More About This Episode In this episode, Zach and Beth talk to Jennifer Castenson, VP at Zonda, about residential builders, what they want and need, and how to reach them right now and in the future. Transcript Zach Williams: The residential construction industry is probably one of the hottest I've ever seen in my career. It's pretty wild. And on today's show, we bring on somebody who talks to builders on a regular basis, and they share their insights on what's going through the mind of the builder right now. What are trends that are happening? What can manufacturers do to ride that wave of demand heading into this next year, as well as how can they establish better relationships with builders regardless of what the market condition looks like? It is a great episode as you prime your strategy for 2021, especially for those who are in the residential construction space. Let's get into the show. Voiceover: Welcome to the Smarter Building Materials Marketing Podcast, helping you find better ways to grow leads, sales, and outperform your competition. Zach Williams: This is Smarter Building Materials Marketing, where we believe your online presence should be your best salesperson. I am Zach Williams, alongside my co-host, Beth PopNikolov, and we're going to be talking about builders today. I'm really excited about today's episode. Beth PopNikolov: We are really excited to introduce to our audience, we have Jennifer Castenson. She is the vice president of the artist formerly known as Hanley Wood. They've recently rebranded as Zonda. She's going to tell us a little bit about that. So welcome Jennifer. Jennifer Castenson: Hi Beth, hi Zach. Thanks so much for having me. And yes, we, Hanley Wood and Meyers Research, rebranded as Zonda. We're really excited about the rebrand and it's one way to have all of our brands under one umbrella. It's super exciting. So thanks so much for having me. Beth PopNikolov: We are excited. Zach Williams: I'm really excited to have you on the show today, Jennifer, because I think you have a really unique vantage point around builders. And if there's ever been a time to be a builder, now is that time. I think you and I met, was it earlier this year? Face to face at Pro Sales 100. Jennifer Castenson: That's right, yep. Zach Williams: In Dallas. Yeah, that's right. And so, when we were talking about having you on the show, I said, "Hey, what do you think we should talk about?" And you're like, "Oh, well, we should talk about what's happening with builder trends." And I think it's a really good time to hear about what's happening in that industry, especially considering that you've just held some events for builders, small builders, big builders across the board. And so, I like to kick things off and just hear a little bit from you about what you're hearing and seeing in the industry and how that translates to what manufacturers should be doing and thinking about. Source Jennifer Castenson: Sure, absolutely. So yeah, we just hosted our Builder 100 conference, which is an event for leadership executives in production builders across the country. So talking to KB Home, Taylor Morrison, Poultry, Beazer, Shea, Fischer, all the top 100 builders across the country. We had about 500 attendees and we had most of the CEOs and executive leadership, it's a peer to peer content forum, so a lot of them presenting as well. Jennifer Castenson: And in talking to them, a lot of the things that keep occurring is exactly what you said, Zach, it's a really good housing market. New construction has been going strong because of COVID. And the builders are trying to find new markets, lower density markets, and new markets where people are going to define more affordability. I just curated a story this morning that said that 23 million millennials are moving because of work from home. And this is from The Economist from Upwork. But regardless of the numbers, we know that it is a trend right now, and trend is that people are moving out into lower-density areas. And the builders are trying to find land in those areas. Land is becoming more costly. Materials to buy homes are also becoming more costly. And the supply chain is maybe even higher risk than before because of COVID factories shutting down. So those are some of the trends that I'm seeing. Beth PopNikolov: If you were a manufacturer looking to expand your footprint in North America, what metropolitan areas would you be looking at? Like, maybe we need to have a warehouse there or open a plant there to get ahead as the footprint in a currently underpopulated, but growing population area. Jennifer Castenson: Yeah, sure. That's a great question. Zach Williams: Yeah, so basically if I want to make more money, where do I need to go? Beth PopNikolov: Yeah, yeah, that's exactly what I'm asking. Jennifer Castenson: Well, that's a good question. I think that as building product manufacturers, they've got to be looking at a lot of things, right? So where are they manufacturing right now? I know that getting things sourced from overseas have a little bit more difficult. And that's some of the challenges that builders are facing with the supply chain right now. And then, getting them through distribution here in the United States is also a little bit more challenging than it hasn't been in the past. Jennifer Castenson: So with all that being said, like I was saying, builders are looking for lots in new areas. So because people can work from home, they're looking at lower density areas. So somebody who Google's no longer requiring people to come in the office, Facebook is no longer, Twitter is no longer, there