This report sponsored by Hunter Industries.
Will the Good Times Keep Rolling?
As 2001 ends and contractors look toward 2002, many wonder what’s in store for them.
The last few years have generally been good years for the irrigation industry. Drought-type conditions hit different areas of the country, new home sales climbed to record levels, new golf courses seemingly opened every week and commercial construction took place across the country. New irrigation systems were going into the ground all the time.
As 2001 dawned, however, contractors found themselves on the brink of a new year with new levels of uncertainty. The rocketing stock market was returning to earth in a hurry, interest rates were climbing and, perhaps most importantly, the word “recession” found its way into a great many conversations. After nearly a decade of unprecedented sustained growth, economists and business people alike wondered if the United States’ economy was due to slow down.
“Last year everybody was really optimistic going into 2001. Now they’re much more cautious,” said Steve Battiston, co-owner, Hydro-Tech Irrigation, Herndon, Va. Of chief concern to Battiston is the effect a sluggish economy will have on commercial real estate development. “Our concern is that commercial building, which is still relatively strong now, will fall off and match the stock market.”
To measure irrigation contractors’ thoughts about the 2001 year, Lawn & Landscape and Irrigation Business & Technology magazines surveyed 1,000 randomly selected irrigation professionals from across the country. After receiving a 16.3 percent response rate, the data was tallied, and much of it is provided here. Essentially, the numbers verify what many industry observers already guessed – the irrigation industry’s growth slowed noticeably this year. But this information also shines some light on the issues that concern contractors about the future and the composition of their businesses today.
| Where the Dollar Goes |
Industry estimates put the value of irrigation components around 20 percent of the total cost of materials installed on a new landscape. But that 20 percent can represent a great deal of spending on a wide range of products for irrigation contractors. What are they buying? According to a survey by Lawn & Landscape and Irrigation Business & Technology magazines, irrigation contractors spent more money on rotors in 2001 than they did for any other irrigation system components. Of course, rotors are an area manufacturers have focused a great deal of design and development on in recent years to deliver water to larger areas of turf more efficiently and reduce contractors’ installation labor needs by allowing them to put fewer sprinklers on a property. Pipe was the second most significant product expenditure, followed by sprayheads, valves and controllers, which were all at comparable levels. Significantly fewer dollars were spent on drip irrigation components, valve boxes and weather stations. Valve boxes simply aren’t as expensive or used in the same quantity on a job as these other components, and drip irrigation and weather station manufacturers continue educating contractors about the need for these products. In fact, slightly less than 30 percent of survey respondents said they purchased weather stations this year, while 68.5 percent of respondents purchased drip irrigation components. All other system parts were purchased by nearly all of the contractors. |
PAINTING BY NUMBERS. By and large, irrigation contractors are not large businesses.
| A Year of Ups and Downs |
Rarely does a year come along where all irrigation professionals enjoy similar levels of good or bad fortune because of the industry’s dependence on new construction and the weather, both of which can vary dramatically on a regional basis. This year brought its own challenges, chief among them the slowing economy and flat, if not slightly depressed, amount of construction from previous years. Irrigation contractors certainly felt the impact of these obstacles, although most respondents to a survey conducted by Lawn & Landscape and Irrigation Business & Technology magazines reported that this year was better than last year. To be specific, 62.3 percent of respondents said their irrigation sales grew this year. However, nearly 74 percent of these same contractors grew from 1999 to 2000. Meanwhile, 16.4 percent reported sales were flat this year and 21.3 percent said their sales dropped from last year. Among contractors whose revenue did grow, the amount of growth dipped slightly, to an average of 19.5 percent. Contractors whose businesses grew in 2000 reported average growth of 20.7 percent. Lastly, the pain was also greater this year for companies whose sales fell, as they did so by an average of 18.1 percent, which is nearly 3 percent more than the average loss felt by companies in 2000. |
CHALLENGES TO GROWTH. Contractors reported they faced a number of obstacles in 2001, not the least of which was a sluggish economy. But while the economy challenged many contractors in 2001, survey respondents identified it as the third biggest challenge they encountered during the year behind finding quality help and competition. In fact, the labor issue was called the first or second biggest challenge contractors dealt with this year by more than 51 percent of the respondents.
