Project works market: not wishing or not being able?

However, the growth strategies claimed before 2013 could be realized only at the expense of the other market participants’ share reduction. Occupying new market and geographical niches competes with companies working there due to their price. 

Additionally, any expansion demands investments. And project and design organizations presently hardly have any free money. Of course, those companies whose market was threatened by “strangers” answered by lowering their prices.

It turned out that in the hard conditions presented by external factors’ pressure on the prices of design and project organizations (transparent calculation of expenses, customers’ expenses reduction programs, trade channels consolidation, rivalry growth) the majority of the market players have agreed to work at the edge of profitability.

Presently, the average sales profitability on the project works market is from –2.3% to +1.0%, and the net profit margin is still lower, respectively.

Of course, to a great extent this is determined by external factors, particularly as many believe that price formation may be managed. Prices are thought to be established by the market itself; either due to a customer or an unreasonable competitor. 

 In actual fact, however, the price decrease can hardly compensate for any additional sales volume sufficient for the indemnification of the price decrease and received benefits.

Despite the complexity of the deals on the design and project market and the fact that professional buyers practice them, there is an important factor related to the subjective perception of the price in this sphere.      

Investigation of the market by the Simple Analytics agency showed that only 20% of design and project organizations establish their prices correctly, from the standpoint of the interrelation between the price and advantages for each market segment they work with. 

Few organizations are aware of how the price perception is influenced by how information is got from a customer, how the price is structured and how payments are distributed in time.

Design and project organizations are not active enough in development and carrying out marketing events (advertising campaigns, PR and GR programs) to enlarge the order portfolio. They prefer to use morally obsolete “marketing strategies” as they are sceptical about anything new.

By the end of 2016, only 4 of 10 companies working on the design and engineering market have efficiently built their marketing and advertising companies. The other 6 companies either do not pay attention to marketing promotion, or do it inefficiently (at least as far as resource expenses are concerned). And only a third of the design and project organizations really try to tune away from their competitors (fig. 2).

The main mistakes in the “tuning away” marketing strategies (advertising and PR campaigns) on the design and engineering market are connected with the excessive focusing on the quality of the work carried out and the use of abstract advertising slogans.

Project works market: not wishing or not being able?

The problem is that such marketing strategies do not present why a customer should address the given company. A company should be distinct about the advantages for a customer and its difference from its competitors. All marketing should be centred on a company’s position against its competitors.

Notions of quality and responsibility are clearly determined in the customer-contractor agreement clauses and are expected by default.  Another idea should be chosen to tune away from the competitors.

The key mistakes of design and project organizations in developing their advertising campaigns are as follows:

— the adverts do not differ from the competitors’ PR-campaigns and advertising,

— the adverts promote the industry, not the company's brand. 

The majority of design and project organizations cannot:

— digest the marketing information on the market’s condition, tendencies and challenges;

— evaluate the market’s attractiveness and the company’s competitiveness;

— determine the market positioning of the company;

— take a decision on the advertising and PR campaigns whilst leaving out competitors’ ideas;

— establish adequate planned figures of sales and gross income;

— draw a conclusion on the reasonability of M&A deals.

New approaches both in the operational sphere and in the spheres of innovation, investments and finance, HR policy, marketing and sales are necessary for companies working in the Russian market to achieve their targets.

Alexei ANDREEV

The Simple Analytics agency’s marketing research materials were used for the article. 

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