are many banks, many financial institutions, they're inherently risk-averse, and so they are just telling people to stay home. Jennifer Castenson: So a lot of people who work for those organizations are now looking at what does my home, my home has to be an office. My home has to be a lot more than ever was in the past. I'm spending more time there. I'm teaching my kids from home. I'm working from home. Now, what I have used as home no longer works for me. So where should I go? Where can I go? And a lot of them are moving into spaces where there's community, where they have more space within their homes, so they can have walls in between the study portion, have walls in between where working and where they're eating. Jennifer Castenson: So when you're asking the question, where should manufacturers go, I think that it's going to totally depend on what their transportation looks like. How easily and accessible are these different areas and how can they get their products across the country? Now, I don't think it changes that much probably. For a lot of manufacturers, it's just where and how they're getting them to and creating efficiencies and making sure that things don't get stalled because of COVID. So taking the safety precautions in the manufacturing process so that they don't get those backorders and they don't have to shut down and they don't take those risks. Source Zach Williams: One thing I would love to know and hear from you, Jennifer, is you held that recent event where you had some pretty large builders on a virtual session or a virtual conference. Could you share any kind of insights that you heard, like things that you had like an aha moment or a story or heard that you think would be valuable for manufacturers to hear from the builder's perspective about what's going on? Because it's not just simply, oh, well, there's a ton of demand and we need to fulfill that demand and we need to do that on the way to the bank. That's just a very small viewpoint. And I think there's a huge opportunity for manufacturers who are looking to break in with builders in a way they haven't before. And so, if you have any stories or aha moments that you've seen or heard, I'd love to hear that from you for the manufacturers as well. Jennifer Castenson: Sure. So I actually moderated a session that was about procurement efficiencies. And I talked to three folks who, one who is a pre-fab modular construction builder, another who is focused on CLT, cross-laminated timber construction. And then the third, that's actually doing some 3D printing. So these are really innovative in the space of volume homebuilding. And what I wanted to talk to them about is how they see things progressing and how they can bring some of that innovation to scale. Jennifer Castenson: One of the things to me which was an aha moment was that it's not winner-take-all. And all of them were saying that. They're mostly competitive and they were all saying, "How can I help you?" Beth PopNikolov: Oh, interesting. Jennifer Castenson: "And how can you help me?" So they wanted it to be a relationship and a rising tide raises all ships and they want to move the industry forward. Jennifer Castenson: So I thought they're talking about integrated innovation. And ultimately, another thing that I found very interesting is it's all to get to more affordability. So interest rates, what's driving a lot of the boom in housing right now, housing sales, is that interest rates are so low and people can't afford to move and into a new home. And with those low interest rates, while they're helpful, I should say, while the low interest rates are helpful, there's still a need for affordability. So all of these other barriers for builders are the regulation, the land costs, the labor costs, all these things that mean that most of the time, when they build a home, they have to build a luxury home in order to get any profit on it. Jennifer Castenson: So right now, they have all these demands. People will pay the price, but most people are looking for entry-level. So a lot of builders are switching gears and trying to get into that entry-level home price that when they've never been in that space before. Beth PopNikolov: So is there making these shifts... So shift is like the word of the year, right? There's so many things that have shifted this year. How can manufacturers who want to be a part of this shift at stake go towards the more entry-level home and be a preferred supplier of the builder? How can manufacturers break-in? How has the sales process changed or what do they need for manufacturers that maybe they haven't thought about until this year? Zach Williams: That's a great question. Jennifer Castenson: Sure. So I think that there's a number of things. So how can you lower costs within your manufacturing process? Are there things that you can do without? So it's just sort of taking an audit of the process and talking to the builders that you're working with and saying, what is the most important to you? What should I prioritize and how can I deliver on that? Jennifer Castenson: And then, I also think that what builders are looking for, and actually what consumers are looking for, and therefore builders are looking for, are things that impact health and wellbeing and working from home and helping. So if you're a manufacturer, how can you take your products to a higher level to deliver better on that health and wellbeing component? So I think that's a huge thing that people should be looking at. Jennifer Castenson: And then, I was just talking about where and how builders are looking for land and