One silver lining to the economic slowdown is a steady rise in unemployment, meaning a larger labor pool from which contractors can select new staff. “We’ve had a whole lot more to choose from in terms of people. It’s amazing what a difference of one point in unemployment makes,” Fay said.
Competition was listed by 27.8 percent of respondents, and 25.6 percent of respondents felt that the climate and the economy were a primary hurdle they had to overcome.
Indeed, many contractors reported that the weather of 2001 was less than ideal for selling irrigation systems. David Williams, co-owner, Rainy Days Irrigation Inc., Garner, N.C., said his company’s sales for the first six months were off by 10 percent due, in large part, to rainy weather. “We were wetter than we normally have been early in the year and the rains have come at a point that made irrigation not an absolute necessity.”
LOOKING FORWARD. While understanding the past and present obviously offers insight into the industry, the key question people want to know is, “What does the future hold for irrigation contractors?”
Some contractors seem rather optimistic about the next few years. “We’ve had a great year and it’s still going. We expect to continue pretty well. Things are looking pretty bright,” said Jeff Pressley, co-owner, Superior Irrigation, Fort Smith, Ark.
| Why Buy? |
Irrigation contractors have an abundance of product options to select from when making a purchase, and a number of variables help sway their decision in favor of one manufacturer’s product vs. a competitive offering. Not surprisingly, contractors who responded to this Lawn & Landscape and Irrigation Business & Technology magazine survey said product performance matters the most to them. In fact, it was named as one of the three most important criteria by more than 91 percent of respondents and it was generally considered the No. 1 criteria as respondents were asked to select the most important from among seven criteria. Product durability finished a strong second in terms of number of contractors it matters to. However, while fewer contractors said price is a top factor, and even fewer pointed to brand name as a key consideration, those two issues are considered more important to those contractors who care about them than durability is to contractors concerned with installing long-term products. |
However, uncertainty surrounding the economy and the potential for war (as of presstime) is unsettling for most. No one knows what the future holds, of course. The housing market remained steady through the summer until dropping 6.9 percent in August. Meanwhile, economic uncertainty acted as a drag on commercial construction, and many industry observers believe the country has more golf courses than are necessary, which could hurt that market segment.
At the same time, the strong market for irrigation services over the past few years hasn’t gone unnoticed by those outside the industry, which has meant more competition as landscape contractors, in particular, add irrigation installation and maintenance to their service mix.
All these factors mean irrigation contractors will probably have to work harder than in years past to sell new installations and grow their businesses. Only time will tell exactly how hard the work will be.
The author is the Editor of Lawn & Landscape magazine.
CUSTOMER FOCUS: What Do Consumers Say?
A survey of 1,000 irrigation customers reveals how they perceive irrigation, how they find a contractor and what they want from a service provider.
So much of what landscape and irrigation contractors talk about centers on the challenges of their own businesses – finding labor, financing growth, delegating responsibility, and so on. But the truth is that everything contractors do, if they want to succeed, needs to be centered on their clients and potential clients. After all, irrigation system installation and maintenance is a service industry.
Of course, what customers want is rather obvious and simple: The best work at the lowest price as soon as possible, right? Truth be told, much more goes into a consumer’s perception of the irrigation industry, and nothing influences their thoughts more than their interaction with irrigation contractors.
To study this further, Lawn & Landscape and Irrigation Business & Technology magazines surveyed 1,000 homeowners who recently had irrigation systems installed to learn more about how they perceive irrigation contractors and, more importantly, what factors drive their decision of what contractor to hire.
| Why Are You Here? |
Water conservation offers a great reason for installing an irrigation system, according to many irrigation professionals. Unfortunately, few consumers share that thinking. In fact, only 19 percent of respondents to a Lawn & Landscape and Irrigation Business & Technology survey of homeowners with irrigation systems said reducing water use was a reason for getting an irrigation system. Instead, consumers clearly want to minimize the time they spend taking care of their yard without sacrificing the look of their landscape. More than 71 percent of respondents said they had an irrigation system installed to “reduce their own work,” while nearly 63 percent did so for the sake of their landscape. |
SURVEY SAYS: More than 310 individuals responded to this survey, for a response rate of 31 percent. The vast majority of survey respondents (more than 95 percent) had an irrigation system installed at their home, and this was the first system for slightly more than three-quarters of these individuals.
