Marketing in a Recession

I may get thrown out of the SMPS for saying this -- or I would if I were in the SMPS -- but I find it incredibly disingenuous for someone who sells marketing consulting services to advise their client base to increase marketing expenditures during troubled economic times. Even if they truly believe what they're saying, these people must recognize the perceived conflict of interest this raises.

It’s like they're telling you to put gas in a boat's engine when it's sinking. It's true that the boat (i.e., firm) will go nowhere without gas (i.e., marketing). But if you don't first plug the holes, there won't be a boat. And in this case, the people giving the advice own the gas station!

Most AEC firms don't have to invest more money into marketing. You may, in fact, be able to cut overall marketing expenses if you invest your firm's time and effort into more cost-effective forms of marketing. For instance:

• Publish Articles. The mainstream media may be dying, but there is still what seems an endless stream of trade and specialty publications for the AEC industry. Target a handful and try to get an article (or a few) published. It's a lot less expensive than splashy, full-color ads and, as part of the editorial content, an article carries a lot more credibility with the reader (i.e., your client base). I'll be speaking on this subject at the ACEC's Annual Convention in Washington, D.C., on April 28, 2009.

• Make Subtle Web Site Improvements. A lot of company web sites in our industry are showing their age. Yours may need an upgrade, but if money is tight, make cosmetic changes and functional improvements instead of revamping the whole site for big bucks.

• Use Your Staff's Non-Chargeable Hours. For A/E firms seeing their staff's average chargeability dropping, the choice sometimes comes down to laying people off or finding other things for them to do. If you're in position to carry some folks while you wait for the workload to pick up (if only so you don't risk losing someone good), instruct your marketing staff or a marketing-savvy co-worker to get these people involved in the marketing effort. This could mean attending networking events, writing letters to clients and targets, starting a company blog or some other Web 2.0 function, or helping with graphical or electronic marketing collateral. See what these people are good at and use it.

• Give Some Attention to Down Markets. There's not much residential building of any kind going on here in Massachusetts, but one of my engineering/survey clients is keeping the development community in his firm's marketing rotation. He just contributed the cover article to a local builder magazine, receiving several comments about it from developers. They're down now, but they won't be forever. Chances are, they'll remember my client when the market comes back.

• Pick Your Spots Carefully. It's important to get out to trade shows, conferences, and other leadership events. Unfortunately, when money is tight, some firm leaders just stop going altogether. Or, if they limit it to one or two events, they choose the wrong one or two. Before you do anything, do some research. Look at the universe of possible events and make an honest assessment of which are likely to provide the most benefit to the firm as a whole. (Or to you, professionally, because if you're a firm leader, they're one in the same…just don't go to a show in Vegas only because you love Vegas.) You may find that the friendly trade show where you see the same old faces from the same old firms isn't as valuable as a leadership event that challenges your preconceived notions and breaks you out of your comfort zone. You may determine that the "fringe" event you never considered is actually rich with potential clients. When it comes to events -- and, in fact, most methods of marketing -- doing something just because that's what you've always done is usually the wrong approach.

These are just a few ideas of many. Give it some thought, talk it over with your partners or marketing staff, and I'm sure you'll come up with a few of your own.
jag

ENR's analysis of the Senate Version of the Stimulus Bill

ENR published an article online this morning analyzing the Senate version of the stimulus bill and comparing its infrastructure spending and AEC-related tax initiatives with the House version.

But there are wide differences in allocations for other budget accounts. For example, the Senate has $1 billion for prison construction and upgrades; the House has zero. The Senate also allots $5.5 billion for cleaning up DOE’s former nuclear-weapons facilities, while the House has $500 million.

On the other hand, the House is more generous to Clean Water state revolving funds, providing $6 billion, compared with the Senate’s $4 billion. The House also recommends $3 billion for Airport Improvement Program construction grants; the Senate version contains $1.1 billion.

The largest single construction spending allocation in each bill is federal highway funding. Senate appropriators provided $27.1 billion. Of that, about $570 million is set aside for projects on American Indian reservations, federal lands and for ferry
transportation. The other $26.5 billion would be distributed to states according to the current formula for the Surface Transportation Program. STP requires 10% of the funding go for safety-related spending and another 10% for bike paths and other transportation “enhancements.”

