ANOTHER MOVIE PROVIDES A LESSON FOR THE HOMEBUILDING INDUSTRY

There was a movie out three years ago called “Idiocracy”. Fortunately I did not pay to see this film at the movie theater but did watch it one night on cable when I could not fall asleep. Luke Wilson stars as Joe Bauers, the definitive “average American” selected by the Pentagon to be the guinea pig for a top-secret hibernation program. Forgotten by the government, he awakes 500 years in the future and discovers a society so incredibly dumbed-down that he is now the most intelligent person alive. I would hope that we are not headed in that direction but I often have my doubts.

This past weekend my wife and I were running errands and on the way home we stopped by a fast food restaurant to bring back lunch. The total of the bill was $12.46 and I handed the clerk a $20 dollar bill and 46¢ in change. He looked at the money for several seconds and then gave me back $12.00. It took me five full minutes to convince him that all he owed me was $8.00.

I know that public school systems across the country have funding problems and have eliminated the majority if not all of the programs in art and music for elementary education but I had assumed that they still had money to teach arithmetic. Perhaps I was wrong and did not account for the fact that I live in Florida which, when my children were in school, discontinued one of the best mathematics magnet programs in the country because, according to the school board announcement, it was elitist (apparently it was of no importance that the only U.S. student ever to win the international math Olympiad had graduated from that program) but still found plenty of money to retain all of the sports programs.

Last night we went to have dinner at a local Italian restaurant. There were five or six tables open but a sign said “please wait to be seated”. After waiting several minutes to be acknowledged, my wife asked one of the people working there if we could sit at the front table and she was told “OK”. However, when we sat down a server came over and said that she thought someone was sitting there (perhaps an invisible family?) but she would be right with us. We got up and stood back by the door but five minutes later, after still standing and waiting, we walked out.

Perhaps things are better in your neighborhood but it seems that where we live there is at least one restaurant closing each week due to the economy and lack of business. Two years ago we would have had to call at least one week in advance to get a reservation at one of the better restaurants. Now when we call at the last minute they are happy to have us there. There are still plenty of neighborhood Italian restaurants and we will give our business to those that welcome us and pay us the attention and respect that we are due as customers but I will never return to that restaurant and I will certainly shed no tears when they go out of business.

Although both were annoying, there is a significant difference to me in these two situations. The first occurred due to ignorance, the second due to stupidity. Ignorance, as I have said in earlier blogs, can be corrected with education, although in Florida it appears that probability is slight. I believe that stupidity, however, is inherent in some people as it can be defined as “the inability to comprehend or to understand and profit from experience”.

idiocracyOne of the major builders in a market where I am active recently revised his advertising campaign (against the advice of his marketing team) to promote the primary premise that their homes are built to a higher standard of quality. I was asked my opinion of this campaign by my client and I responded that in the reality of today’s market, it appears to me that purchasers are concentrating on price and that value is of importance in the buying decision only when it can readily be seen and appreciated

As the builder who has embarked on the “quality” campaign provides included finishes and features that are below what the competition is providing as standards, and their higher quality is “behind the walls” and not visible to the consumer, the only way that premise could be translated into a benefit is through a lengthy education process to which buyers today are typically not receptive. And any such attempt at consumer education would be doomed to failure as that builder has no independent studies or surveys showing that he has higher standards, higher quality or a higher satisfaction rating than any other builder in the market. While the quality claim may well be valid, it cannot be perceived as such by the buyers and, instead, comes off merely as self-promotion and therefore will not, in my opinion, produce a meaningful number of sales.

Now I am familiar with the “quality” builder’s marketing team and know them to be professionals. I cannot believe that they did not try to dissuade their client from this approach or at least first suggest that they be allowed to investigate that issue further through a focus group. But I also have met this builder and know with certainty that his response would have been “after twenty years in the business I know what the market wants so I am not going to waste my time or money on a focus group”.

By the way, that builder who claims to know his market has seen his market share decline by over 30% in the past year so perhaps he really does not know the current market that well. And fortunately my client, who does not claim to know the market that well, has retained a consultant, utilizes focus groups and consumer research, and has seen his market share rise by 20% in the same year.

I have repeatedly heard the “quality” builder proclaim that he is the best builder in the marketplace but my belief is that the “best” builder in any market is the one with the largest market share as they have served, by virtue of their sales, the greatest number of buyers and satisfied the largest demand segment. So the self-proclaimed “quality” builder has lost market share in a market where the total new home sales have fallen by over 50% so his sales are now down by 65%, yet he still claims to know what the market wants. Does that not sound like “the inability to comprehend or to understand and profit from experience”?

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