If you haven't yet been hit with builder customers looking to negotiate prices for your products and services, count yourself among a shrinking pool of dealers. An updated survey of more than 300 builders, weighted to reflect national industry demographics, says that 80% of them are somewhat to very likely to negotiate price with their suppliers.

Nearly as many are on the lookout for new suppliers offering lower costs, better values, or better selection to help them weather the housing industry's prolonged correction in starts, sales, and price appreciation from the heydays of 2004-05.

If that's not enough of a wake-up call, the latest version of the Soft Market Study, released by the NAHB Research Center at the 2008 International Builders' Show in February, reveals the methods builders are using to secure sales and reduce costs–both of which have implications for dealers anxious to stay afloat–until the market recovers.

"Manufacturers and suppliers that adapt to this new reality stand to gain the most when housing recovers," says Ed Hudson, director of the market research division of the NAHB Research Center in Upper Marlboro, Md., which conducted the study following a similar effort a year earlier.

Key Findings. The survey results, available through the Research Center's bookstore for $200 (www.nahbrc.org/bookstore), are rife with opportunities for dealers far beyond the section focusing on changes in supplier relations. "One key finding is the degree that builders are allowing buyers to suggest changes to the floor plan and design, which has proven to be one of the most effective sales tactics," Hudson says.

Dealers fit into that finding with their willingness and ability to alter framing packages, deliver short orders, and supply or act as a conduit to a wider range of products within key finish categories–namely countertops, flooring, and cabinets–to help builders in a buyer's market. "Home buyers are in the driver's seat, and builders need to be flexible across their entire operations," Hudson says.

Other opportunities buried in the results include an increasing propensity among builders to use higher value, low cost, and innovative materials to help reduce hard costs, create a marketing distinction, and boost buyer interest. Builders also are interested in sourcing products that come with marketing support from the manufacturer or supplier, and solutions that reduce construction cycle time to realign their production costs with lower profit margins.

Supplier Relations. For both the 2007 and 2008 studies, Hudson and his research team reserved a section for supplier relations.

In the first survey, builders indicated that negotiating materials prices was one strategy for lowering production costs and preserving margins, but that dealers were more apt to boost services, such as speed of delivery, more so than to discount prices.

By the time housing's downturn appeared to be more than a blip, however, Hudson anticipated a shift in attitude and aggressiveness. "After the market took another tumble in mid-2007, we expected builders to take more extreme measures to lower their costs and negotiate with suppliers on price," he says.

The 2008 survey results bear that out: not only are more builders more likely to ask for discounts, they're looking for new sources to give them better deals.

"Finding a lower cost is the biggest motivator to switching to a new supplier," Hudson says, a statement backed by the fact that 76% of builders are somewhat to very likely to pursue that option. They also want things such as free materials for model homes, design centers, and co-op advertising (see PDF chart).

Just as telling is what builders are not pursuing with their suppliers, at least not in large numbers. Despite a stated desire to become more efficient in their operations and production, few builders have yet to leverage installed sales, component framing capacity, automated purchasing, and upgraded lines of doors and windows, millwork, siding and roofing, and insulation offered by their suppliers. Dealers with those capabilities should point them out as potential options for saving time and money or as effective home sales carrots.

Says Hudson, "If a service provided by a supplier can help sell or market homes, builders want it."

–Rich Binsacca is a contributing editor to ProSales.

The results of the NAHB Research Center's new study, "Implications of the Soft Housing Market for Builders, Suppliers, and Manufacturers," are available through the research center's bookstore (www.nahbrc.org/bookstore) for $200.