Daily Roundup

Interesting day today on the AEC business front, made all the easier to dutifully follow here in Mass. when outside the window was snowfall, then sleet, then a cold rain.

At 10 a.m., the American Society of Civil Engineers (ASCE) officially released its 2009 Report Card on America's Infrastructure. The results were predictably bad, but the tone of the press conference had welcome measures of optimism and forward-thinking ideas.

At 1:30, I listened in on part 2 of PSMJ Resources' A/E Industry Forecast Webinar. In Part 1 yesterday, the news on private-sector markets was almost entirely bad. The only exceptions were the energy and environmental sectors. The results on public-sector markets today was a little better. Again, a bit of hope trickled through the gloom.

Later, I spoke with a client who tells me that he's dealing with frustrating delays on major public-sector projects. In thinking about it later, I wonder if the anticipation of the stimulus money isn't as much or more at fault than the crummy economy.

A few minutes ago, the House passed its (only slightly changed from the original) version of the stimulus bill. The vote was along party lines, with the exception of 11 Democrats who voted against it. Not exactly the rousing bipartisan support President Obama wanted. Next week, the Senate will take up its version. Unlike the House, the bill is unlikely to pass the Senate without at least two Republicans voting for it. This could mean significant changes in the bill -- good changes for our industry, I hope.

Busy day. Big day. Can't wait to see what's in store for tomorrow.

Follow-up -- ASCE's Report Card Webcast

The ASCE press conference on its 2009 Report Card for America's Infrastructure was well executed. It featured ASCE president Wayne Klotz, Committee Chairman Andrew Herrmann and Pennsylvania Governor Ed Rendell.

In addition to presenting the grades and adding some perspective to the needs and problems identified, the ASCE deserves credit for offering solutions that go beyond the $2.2 trillion they say we need to invest to bring our infrastructure up to good condition. This includes public-private partnerships and changing our personal behavior as it relates to using our infrastructure.

All three speakers referenced positive changes that have been made -- and that could continue to be made -- to improve specific situations. For example, Mr. Herrmann described how the solid waste issue has improved due to increased recycling and agreements with manufacturers to address concerns about landfill capacity and technical waste. This is why solid waste has the best grade of C+.

ASCE deserves an "A" for how they've handled the presentation of the 2009 Report Card thus far. Their tone wasn't threatening or entirely doom-and-gloom, but they expressed the seriousness of the situation and showed their commitment to helping improve it.

America gets a "D" from the ASCE

The American Society of Civil Engineers (ASCE) released their 2009 Report Card for American Infrastructure this morning. If we were a student and we brought home these grades, we'd surely be grounded. We might be looking at military school.

The overall grade of "D" was the same as the nation received the last time ASCE assessed the state of our infrastructure system in 2005. According to AP, the highest score is a C+ for solid waste. Only one category improved -- energy went from a D to a D+. Three areas dropped: aviation and public transit slid from D+ to D and the highway system went from D to D-.

ASCE is holding a press conference and live webcast at 10 a.m. to announce the results and give more details. As this is the kind of easy-to-get, research-free sound bite that journalists of today thrive on, expect the ASCE report card to be mentioned on every network and in every major newspaper and magazine over the next few days. Just don't expect any of them to delve too deeply into the results or provide much in the way of perspective -- U.S. media outlets don't seem to have the time or inclination to do that kind of thing anymore.

ASCE has done the industry and the country a tremendous service by drawing attention to the horrible state of our infrastructure system. Still, I hope the full report -- to be released in March -- offers some big-picture solutions that go beyond the call for insane amounts of money ($2.2 trillion now, according to AP) to be invested by government to fix the problem. If we really want to repair our infrastructure problem, it's going to take some combination of dollars and innovative thinking to get it done. This includes more public-private partnerships, more efforts to ease the burden on our infrastructure system, and more efficient use of the money that we do spend on infrastructure.

ASCE Report Card Comes Out Tomorrow!

Tomorrow (January 28), the American Society of Civil Engineers (ASCE) presents the U.S. with its infrastructure report card. Something tells me we won't be seeing our name in the paper when the honor roll is published.

