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C. Winter* & C.N.Preece**

*Mitarbeiter, TU Bergakademie Frieberg i.s.
**Construction Management Group, School of Civil Engineering, University of Leeds

Keywords
Relationship marketing, main contractors, sub-contractors, SME's

Contents
Abstract
1. Introduction
2. Underlying Aspects of Construction Marketing
2.1 Industrial or Services Marketing?
2.2 The "Six Markets" Model
2.3 Process Optimisation
3. Research
3.1 Introduction
3.2 UK research
3.3 German research
4. Analysis and Outlook
4.1 Analysis of responses both in the UK and Germany
4.2 Outlook
References
Bibliography

ABSTRACT

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1. INTRODUCTION

Although the subject of marketing has received more attention in the construction field over recent years, in the words of Fisher (1991), the construction industry has traditionally suffered from a lack of the kind of general management skills taught at business schools, resulting in ignorance of the true nature of marketing and a tendency to confuse marketing with the often rather dubious selling techniques.

2. UNDERLYING ASPECTS OF CONSTRUCTION MARKETING

2.1 Industrial or Services Marketing?
The question of whether industrial or services marketing is appropriate for the construction industry is probably best answered by saying that both apply, depending on the degree of involvement of individual organisations in the production process, particularly if one differentiates between suppliers of building materials or contractors. Generally the product of the construction industry is characterised by its technical complexity, considerable size both in terms of money involved and in life, which provides long-term benefits. It is as a rule renewable and unique, no two projects are exactly alike. A great proportion of the product package consists of service: a load of 5000 bricks is undoubtedly a product; the team of bricklayers who put them in place provide an industrial process and the contractor who manages this process provides a service.

Undeniably, services and the service quality become ever more important. "So important that a number of construction firms are positioning themselves as service organisations positioned to meet customers' building requirements" (Buttle, F., 1996). An extensive contractor - client relationship with intensive information exchange is inevitable and as a direct consequence, in order for the M/C to fulfil this new role, he has to manage this relationship.

Having identified services marketing as being of importance, it is particularly relationship marketing that is of interest, which not only considers clients' relations but also those involving other members of the construction industry, such as suppliers, sub-contractors, consultants. The emphasis is not on bringing about exchange processes, but on building relationships (Woodruffe,1995). This type of marketing becomes significant in those areas of service operations which cannot be provided entirely on one occasion. There are three complementary perspectives to be considered according to Christopher, et al (1991):

1. importance of customer retention
2. alignment between marketing, customer service and quality
3. enhancement of internal and external relationships

2.1.1
Attracting and retaining customers is the objective of relationship marketing. It includes the forms of marketing from a transactional to a relationship focus, with the emphasis on customer retention, high customer service and commitment and quality being a concern for all. It is about recognising that the organisation's existing customer base is its most important asset, which has to be protected.

2.1.2
Rather than treating marketing, customer service and quality as separate and unrelated issues, they have to be fully integrated in a truly customer focused company. The customer's perception of performance should be monitored and measured rather than merely relying on internal means of information.

2.1.3
Not only improved relations with customers, but also development and enhancement of relations in supplier, recruitment, internal, referral and influence markets is necessary.

2.2 The "Six Markets" Model

These six markets are illustrated by Christopher, et al (1991) in the six markets model:

2.2.1 Customer market
Primary focus of marketing activities rests on the client, with emphasis not only on individual sales (transactional marketing) but also on long term relationships (relationship marketing).

2.2.2 Recruitment market
Maintaining good relations with those who supply labour resources to the organisation is beneficial. As success of service organisations is particularly dependent on the availability of skilled and suitably qualified personnel it is important to cultivate long term relations with the suppliers of personnel so that the required number of qualified staff can be attracted.

2.2.3 Internal market
The employees of a company have to be involved and be a part of the business, share an understanding of the company's mission and have formed long term ties with the employer for it to remain successful in the market place. Employees with high levels of satisfaction are very valuable, long ties create a familiarity with the business and they posses a high degree of knowledge, all of which has the potential to determine a high level of client satisfaction. This particularly applies in a services marketing context, where frequent employee - client interactions determine the level of client satisfaction and ultimately influences the overall performance and profitability of a company.

