarchitects.com/>