November, 2008

The Color of Money

Green building is a very real opportunity in today’s down market.

By John Wagner

Guys, there’s money lying all over the table. Green dollars. Consumers expect to double their spending on green products and services in 2008, totaling an estimated $500 billion annually or $43 billion per month. That figure wasn’t produced by a community college business seminar. It’s from the research giant McGraw Hill. The same folks tell us that the value of green building has “tipped” and is expected to be worth $20 billion in 2008 (10% of the total market), and balloon to $70 billion within four years. Further, 40% of today’s builders say green building is helping them sell homes in slow market conditions and that “quality” has emerged as the most important reason.

How do you convert this historic market boom into sales and dollars in your registers?

Sales Training. More sales training. And even more sales training.

In the last 10 months or so, I have spoken about green products and green sales techniques to more than 20 dealer conferences and training seminars. The single greatest obstacle I see to dealers capitalizing on green building is this: When a contractor comes into a yard, and says he wants to “go green,” most sales guys don’t know how to express that customer desire as a product choice. The sales guys don’t know how to respond with product recommendations, either by category or brand name. Oh sure, they may be able to point out the easy stuff, like low-VOC paints and adhesives, because they are labeled and branded green by the manufacturer. But what about the higher margin stuff? The 75 pieces of lowemitting FSC-certified plywood (instead of non-certified lumber), the 60 raisedheel “energy” trusses (instead of scissor trusses), the multiple sheets of premium formaldehyde-free hardwood plywood (instead of traditional sheetgoods), or the 35 Energy Star windows (at $660 each instead of $400). Guys, that’s where the money is. That’s where the real margins are, on the premium products that people are tumbling over themselves to buy when going green.

Telling Green, Selling Green To determine whether a product is green, you can start by looking for a third-party label. That said, today’s labels can be new and confusing. Even more confusing, many products (like energy trusses) will never be third-party rated for green, even though they are green to the core, in terms of their components and what they contribute to the structure’s green attributes, like a good thermal envelope.

So, your sales guys need training in at least two categories. One, they need to be able to read the basic labels and know the basics about green standards, especially in the area of lumber (SFI and FSC), windows (the NFRC label), and the various agencies that rate products for indoor air quality (VOCs). More importantly, they need to develop the critical judgment to determine if a product is green, with or without a label. That means obtaining a basic understanding of common or consensus green principles (see “What Green Really Means,” Sept. 08 LBM Journal) and knowing how to express green principles as product choices down to the brand level.

How Much More Will People Pay for Green?
When a contractor comes into your yard, and says that his client has asked him to go green, it’s likely the contractor doesn’t know what “going green” means. Indeed, he is looking to you as the expert. You’ve done a great job historically, by knowing dry times, workability issues, installation tips, and the latest products. Why wouldn’t you be an expert about green? By getting the sales training mentioned above, you are off to a good start in being able to look smart. But the next question is: What will the contractor’s customer pay to go green? Luckily, there’s recent NAHB data on consumer green spend.

For the average U.S. consumer building a typical home, (+/- $225,000), 51% will spend between $5,000 and $11,000 on features that reduce energy consumption and utility bills; 16% of those consumers will spend more than $11,000 and 32% will spend less than $5,000. So, if you were bidding out the whole house (and I know that’s improbable, but you get the point) you can put together a package that is worth around $11,000. If the customer freaks out, you can work down from there to “yield manage” the green spend.

Finally, it doesn’t take much to train your sales staff to knowledgeably sell green. On average, around four to five hours on the basics will get them comfortable with the terms, familiar with the new products, and aware of the traditional products that have always been green, before this market exploded with opportunity.

The award-winning author of many articles and books—and a sought-after green trainer and keynote speaker for dealer events— JOHN D. WAGNER is the Green Editor for LBM Journal and the content manager for the Certified Green Dealer Program. Contact John: John.Wagner@LBMJournal.com. Or visit his website: www.JohnDWagner.com