different land opportunities. They're looking for land that is inexpensive or that they can build on inexpensively. And they're also looking for things that are resilient. So right now, we have crazy wildfires that are impacting so much of the country. We also, at the same time, are having hurricanes and their insurance is changing and home builders have to be looking at that. And that impacts the price of land, that impacts the cost of the home. So manufacturers need to be thinking about how they're bringing products to the market that can help with resilience, that can help with lowering the insurance costs, that can be a barrier to strong winds. So there's a lot of different components that manufacturers, or opportunities I should say, for manufacturers to enter into that resilient, healthy space. Zach Williams: One thing I really want to hear from you about, Jennifer, is, what are manufacturers doing that doesn't make any sense? What are they doing that's, as a builder would say, "I cannot believe manufacturers are doing this"? I like to think of this as the closed-door moment. What are builders saying about manufacturers when they're not in the room? And I'm asking this question. It's a very loaded question, but I want to know that because I want manufacturers who are listening to find ways to stay ahead of, as best said, that shift word. I want them to stay ahead of the shift and understand what are the things going through the builder's mind that manufacturers need to know about? And how can we help them be more successful as they head into this next year? Jennifer Castenson: That's a good question. Nothing really comes to mind, and I have actually took a page of notes to, as I was thinking of things, I kept writing them down on this page, which is really hard to read now. And I don't even know if I have an answer for that. I think that what I have seen, and actually I've been on both the manufacturer side, working for manufacturer for nine years, and then I've been on this side of it. I have not worked for a builder, but I've seen that kind of dynamic, and I feel like there is a fairly good relationship where there is a lot of back and forth and there's a lot of dynamic. Jennifer Castenson: I do see there are some manufacturers who invest a lot more in R&D, and when they do that, they reach out to us, as Zonda as an organization, to help them with surveying or understanding what the builders are thinking. And actually, I hosted a focus group for one of the manufacturers a few months ago, where we really dove into some of the sustainability issues. And now they're going to walk away and be able to deliver a lot more of that to the builders. Jennifer Castenson: But I think that in general, I don't know if there's something that I can point out that builders are frustrated with, or I think, for me, if I was a builder, a custom builder, even up to a production builder, the number of options are really difficult to manage. So if you talk to a production builder or a custom builder even, limiting that number and making them reduce choices or control choices would be hugely beneficial and really help the back and forth, the supply chain, and I think every aspect of that. Zach Williams: How would you do that? If you wave a magic wand and make that happen? Jennifer Castenson: I know, right. Well, if you look at some of like consumer products, Coke doesn't need to have a diet caffeine-free Cherry Coke. Coke is a really good product and it sells a lot and most people like it. Can you just stick with that product and put more efforts into that, reduce the cost of it and make your consumers happier that way? So that's a very simplified version, but if you're another building product manufacturer, can you look at what sells the best and put more behind it, put more of those sustainability, health, resilience features into that product and bring it to your builders in a different way that reduces costs for them and reduces headache and all the optionality. That would be great. Beth PopNikolov: I think that's really smart and probably an under-utilized strategy. We talk a lot about the 80/20 rule, right? There's 20% of your products probably bring a manufacturer 80% of your revenue roughly. But then, so those manufacturers are sweating about, how do I create this net new product that is sustainable and speaks to health and wellness, and doesn't have off-gassing or is green and healthy and whatever? But instead of creating net new and going, maybe outside of your core business, instead looking at how do I revise my existing core and trusted products so that you're instantly taking down some of those immediate objections. So this is a product that you've always trusted, you've used it for the last 15 years, we've just removed some chemical or... I'm obviously going to get out of my depth with what you would have to do, but we improved the installation and we increased our values, whatever. I think that's really, really smart. Zach Williams: Jennifer, this has been great. Thank you so much for coming on the show. For our listeners, what's the best way for them to get in touch with you if they want to reach out? Jennifer Castenson: Yeah, absolutely. So I can be reached at [email protected] or a LinkedIn at Jennifer Castenson. Beth PopNikolov: Awesome. Zach Williams: This has been awesome. Thank you so much for coming on the show. For our listeners, if you want more great content like this, go to venveo.com/podcast. Also, make sure to rate and review us in the podcast store. Until next time, I am Zach Williams alongside Beth PopNikolov. Thanks everybody.