2.2.4 Referral market
Traditionally it is satisfied customers that are the key referral source and their marketing on behalf of the company represents the best form of marketing. Other sources include architects, engineers, suppliers, S/C, other agencies or in some cases even competitors. Specific strategies need to be devised to reward referral sources that generate most business.

2.2.5 Influence market
Trade and consumer associations, legislatory and political groups that make up the influence market can also affect the relationship an organisation has with its clients. Maintaining good relations with the appropriate influence market lets companies keep up with latest developments in the industry and signals to clients that they are committed to their relationship.

2.2.6 Supplier market
Although relations with suppliers have in the past been of an adversarial nature, where contractors have typically focused on extracting a lowest price, which has led to costs of variability in supply or quality and more often than not in both, a shift in attitude has been observed of recent. Firms have recognised that the supplier is very much a part of their product, realising that benefits can be gained by working together. Tangible benefits can be the optimisation of the product through an exchange of ideas and information between M/C and subcontractor, improving the level of quality, greater flexibility in meeting design changes and shorter delivery lead times.

2.3 Process Optimisation
Supplier and internal markets, which directly bear on a company's value chain, are of particular interest to us. They affect the quality of service delivered, they are at the heart of our survey and it can be argued that in fact these two markets should be seen as one market only.
When a subcontractor is of significant importance for the performance of a contract he should not merely be viewed as a supplier but looked at in terms of internal marketing. This is particularly true when a contractor provides his service to the client entirely through the input of S/C's, which is only to common not only in the UK.
One of the hallmarks of internal marketing is of course to achieve a high level of motivation and satisfaction of internal members by offering greater responsibility and rewards in exchange of greater participation. The same can be applied to S/C's, who require sufficient information, adequate access to the decision making process and a reward upon successful participation. In all of the above, whether own employees or S/C's, a substantial level of trust is required and must be developed over time with an appropriate internal marketing approach.

The following chapter will look at the research carried out to date and despite its narrow sample it clearly demonstrates that a shift in the thinking of M/C is taking place, but that a long way is still to go before one can truly think of internal and relationship marketing taking hold in respect of supplier markets.

3. RESEARCH

3.1 Introduction
It is the analysis of the research that is of interest, but scope and methodology will be briefly explained in order to place it in its appropriate context, separately for the UK and Germany. Summaries of results, analysis and comparison will follow a general presentation of research and work carried out.

3.2 UK research

3.2.1 Main Contractor

Table 1: The interviewee and the company (main contractor)

3.2.1.1 General approach to marketing
While all companies throughout maintain that marketing is taken seriously and is at least demonstrated outwardly by the existence of separate marketing departments and staff, neither is its function integrated into the firm's strategic policies, nor is it well understood by other staff. The impression gained in carrying out this study is that marketing is essentially still understood as a sales function, is not integrated into the structure of a firm and communication with other management departments occurs only on an informal and adhoc basis.

3.2.1.2 Internal marketing
Although all companies have been found to value their employees and support internal as well as external activities to motivate and enhance their performance, an example of a structured approach with a system of measuring improved business performance was not found to exist with any of the companies studied. The idea of viewing external organisations in the supply chain as internal clients in terms of internal marketing was not encountered in any of the firms approached.

3.2.1.3 Relationship marketing
With one exception all firms rank the order of importance in managing relations with external organisations as follows:

1. key clients
2. non key clients
3. architects and consultants
4. suppliers / sub-contractors

Not surprisingly clients are seen as most valuable, after all they are the one's who provide a firm's revenue. While it is acknowledged that construction relies on extensive networking it is still largely the position of M/C to expect from their S/C's all the work necessary in maintaining a good working relationship. In contrast to earlier years the difference is now that the link is at last acknowledged as being important, which has not, however, filtered through to a more constructive approach. It is interesting to note that the marketing department is never a contact point for, nor does it ever have any dealings with a S/C.

for the six specified regions and the European specific proportional shares. More than two-thirds (73%) of international construction activities occurring in Europe are executed by the European contractors themselves. Also strikingly high is the approximately two-third share of the European contractors in America. In Africa and South America the European business part is more or less half of the total generated. In the Middle East it is about a third and in Asia even less, due to the Japanese, that are controlling their home region. The share of the Americans, Koreans and Chinese combined is slightly higher to the Europeans. The Americans are strongest percentage wise in South America and the Middle East. The Koreans have only significant shares in Africa and Asia/Australasia. The shares of other contracting nations are not significant in any of the regions.

