 the last two years, anybody who's telling you that they've nailed the communication on pricing is just lying to you. Welcome to the Smarter Building Materials Marketing Podcast, helping you find better ways to grow leads, sales, and outperform your competition. All right, everybody. Welcome to Smarter Building Materials Marketing, where we believe your online presence should be your best salesperson. I'm Zach Williams, and we have an awesome guest lined up for us today. We've got Porter Thompson, who's the Director of Innovation and Insight at American Woodmark on the show with us today. Porter, welcome to the show. Zach, thanks. I'm happy to be here. It's going to be fun. We met, I don't know, almost not six months ago, what, four or five months ago in Denver? Yeah, it was awesome. I'm really, really glad you can make it. And we were there just chatting about your business. And I don't want to get too far in the episode, but for our listeners, just give us a little bit of oversight of who you are, what you, Porter, do, and then a little bit about American Woodmark. Sure. So I'm actually an engineer by education who just figured out a little earlier than most that I like solving business problems better than the technical problems. So I was working in the aviation, the aerospace industry, and looked for a bit of a pivot, and so found a company that was willing to gamble on somebody who didn't have a business background, but showed some technical acumen, getting into more of the maybe hard marketing analytics side of it, you know, covering marketing kind of trends, covering marketing data, where the industry was moving, and then bringing that into strategy conversations and where I landed was in the chemical industry. So, you know, B2B hard manufacturing, that's kind of my background, and ultimately looked for and found an opportunity to get more consumer facing, more brand facing, try to expand my marketing toolkit. So just an expansion of solving business problems. I came over to American Woodmark about six years ago, and I do things like special projects, strategic initiatives. That's where the innovation insight title comes in. It's a way to mask maybe some of the things I'm working on for real. So it's bringing that data information that the organization's tracking to new opportunities, new businesses, new products, new areas of the market, or maybe just improvement opportunities in the existing areas of business. So that's my focus. It's included things like channel marketing and big box retail. It's included standing up and helping digital marketing grow inside the organization, and just forward thinking around strategy and the planning for the overall company. So you all have a slew of brands. I don't have the exact number up in front of me, but you've got private label. You've got stuff that's sold in big box. You also, you know, looking at selling direct. How do you approach all of those different brands from a strategic standpoint? Like, are you trying to get data like at our event in Denver? And are you siphoning? Oh, that's really interesting for this brand. Really interesting for this brand. How do you approach strategy when you've got a pretty large array of brands that maybe overlap even a little bit? Yeah. You know, we think of our brands as a way to connect with the right audiences in the market. And so each of these brands should have a target on the other end of it. And so as we collect information or think about the data or how we want to understand and present ourselves to the market, it's driven through that customer focus. And it may be a customer in the true sense for American Woodmark, which would be our B2B partners, but it may also be consumer driven. So who are those homeowners that are ultimately ending up and shopping for our products? We organize around channels. So we think of big box retail is having some similarities and then smaller specialty retail distribution, home builders that we sell to. And that helps us keep our brands and audiences organized. When it comes to private versus the proprietary brands of American Woodmark, it's really about partnership. So who are we partnered with? Who's that target audience? And ultimately, what's the brand and the program? Because it's not just the product, it's the service, the way they're going to buy, the tools and the support they get through that buying experience. How does that all come together in that channel? It doesn't make more sense for American Woodmark as an organization to be the foundation for that or for our retail partners or our business channel partners to be the underlying foundation. And we provide the layered in services and products that are needed. You know, the thing I really am excited to talk with you about Porter as we were prepping for today's show is pricing strategies, which you were saying, and I don't want to steal your thunder, but it's oftentimes an overlooked marketing, even though it's arguably the biggest lever you can pull to create or pull back demand. I don't want to, like I said, I don't want to steal your thunder, but I'd love to hear your perspective on how do you as an organization that has a pretty large array of different products, like how do you think about pricing your products? And more importantly, how do you think about that as your strategic lever to position and create demand? You know, in fairness, pricing is a group effort for any organization, right, even the best of them. So a lot of help and I'm one of the team members who helps contribute to it. But yeah, you think about at American Woodmark, you're in the north of 20 brands, like you said, we've got that mix of private and proprietary brands. We're dealing with lots of different channels, you know, all across the country. You know, the challenge for us is finding that right point that's acceptable in the channel, the way that they do business and for the audience that they're targeting. And that ultimately allows us to achieve our goals as an organization and reinvest in the business and build new programs, solve new problems for our customers and continue to be a good partner for them over the long run. So, you know, it's really a for me, you know, thinking about being intentional. So it rather than waiting, being reactive around pricing, you know, the last two years, two plus years, I think everybody's really been chasing it. In fact, I can't believe this hasn't been every week for you guys, because I think every manufacturer has been talking