Think Harder

Market Minute: Amidst the Canada-U.S. softwood lumber dispute, underlying strong demand on both sides of the border seems to be catching buyers unawares on many fronts. There are reports this week that some mills in B.C. are extending order files to unprecedented levels. In their February 8, 2017 Industry Update, CIBC Capital Markets describes dramatic lumber price increases since February 1 as “an encouraging sign for producers’ ability to pass on duties to U.S. consumers when tariffs are actually imposed.. considering we are only in partial retroactive territory, and we still have no idea how high Commerce will set initial duties..”

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There are many joys in blogging. We appreciate that cyberspace offers bloggers virtually unlimited latitude in expression and range of viewpoints. The medium can be a useful tool in support of business and development of customer relationships. In these days of heightened political sensitivities and polarized opinions, it’s evident that messaging via any medium creates perception of opportunity as well as risk. Measuring effectiveness may call for nuance. It’s interesting to read of the early feedback on the Super Bowl ad of our friends at 84 Lumber.

Of course daily now we’re exposed to direct messaging of folks marching in the streets, advertising a particular point of view or belief on, what is often a hastily-scratched message on cardboard. Through six years, I have found Harderblog to be a positive experience and useful medium for periodic messaging in support of lumber marketing here at Dakeryn Industries. Some might suggest that the messaging here is no more effective than if I decided to march in the streets with a placard advertising personal beliefs in support of the value-added services we provide. But then I took heart in affirmation of my beliefs on that score when I saw the image below. My only suggestion is that if I were a sign-carrying marcher in that parade I’d suggest a small revision to make it read: If you believe in lumber, think Harder…

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image source: brobible.com

Lumber Super Bowl

This year, Dakeryn has decided against buying TV ad time for the Super Bowl. The decision is based on analysis of how to most effectively nurture the relationships with our valued customers and supplying mills. It could be that the $5 million-plus cost for a 30-second ad played into the decision as well. But that hasn’t deterred 84 Lumber. According to this report at Adweek, 84 Lumber will make its Super Bowl advertising debut just before halftime of this year’s event – the only brand to purchase more than a minute of airtime for a single spot.

We’re told the purpose of the ad is to launch a year-long campaign focused on recruitment, targeting men aged 20 to 29. According to the report, 84 Lumber includes some 250 locations across 30 states and made Forbes’ 2016 list of “Largest Private Companies in America.” It is also one of the biggest such businesses run by a woman; Hardy Magerko was chosen by her father at the age of 27 to lead the company he founded in 1956.

Our industry is going through a period of extreme disruption. And I’ve always preferred to be the one doing the disrupting, rather than the one being disrupted. But to do that, we need to hire and train people differently. We need to cast a wider net, and to let the world know that 84 Lumber is a place for people who don’t always fit nicely into a box.
– Maggie Magerko

Economy Grade

When referencing “Economy” in relation to lumber, we’re talking falldown or lower grade. That’s not to say there can’t be value in economy grade. A whole industry of utilizing lower grades finds economic viability around remanufacturing lower grades of wood. At the same time, bottom-line, results-driven users of lumber are recognizing benefits of enhanced value in quality in planning construction inventory needs. It’s understandable that suppliers concerned with building brand recognition around quality, both in terms of service and product, tend not to build that awareness around ‘economy’.

In the airlines industry, ‘economy’ defines a supposed base line of minimum, acceptable service. Or so we thought. But not so much anymore. In an effort to redefine coach by re-grading passengers, it’s reported here a number of airlines are introducing a section with even fewer perks than economy class. The “deprivations” United passengers will be experiencing with implementation of “basic economy” suggest levels of service that will not allow for any overhead bin space – and declaration for boarding last. Presumably everybody still lands at the same time.

This trend is interesting considering the inferior quality of products and service being promoted seems to be ‘flying’ in the face of other aspects of commercial/industrial/consumer trends. In this age of heightened branding awareness, the airline approach seems to be contradictory to what their branding goals purport to represent. In the lumber business, “adding value” has built-in connotation for upgrade of quality in product and service, not a dumbing down of those variables. In fact, in the event of a new hybrid tax and quota softwood lumber agreement, some suggest that ‘economy’ could be the first to go.. on a slow boat to China.

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From NLGA, Standard Grading Rules for Canadian Lumber

Frictional Factors

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with Clark Ellis, LMC Forest Products Expo (4 Nov 2016)

Frictional Factors are said to impede process or progress. One of the highlights each year of the LMC Forest Products and Building Materials EXPO in Philadelphia is the keynote speaker at Friday’s breakfast. This year featured Clark Ellis, Founder and CEO of Continuum Advisory Group, a management consulting firm that works exclusively with the homebuilding and construction industry. His hi-speed presentation explored ways to improve your business in a world of rising demand and constrained resources. While re-confirming that the biggest constraints in the U.S. housing market recovery are land and labour, he stressed the need to minimize frictional factors. “Complexity is the enemy of velocity!” declared Ellis. “Reduce complexity throughout your organization to increase velocity and enhance your flow rates.”

Ellis talked about the Margin vs Velocity Mental Model, explaining that because “margin is what we know and it comes naturally to us,” companies tend to focus too much on margin. According to Ellis, “in a resource-constrained environment, collaboration trumps adversarial cost-based selection every day of the week.” Rather than focus on ‘more work’ and margin, build strategic relationships with suppliers and customers. “Instead of asking for more, ask ‘how are we doing?'” advised Ellis.

Ellis stressed that feedback – from both employees and customers – is critical. “If you are not measuring employee engagement on at least an annual basis, you are missing one of the most powerful and critical indicators of future business results.” Ellis argued that customer experience must also be measured, tracked, and used to make better managerial decisions. “Mapping and optimizing ‘customer touch points’ is crucial.”