3.2.1.4 M/C - S/C relationship

Table 2: The M/C - S/C relationship

The above table indicates the approach taken by M/C in involving S/C in their supply chain. Before considering the information further it is interesting to note that it is always the buying department and/or site team that is/are responsible in selecting a S/C.
The study has found that companies are keen to improve their working processes with S/C's and try to address some of the common problems usually encountered by having formalised start-up meetings and keeping organised and systematic records on S/C performances. However, problems of poor communication, lack of information on site, poor supervision, not finishing on time and incorrect pricing, poor quality or wrong product are experienced regularly by all who where studied.
That these problems are still encountered all too frequently is not surprising considering that the approach still adopted in procuring S/C services is based on price alone (why else are 6 quotations required as a rule) and all work to maintain a constructive working relationship is shouldered by the S/C. M/C's have now at last realised that many of the problems mentioned are caused in-house, but as one M/C was found to say, its all in the "name of the game".

3.2.2 Sub-contractor

Table 3: The interviewee and the company (sub-contractor)

3.2.2.1 General approach to marketing
On account of the smaller size of many companies that find themselves in a S/C position they do not have a marketing function as a separate entity and marketing activities are undertaken by upper management and their directors. It is largely done on a intuitive basis and concentrates in the main on relationship marketing targeted at contractors, architects and consultants who are about to let contracts or are involved with new projects. In some cases employees in suitable positions are actively encouraged to make contact and gather information from potential clients, thereby inadvertently taking part in relationship marketing. All companies have some sort of promotional literature about themselves, covering the work they do and presenting past projects as reference, to support their adhoc marketing activities.

3.2.2.2 S/C - M/C relationship
In the interest of generating repeat business all companies studied try to establish long-term relations with important contractors. A further advantage that was cited by working with larger organisations is the benefit of having the opportunity to become involved in larger projects and experience new products and procedures.
A unanimous response was received from all to the effect that getting paid still presented the most serious of problems in building up a better relationship over the long term with M/C's. These, it was felt, were lacking trust in their relationship to S/C's and to be overtly suspicious in all business dealings. They were generally applying pressure by making onerous demands, all of which making for a tense relationship between M/C and S/C. Pressure is regularly applied to reduce prices and at the same time essential information is held back, making it almost impossible to allow for proper pricing and working. Late orders and not allowing for sufficient time in both preparation or execution of a project often creates problems in the provision of a product or service. A further problem occurs in that staff and personnel are often lost to main contracting organisations.
It is felt that project review meetings as a means of facilitating communication, improving relations and receiving important feedback on performance are useful, however, that not many M/C are as yet convinced or fully support it. Post-contract questionnaires, on the other hand, are not seen as being anywhere as effective as face to face meetings.

3.3 German research

Table 4: The interviewee and the company

3.3.2 General Marketing
As has been the case with SME's in the UK none of the German companies maintained their own separate marketing entity and thus it is the responsibility of upper management and the directors. Any marketing activities undertaken occur on a intuitive basis, including having reports of projects carried out in the local press and trade press, attending local trade fairs and the occasional advertisement. This is not done systematically, no follow up occurs and neither is it known how effective the input has been. As in the UK good contacts are seen as vital and relations to clients, architects and consultants receive most attention. Otherwise the study of market development or client satisfaction has been neglected and it is only know that one or two companies have started to look into this area. Most of the companies rely on their reputation as a long established company and good trading name.

3.3.3 Internal marketing
All of the companies reported that their employees are engaged in regular off the job training either in-house or externally. In three of the companies a bonus is paid to employees depending on the success of the company. Communication, while not necessarily structured, was reported as being good, however, appears to be more in a form of a reporting, top-down style flow of information, intended to let employees know where the company stands. Bottom-up communication, while reportedly encouraged, is not as frequent.