While record levels of new home sales and booming commercial construction across the country has contributed to the irrigation industry’s growth, contractors also appear to be benefiting from consumers’ dwindling amount of free time. The most popular reason for having an irrigation system installed was that respondents wanted to reduce their own work (see sidebar “Why Are You Here,”).
Consumers find irrigation contractors through a number of ways, but referrals remain the most popular research avenue (66 percent). While consumers also hired irrigation contractors they uncovered in Yellow Pages, saw on another property or learned about through an advertisement or direct mail promotion, not one of the survey respondents found a contractor by using the Internet. Once the consumers began their contractor selection process, however, roughly 5 percent of them used the Internet to learn more about the contractor(s) they were considering.
| Who Else Was Here? |
An obvious question for irrigation contractors to ask potential customers is, “How many other contractors are you soliciting prices from?” If that number is more than a few, the odds are good that consumer simply wants to find the best price, which makes them an undesirable account. A survey by Lawn & Landscape and Irrigation Business & Technology magazines, however, found that irrigation customers rarely solicit more than a couple bids for their irrigation systems, which is at least in part due to the fact that 66 percent of the respondents selected their contractor based on a referral. Meanwhile, about 14 percent of respondents selected a contractor after seeing them on a property, 14 percent selected their contractor from the Yellow Pages and 6 percent used an advertisement or direct mail to help them find a service provider. |
Since so many respondents relied upon referrals or seeing a contractor on a property as a way of finding potential service providers, it’s not surprising that relatively few respondents invited a number of contractors to bid on their job. In fact, more than half of the respondents (51.3 percent) only talked to one or two contractors before hiring someone to install their irrigation system.
Obviously, contractors are responsible for their own sales and marketing success. Once the potential customer calls and invites a contractor to bid on a job, the contractor has the opportunity to secure the job. In order to do that, the contractor clearly has to bid what the customer considers a fair price and be able to do the work in an acceptable timeframe. Survey respondents indicated these two factors matter more than the product the contractor wants to use, the warranty, professionalism or even the reference that may have brought the two parties together in the first place.
| What Matters Most? |
Ask any proven sales professional about the key to closing a deal, and they will invariably tell you that while having a quality product and the right price are important, sales success results from meeting the customer’s need. The challenge for irrigation contractors is identifying the particular need for each client they meet with and tailoring their sales presentation appropriately. Lawn & Landscape and Irrigation Business & Technology magazines surveyed 1,000 individuals who recently had an irrigation system installed professionally, and we asked them to identify the two most important factors in their contractor selection process. |
Most successful contractors clearly take the sales presentation seriously and use it as an opportunity to earn business. At the same time, a surprising number of contractors apparently don’t use meetings with potential clients to their fullest. Nearly 40 percent of respondents indicated that contractors who presented bids to them didn’t demonstrate the products they use, nearly half of the contractors didn’t check the home’s water meter, and almost 20 percent of the contractors didn’t even explain their services to the consumer.
When all is said and done, though, results matter the most to consumers, and nearly all of them seem pleased with the contractors they hired. Nearly 90 percent said they would refer the contractor they hired to other consumers. But despite this level of satisfaction, only one-third of respondents indicated they hired the contractor who installed the system to maintain it as well.
| Let Me Tell You... |
Let Me TELL YOU... Green industry professionals regularly lament the lack of respect they receive from the general public. Sales presentations, then, represent an opportunity to impress a potential customer and educate him or her about the level of expertise involved in irrigation system installation and maintenance. In addition, this client interaction affords contractors a chance to differentiate themselves from the competition that may also be bidding on the job. The Lawn & Landscape and Irrigation Business & Technology survey of 1,000 irrigation system owners found that various contractors incorporate a range of material and topics in their presentations. |
The author is the Editor of Lawn & Landscape magazine.
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