Continuum’s four biggest opportunities to improve your business in today’s constrained environment:

  1. Understand and visually represent your business processes
  2. Drive a velocity mindset through your company and its external network
  3. Change your concept of trade and supplier engagement
  4. Understand that employee engagement drives customer experience which drives business results.

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Market Minute 

The 2016 LMC Forest Products and Building Materials EXPO was brimming with lumber dealers feeling upbeat about 2016 to date and bullish on 2017. However a number acknowledged significant business was pulled forward/covered in advance of the October 12 standstill expiry. Moderating activity since that time also helps to explain the present supply-demand imbalance. The skittish tone and extreme hand-to-mouth buying patterns in evidence suggest dealers, wary of winter and working down inventories for year-end, are perhaps content to “run out the clock” on a good year.

Great!

According to news that’s filtering through to us in the great White North, these be challenging days as friends and relatives to the south wrestle with decisions in advance of November elections, said by some to be aimed at “making America great again.”  Say what?  Again?  Let us echo a Toronto ad agency’s campaign that helps cut through the negativity in play.

Having just returned this morning from the classy LBM Advantage Forest Products Conference, I was also reminded just how invigorating it is to connect with people face to face. It’s been said that the best social network is a table and two chairs, or, in the case of the Dakeryn table inside the packed White River Ballroom at the beautiful JW Marriott Indianapolis, a table and six chairs! Despite election angst, dealers appear to be cautiously optimistic about business for the balance of the year. While bullish on 2017, the extreme hand-to-mouth buying patterns in evidence suggest an emphasis on risk management through December. Coming from B.C., where we are inundated with SLA headlines, it’s interesting to note there so far seems to be little weight given to possible cross-border softwood lumber trade constraints in relation to market impact.

Upon arriving home late last night, my wife relayed this story after picking up our five-year-old from Kindergarten yesterday:
Evie: “Mommy, I made a new friend from my class today”
“Oh? How did that happen?”
“He came up to me and said ‘Evie, give me all your Bunny Crackers.'”

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Indy Sunrise (18 Oct 2016)

In the days of magical thinking

According to a report at World Trade Online from Jenny Leonard, IWP News, last Wednesday’s meeting in Toronto between U.S. Trade Representative Michael Froman & Canadian Minister of International Trade Chrystia Freeland “did not yield sufficient progress”. Some takeaways from the report:

  • Multiple sources expect the U.S. lumber coalition to file a petition on Oct. 13 – the first day after the deadline expires – but they also note that the preliminary determinations won’t be announced by the U.S. Commerce Department until February or March, which gives both sides more time to talk.
  • One source said it is “very common timing” to get a deal done before duties attach and noted the two sides could still “engage in negotiations parallel to a case.”
  • The talks with the Obama administration can last only another seven weeks – leading some to doubt whether there is enough time to discuss all the outstanding details of the deal before a new administration’s team is put in place.
  • So far there has been no meaningful engagement on those details – including the target number for U.S. market share, an exit strategy for Canadian provinces to get out of the deal if they can prove their lumber is not subsidized, and the exclusion of certain provinces that were not part of the old softwood lumber deal.
  • Canada wants the new deal to reflect its provinces’ different demands – an approach referred to as “optionality” that was central to the framework of the expired deal.
  • The U.S. is holding on to its demand for a quota-only approach, which it says would limit Canadian lumber in the U.S. with certainty.
  • According to multiple sources, Froman emphasized during the meeting that the Canadians are better off reaching an agreement with the Obama administration by the end of this year – and noted that because of the transition period in which a new USTR must be nominated and confirmed, it could be months before the U.S. can come back to the table to discuss lumber trade.
  • While both sides have not yet ruled out the possibility of a deal being reached before duties are applied, one Canadian source said “we are now in the days of magical thinking. There is too much ground to be covered,” the source said. “The two sides have been talking past each other for more than a year.”

Informational Peekaboo?

The moment when somebody is on your website, interested in what you sell, and in need of answers, is The Question Moment of Truth (QMOT) explains marketing consultant Barry Feldman. Based on his interview with popular social media strategist Jay Baer, Feldman explores how well companies are responding to this critical moment here. Some takeaways:

  • Companies are generally not responding well enough to the QMOT. “Too many organizations still feel like there’s a reason for somebody to come to their site other than if they have a question or problem.. (as though) somehow going to their website is going to be valuable entertainment. A lot of brands still believe they are somehow competing successfully against Facebook for attention.”
  • “Websites are the only form of communication in the history of communication where every individual consumer of that content has to relearn how to navigate that content every time. Every website has different navigation, which is absurd on surface.”
  • “We are at a point, a transition phase, where business websites are going to become less, not more – and should – because nobody wants to go to your website unless they have a very specific task in mind.”
  • “Just because somebody comes to your website doesn’t mean anything, it does you no actual good unless the person who comes to your website then takes a subsequent action.”

So how does that “subsequent action” happen in the e-commerce experience? (this “weird game of informational peekaboo” as Baer describes it). And what happens when a prospect visits your website and can’t find what they’re looking for?
Baer and Feldman struggle for answers. They tell us offering more website options and channels to communicate is a possible solution, but timing – how to engage when the customer wants and needs to engage – is the challenge. Adds Baer, “Some people hate live chat, some people love it. And this idea that everybody has to call us doesn’t make sense because people don’t want to wait on hold.”

Perhaps it’s all not so complicated. It seems that an easy-to-navigate website, with concise information customers want, might be sufficient?

“We’re so focused on customer acquisition that we don’t spend enough time thinking about customer retention, and certainly not enough time thinking about what our current customers can tell us about what we should offer in the future.”
-Jay Baer

'I'm afraid Mr. Caldwell doesn't want to see you now. However, you're free to visit his web site.'