3.3.4 External marketing and M/C - S/C relationship
The responsibility of obtaining new work in all of the companies is that of the managing directors. A differentiated approach is adopted in order to attract new work. On the one hand firms participate in official tenders, on the other hand direct negotiations with clients occur where the firm was approached directly or suggested by an architect or consultant.
All companies find themselves in the majority of cases in the role of trade contractors, sometimes as S/C and on occasion as M/C on smaller projects. The preferred position is that of trade contractor, where some 20% to 30% of work is subcontracted, depending on the size and nature of the project, either because the work cannot be carried out within the firm or no spare capacity is available. The objective of using S/C's varies depending on the nature of the company where one firm may be afraid that its role will be replaced by others and the other concentrating on its core activities, thus discouraging or encouraging their use respectively. The least preferred role is that of S/C, which occurs in 10% to 50% of projects for all companies. In performing this role problems are frequently encountered with payment, unfavourable prices and poor relations with M/C's as well as being forced to accept extended defects liability periods.

4. ANALYSIS AND OUTLOOK

4.1 Analysis of responses both in the UK and Germany
Not surprisingly it is only the larger companies, the M/C's, that have developed separate and distinct marketing functions with dedicated staff. However, this does not necessarily translate into a systematic and well developed marketing approach that integrates with company strategy. Much to the contrary it appears that marketing activities exist as an isolated, independent function that is intended to focus on client relations only and thus is no more than a selling function, very much along the line as Fisher was quoted at the outset.
Certainly, none of the marketing functions had any involvement with the supply side and S/C's and as such cannot contribute anything to the concept of supply chain management as an integrated strategic approach.
S/C's studied not surprisingly did not have any distinctive marketing functions and this task usually fell to the directors and upper management, who adopted an intuitive style. Marketing thus occurs haphazardly and infrequently, preventing any attempt at measuring effectiveness. No strategic direction could be discerned.
M/C's were found to stress that a partnering approach or negotiated contract directly with clients was favoured and seen as improving overall business. However, this approach was always seen in context with the client, never from the point of view of the supply chain and S/C's. This relationship, always handled from the operative side with buying and/or site team responsible, is characterised by a traditional approach and none of the potential benefits through partnering with the client pass on to the relationship with the S/C. Pressure on prices, lack of trust, poor communications, inadequate information and perceived poor service complicate the relationship. Some of the M/C's at last seem to recognise the problem, but change cannot be expected to happen overnight as this was believed to be all in the "name of the game" and borne out by the table illustrating the M/C and S/C relationship.

In order to avoid the problems associated of working with M/C's, S/C's try to establish direct contractual relationships with clients. This appears to illustrate the main difference between M/C and S/C relations in the UK and Germany, where German S/C's manage to obtain a larger proportion of direct contracts, in the order of 50% to 70%, and appear as S/C's themselves in only 10% to 50% of workload. They in turn subcontract 10% to 30% of the workload. A typical S/C in the UK of those who were studied only achieve a proportion of 10% to 30% in direct orders of the total workload. One explanation is probably found in the German practice of letting public work contracts where trade letting is mandatory in most cases and thus favours smaller, regionally based contractors, who often play a more varied role and maintain greater in-house activities than their UK counterpart. The UK in contrast favours a letting practice to a single, larger contractor, who bears overall responsibility for co-ordination and outcome of the works.

Both German and UK SME's in the role of S/C reported that working for larger M/C presented them with a number of problems, including: pressure on prices, time pressure, poor communication, distrust, insufficient information and extended warranties. It comes as no surprise then, that relations between M/C's and S/C's are found to be difficult and the most important issue that concerns all S/C's both in the UK and Germany is that of a poor payment record.