about rising input costs and inflation and how labor is getting more challenging and, you know, just having to pay more for everything, you know, freight logistics, you know, being a manufacturer is expensive right now. It doesn't matter where you're doing it, what part of the world, what part of the US, it's expensive right now. And so I'm happy to be here talking about, I think it's about being intentional. So really sitting down with the organization and thinking about what are the key drivers, what are the goals and objectives of the organization overall, you know, how can you create a framework for decisions? Because as we were talking about, pricing is one of those levers that you can pull fairly quickly as an organization, you know, quicker than some of the other marketing piece that we talked about. Ultimately, you can move pricing, drive that supply of demand curve in a direction that you want to. And so having a framework to make those decisions will just allow you to move more quickly. And being intentional just means having a plan about how your organization is going to sit down together and move forward. So it doesn't mean that there's one right way to do it or that there's a best way as a manufacturer. There's all different kinds of pricing strategies, you know, strategies, just a fancy word to say that you've got a, you put some thought into it and you're, you are structured and you're going to do it a certain way so that everybody remains aligned. But pricing strategy could be whatever you want to be as an organization, as long as you've found that, again, it meets those goals and objectives that you have, it meets the needs of the customers that you're targeting to serve in the marketplace. And then ultimately allows you to continue to sustain the business that you're running in. So for us, it's about creating that framework, you know, thinking about what parts of the business need to be structured, which way for pricing, we could go into a textbook and talk about what are the different types of pricing strategy. So, but maybe you're an organization that's just worried about what your cost inputs are, and you've got a certain amount of margin and overhead that you want to cover there. You could be a small independent retailer or maybe your own, you know, self-employed general contractor. And your goal is just to take home a certain salary, you know, that's your profit for the year. And you structure your business around those costs. But as a bigger manufacturer, as a bigger organization, you know, there becomes some more complexities. And so it might be that simple. And there's big manufacturers that do that. But there's also big manufacturers that look at more of a value added strategy. So, you know, here's our costs, but we know that the market places a certain amount of value on the product or the offering that we package together. Maybe it's a combination of goods and services that you're packaging together. And so what is the market value for those, you know, you could do that by asking customers. You could see what their willingness to pay for things is. You can run tests as a manufacturer, you know, maybe taking small parts of your business that, you know, won't be as impactful to see, you know, what is the willingness of the market to take additional price or maybe to take price reductions to help you move more volume. You ask customers, you can throw pricing out there and just see what happens. It can be very entrepreneurial, right? You know, so there's lots of different approaches, but every organization needs to have an identity around it. And so at American Woodmark, we're a bit larger organization. It tends to help us to have a bit more structure, maybe not be so entrepreneurial about pricing and not throwing things around the market. But that doesn't mean that we don't have areas of the business that might feel more like custom pricing, you know, where we know that we're supplying a unique combination of the goods that we have and the services that we're offering, the support model, maybe it's, you know, lead times and logistics that we're providing to a customer. And at the end of the day, you know, we will price based on the unique circumstances that their customers presented to us. And then, you know, for bigger partners where there's more structure, more repeatability and consistency in the business, that's what they want from you is just consistency in that pricing. So for each of those different ways that we're pricing across your organization, you need mechanics. So how are you going to execute and deliver that pricing to the customer? You need decision making, whether it's committee or maybe it's a process. It could be data or signposts, milestones that you're looking for that indicate you should do something. So some structure about how you want to make those decisions and when you want to trigger those decisions. And then at the end of the day, someone who's ultimately responsible, right? So you have to have that high level authority, whether it's a general manager, president of the business, you know, the CEO, if it's that type of organization who is going to make the final call when you're ever in doubt that it's the pricing decision you're making is not aligned with the overall company goals and strategy. So you need to know who's going to be accountable for that pricing. And then it's that partnership working across the different functions, making sure everyone understands those different fundamentals in those different areas of your business or in your specific area of your small business. And that you all know your role responsibility to bring to the table. And marketing really sits in kind of the middle of that network, right? So making sure that you're going to those cross functional partners, you're working with your accounting, your finance people, you're working with your sales organization, you're working with your product and manufacturing organizations and making sure that you bring all those inputs together to understand what the business needs to do. You hate to have, you know, your sales organization being the only part of the organization driving pricing because they've got specific goals and metrics that they're trying to hit and they want to move product out the door and drive revenue and volume. But you also don't want to have finance knocking on your door and telling you that you haven't been diligently watching pricing, because it probably means that you haven't