The full House is expected to begin debate on the proposed infrastructure bill either today or tomorrow. The timing couldn't be better for the pro-infrastructure forces --as the ASCE releases the type of grades you'd expect from a Delta House pledge, Congresswomen and Congressmen will determine how much of the federal investment in the stimulus bill will go to infrastructure projects such as roads, transit, and public works. Expect the ASCE to get some "face time" on C-Span this week.

By the way, the ASCE is releasing the report card two months early. Probably not a coincidence.

Thoughts on the Stimulus Plan

I just finished writing a report on the stimulus plan for management consulting and publishing company PSMJ Resources. The report -- entitled "The Obama Infrastructure Plan: A Supplement to PSMJ's 2009 AEC Firm U.S. Market Sector Forecast" -- focuses on how the plan may affect the markets served by the AEC industry.

I'm amused, but not surprised by the fact that the stimulus debate has become politically charged only a few days into the new administration. After all, what's in it for the Republican Party to help the Democrats succeed? If things go smoothly and the country recovers more quickly than expected, the party in control (in this case, the Democrats) would get full credit and the GOP would have a hard time getting anyone elected anywhere. That's politics. It's a natural function of the party out of power to be obstructionist.

That's not to say that the Republican criticism and their desire to help shape the bill are wrong. It's just that the fight was so darned predictable.

With that said, the plan will eventually pass in a form close to the one originally proposed. The Democrats are likely to insert a few more "soft" programs into the bill -- during committee deliberations, they already increased money for some non-infrastructure investment programs. Some Democrats also want to put more union restrictions on the bill's infrastructure funding.

To win Republican support, the Democrats may agree to include more tax cuts and, with any luck, increase some hard infrastructure spending. As it stands now, here are three important factors to remember as you follow the process and wait for the infrastructure spending to arrive:

1. The goal of creating jobs quickly is likely to result in highway projects that have already advanced pretty far down the pipeline. This include "shelved' DOT projects that couldn't get funding and maintenance projects that require very little design work. All isn't lost for the design side, according to my interviews. The consensus is that there will be work for designers, both in the construction phases of "shovel-ready" projects and in long-term projects for which federal money would be withheld from the short-term spending requirement. The latter is to ensure that critical infrastructure needs are addressed, and not just quick fixes, as well as to prevent the spigot from abruptly shutting down too early in the recovery process.

2. Design-build and other "alternative delivery systems" may be a ticket to winning some stimulus-driven work. If the goal is to fast-track projects, design-build may be promoted as a way to get that done. If your firm has design-build experience or solid relationships with some allied professional firms with which you could form a design-build team, start talking now.

3. Don't anticipate a huge influx of work or money any time soon. The Congressional Budget Office said last week that the stimulus money would trickle in. After researching this unofficial report, I believe their analysis is flawed and sells the plan short because it does not appear to take into account the provisions requiring fast appropriation of federal money. Yet, we do need to recognize that it takes time for any money to get to its final destination when infrastructure projects are involved. Contractors and designers need to do the work first, then they need to bill the work before they can get paid. So assuming you're one of the many firms trimming costs and getting lean, it's prudent to continue that course of action.

The bottom line is that the stimulus plan should help the industry and the nation to survive during difficult times. But it won't signal a return to the boom times we experienced a few years ago.

My advice is to keep apprised of the bill's progress and position your firm to take advantage of opportunities likely to emerge from the bill. This includes transportation projects (highway, aviation and transit mainly), school projects (lots of energy-related work, but also some new construction and renovation), energy (smart grid and expanding the transmission/distribution network), public works (mainly water and wastewater system upgrades, as well as flood control) and federal buildings (military bases, parkland structures, museums, border stations, etc.). There might also be some work in low-income housing, but that is likely to have a minimal effect in the grand scheme.

I suggest treating the stimulus program like you're (I hope) treating social security as it relates to your retirement planning -- if it's there when I need it, great...but I'm not counting on it to keep me afloat. -- Jerry Guerra

Welcome to AEC Insight

Hello:

I've created this blog to offer news, advice and insight to AEC (that's architecture, engineering and construction) industry leaders. This blog will be heavy on breaking news, media, market research, and marketing as it relates to the design and construction industry. Let's see where it takes us.

Jerry Guerra

Principal

The JAGG Group