Agreement between all companies, whether large or small and in both countries, exists where personal relationships are concerned, in that practising relationship marketing on a personal level is considered essential for maintaining good contacts with decision makers in other organisations. Clients, architects and consultants receive most interest, whereas the supply side, particularly S/C's are at the bottom of priorities. This again is characterised by an intuitive approach not much influenced by strategic considerations and not necessarily of benefit to the company but dictated by the everyday need to attract sufficient orders to keep the organisation afloat. It is also that what occupies most of a director's or business development manager's time when he thinks of marketing.

Attempts under way for M/C's to improve the supply chain process and to overcome typical problems of the type discussed above have resulted in structured project start-up and project review meetings, which are welcomed by S/C's as long as these occur on a face to face basis, experience a true exchange of information and are properly acted upon. As yet, however, they are still rare and where they do happen they are not always seen as to be of sufficient sincerity.
Marketing by smaller as well as most larger firms is still determined by operational requirements, such as "selling" or obtaining a new order, rather than strategic requirements derived from adopting a longer term perspective. The strategic approach is not usually rejected out of hand, but is always referred to as to exist in people's minds. There it is of not much use to anybody else and it is difficult to imagine how such a strategy can be of benefit for the organisation, if it is not effectively communicated and acted upon by all within the organisation.

4.2 Outlook
The studies carried out so far, which admittedly have not encompassed a great number but nevertheless a cross section of representative firms of S/C's and M/C's in both the UK and Germany, has brought to light some interesting results, if not confirms the belief of many that marketing has not truly taken hold within the construction industry beyond the very largest of players.

Generally it is true to say, that experiences of S/C's both in Germany and the UK have been the similar, with the exception that the role of German SME's varies probably on account of German public authority letting practices. It can be said that these practices are under pressure for a number of reason, for example privatisation of public utilities and influence of private clients, so that multi-trade and single letting will gain in importance. Pressures on S/C as witnessed in the UK can be seen as a precursor for the situation of German firms, who face substantial competitive pressures particularly where multi-trade, medium sized enterprises are involved, which constitute a large proportion of German construction firms.

M/C's endeavours to improve upon the supply chain process is probably in no small measure driven by demanding, large scale clients seeking a better service and the buoyant UK construction market, which has placed some S/C trades at a premium and thus require a different approach. This has been found in the past and as reported above still today, to be of an adversarial nature, characterised by extreme price competition, distrust, poor communication, insufficient information and reliance on the part of M/C's on a large pool of experienced and suitably qualified S/C's. To lend credibility to supply chain management it is high time applying marketing strategies not only from the point of view of the client but also from the S/C's position, who after all determines no small part of the overall service that the M/C offers to the client. In this respect it is helpful to view the S/C not only as a supplier organisation of products and services but as an internal, essential part of the organisation and thus integrate him as such, at least as far as significant trades are concerned. This is intended to motivate and involve the S/C in the decision making process and potential profit, at the same time trusting him to input his experience and full capabilities and having to bear his proportion of the risk inherent in any project. No doubt a tremendous change in the mind set of many people in the industry is required, major problems will be encountered in the transformation process where M/C's and S/C' learn about each other, but in the long run the service that the construction industry will offer its clients will become comprehensive, competitively priced, in time and of the quality required.

REFERENCES

Buttle, F. (1996): Service quality in the construction industry, in: Smyth, H. (1996): the 1st national Construction Marketing Conference:Proceedings

Christopher, M. et al (1991): Relationship Marketing: Bringing quality, customer service and marketing together, Butterworth-Heinemann in association with the Chartered Institute of Marketing, Oxford

Fischer, N. (1991): Marketing, in: Chartered Builder, April 1991

Woodruffe, H. (1995): Services marketing, Pitman Publishing, London

BIBLIOGRAPHY

Best Practice for Subcontractors to Market to Main Contractors", Diploma Dissertation (1998), Susan Graul, Technical University Bergakademie Freiberg, Chair of Construction Business Management

"Verbesserung des Beziehungsmarketing für deutsche Subunternehmer bei der Vermarktung an Generalunternehmer", Report (1999), Sindy Holschumacher, Technical University Bergakademie Freiberg, Chair of Construction Business Management

International Journal of Construction Marketing
ISSN 1463-7189 (web)
ISSN 1463-770 (hardcopy)
© Oxford Brookes University

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