been hitting your revenue and profitability goals as an organization. So you want to be on the front end of that. And you don't want your product and manufacturing organizations coming and dictating what pricing is going to be based on how they want to run their plants. You know, so you need to take into consideration all those different stakeholders and make sure that, again, you've got a framework to think through and ultimately make those decisions. And so we can do that for each area of our business. You said something a minute ago I want to dig into, which I think the common listener might have just glazed over, but I think it's super important to use the word identity around pricing and understanding what is your identity as an organization. I'm curious to get your take on if you've seen, I'm not going to ask you to name anybody, but like, have you seen anything in the market that you kind of scratch your head and you're like, wow, like why did somebody do that? Like that doesn't really line up with who they are as an organization. Are there any situations where you see that as somebody who studies pricing and how that creates part of the brand and part of the demand around a product line or around a brand itself? Yeah. So building products, there's a lot of room for improvement I think when it comes to being structured around pricing. And I think, let's throw home builders under the bus for a second here. So I think they're a little bit of an easy target. There's a lot going on. They're building homes and at American Woodmark, we're typically dealing directly more with like the track home builders, the big production builders who are building out full neighborhoods. And so they've got thousands of projects that they're trying to think about and manage. And they're looking at, to their credit, they're looking at thousands of projects in the margin on each of those projects and trying to look at the portfolio that they're creating and how that affects the profitability of the business. But they're trying to serve the needs of every individual potential home buyer that's coming to their neighborhood, coming to that market, how it's very individualized to the local market, what's that home-building environment like? What are home prices? What are the neighborhoods like? What kind of appeal are they trying to create with the neighborhood that they're pulling together? Is it a neighborhood that's got higher-end homes and they're looking at more options, configurability, are they truly trying to target opening price point homes? Are they trying to attract certain demographic? It gets messy when it comes to pricing because they want to be able to pull all the hundreds of levers that they have with all the manufacturers, the trades, the subcontractors that they're working with. And it's a very complicated juggling act that they're trying to manipulate so that ultimately the equation comes out at the end of the day with the home builder making the profit that they want to make. And so there's a headscratcher a bit for you. I think some of the production builders have gotten better about it, but I think it's that desire to create that individual localized profitability that creates a lot of complexity ultimately through the entire network of suppliers into that home-building effort. It's a really good example and I appreciate you treading lightly there because it sounds like you've walked through. We love home builders. We need to have them as our partners. And so it's nothing against home builders, but they know that they've created some complex situations and we're happy to have them as partners. But yes, that is an example there. I want to get your take on, you said something else earlier when I was talking about your pricing strategy, which is around communication of pricing increases. You're saying, I can't believe that this is not something you're talking about all the time. I've got a buddy who works in another manufacturer and I was talking to him, I don't know, 2021. I was like, hey, how's your job going? He's like, okay, let me tell you about my job. I basically get on the phone. I tell customers we have to raise prices again. They yell at me and then I rinse and repeat that every three months. And I'm curious to get your perspective on, we talk about inflation, we talk about price increases, the issues with labor. What are you all doing from a communication perspective to maintain relationships, but also talk about pricing when there is an increase? Yeah, I will say as the last two years, anybody who's telling you that they've nailed the communication on pricing is just lying to you. So everyone's been chasing challenging circumstances. I think when it comes to communication, it's that identity question. Can you be clear about what type of pricing organization you are? Are you going to be reading input costs, reading raw materials, looking at indices across the market? And that is the moment that's going to trigger you to bring communication to your partners. If they've been business partners with you for more than a couple of years and certainly within the last year, they've gone through the negotiation with you. So they understand why and when you're coming to the table. And I think that's what's important, is to make it very clear about why and when you need to come to the table to talk about pricing. No one wants to be surprised by a price increase. That's just a business killer. Whether it's somebody at home builders who are trying to figure out what those sales look like as they're building ahead and they're working through that backlog. In our business, we're working with a lot of small specialty businesses who are doing a lot of remodel projects. And they're putting together costs for those projects and trying to bid and quote and win those on our behalf. So we make the product sales, so we want them to be successful. But ultimately, they're thinking ahead. They're working projects out in the future. They're building that pipeline. And if they don't have some predictability about how and what to expect for pricing, then ultimately makes it challenging for them to run and manage their businesses. So when it comes to communication, it is about that identity, creating that consistency and pattern and ultimately making it clear to your business partners when and why you're going to come to them to have that pricing conversation. Yeah, I think you hit the nail on the head there with the proactive communication. And the fact that, I mean, for a lot of your customers who talk about builders, their margins get eaten when manufacturers have to increase price for whatever reason that is. And so no one enjoys that. No one likes it. That which leads to negotiations. Talk to me about, if you can, share with me a little about like, what does your approach to negotiations look like with your different customers and partners? Is it strenuous? I'm sure the last two years have been a little challenging. But like, how do you approach that while still trying to keep those relationships intact? Yeah, has a lot to do with the depth of the partnership you have, but also size of leverage in the conversation. So there's clearly times when there's more leverage with one party than the other with rising input costs, the way that inflation has been going, there's been more leverage with manufacturers with vendors on that side of the business than the, in retailers or the in-home builders in the home improvement industry. That said, you have to come with the way we approach it is coming with fax and data. So avoid it being an emotional conversation. Bring the clear indications as to why you need to take or change your pricing activity in the marketplace. It doesn't mean that it won't turn into a bit of an emotional conversation. Everyone's trying to do the right thing for their business. There's a reason it's always a negotiation. Two parties trying to find their win and their value in it. And you need to make sure you're not putting your partners in an unfair position. So ultimately, they need the opportunity to evaluate and understand price as it pertains to the customers that they're serving, which is why I would encourage especially manufacturers to stay in tune with what market pricing looks like for their products or for the applications that their products are in, because it will be a much more emotional conversation if you're negatively impacting the ability of your partners to do business because the types of applications or the types of products as they're making it to the market are being negatively impacted because you're forcing more price than what they can really extract value from at the end of the day. So yeah, you got to come to the table with fax and data. You got to understand the full value chain, how that's being impacted in patients. So at the end of the day, there's just a bit of patience that's involved with this. Even though it is one of the quickest levers you can pull as an organization and create change in the marketplace, everyone needs a chance to absorb the information, process it, react to it, start making their own decisions and so some patience with your partners about what the next steps are going to be and keeping that line of communication open so everybody is working toward the same goals at the end of the day. It's contentious, right? No one wants to talk about pricing. Nobody wants to take additional pricing. It's hard on their businesses, but it's a muscle that I think the marketplace exercised a bit more the last couple of years just due to circumstances. And I believe it's one that the marketplace, the industry will continue to try to keep exercised going forward so that it doesn't feel like such a surprise in the future. This has been awesome, Porter. I really appreciate you sharing just your take on pricing as a whole. And as you mentioned earlier, it's something we oftentimes overlook, especially when there's fun things out there like brand and digital and all these different areas that you can create demand. As somebody who's got a pretty good pulse on the market, I'd love to just end the show with hearing your take on what you think is in store for our industry as a whole over the next 12, even 24 months if I had to put you on the spot, which I will preface all this by saying that if there's anything the last couple of years has taught me is what you think today will likely change a week from now. So I promise you we'll try to release this episode quickly. I think everyone out there who's projecting into the market, certainly home building looks like it's going to come back, but it'll be slow in 2023. Remodel is supposed to show a bit more strength. So that could be a flat year. Showing more strength in the home building market could be a flat year. So if you just think about the overall dynamics in the market, you're looking at a more challenging year for home improvement in the home building industries than we've had the past two years where it was supply as much as you possibly could. So as that pertains to thinking about pricing, input costs, I do believe that pricing is going to hold up in the marketplace. I know that there are vendors, manufacturers who are being challenged, being asked to consider pricing, consider changes in their input costs. Certainly freight logistics has become more affordable over the last few months. There are certain commodity materials that have become more affordable over the last few months, but a lot of the costs that have been driven have been manufactured value-added goods, labor, things that don't tend to move the other way. So I think those will mean that manufacturers, vendors, pricing holds up in the market. Retailers will look at holding pricing and ultimately try to find ways to drive that demand back into the marketplace as opposed to trying to quickly pull that pricing lever the one we know that you can pull quickly and bring that demand back right away. I think the market indications are that pricing holds it up and everyone starts looking at those more long-term drivers. How do you bring more value into the product? How do you bring better communication connection? And how do you solve other problems that the marketplace is presenting to retailers, to home builders, to the trades members, and to the vendors and the manufacturers who are in the industry? How to present those problems, find a way to solve those problems and add value rather than just immediately coming back and pulling pricing to pre-pandemic. This has been awesome for our listeners. If they want to get in touch with you, what's the best way for them to do that? Yeah, I would say have them reach out on LinkedIn and then we can establish a channel of communication there. Order man, thank you again for coming on the show. This has been awesome and for our listeners, if you enjoyed this episode, check us out at venue.com slash podcast to subscribe and get more. Until next time, I'm Zach Williams. Thanks everybody.