HOMEBUILDERS AND SUSHI – PART II

sushi #2I had lunch again at the local sushi buffet.  For those who follow my blog I am pleased to report that yes, they are still in business.  In fact, the restaurant was crowded.  On my way in I picked up a copy of the New Times, a free alternative newspaper, to read at lunch.  If you live in a major metro area, I am sure that you have similar newspapers available.  The editorials are typically aimed at a local politician and are vitriolic; the dining and entertainment sections are extensive.  

What caught my attention at lunch, however, was the substantial collection of ads for pain management clinics, comprising 14 of the 72 total pages in the publication, with the majority offering “dispensing on-site”.  Apparently I am not as “current” as I thought as I was unaware of the extent to which the drug dealers in my area had apparently become legitimate businessmen. 

Many of the homebuilders and developers today are certainly feeling pain.  But, rather than visiting one of these thinly disguised drug dispensing facilities, I would suggest that a visit with your marketing team, whether in-house or outside consultants, might be more beneficial and have longer lasting results. 

Several weeks ago I received a call from a client asking for my advice.  He had opened a community a few years ago and sales had been very good until the market downturn in 2007.  Recently in reviewing this community he realized that three of the eight home plans that he offered are accounting for over 80% of the total sales.  In the good market he saw no need to analyze the operation as he was selling as fast as his production capacity allowed but now that the market is much slower, he was concerned that he might have a problem.                         

There are many factors that influence a homeowner’s buying decision and often the builder inadvertently creates additional factors that will favor certain home plans over others.  As a development that only sells a few of their home plans can quickly become stale and repetitious in the eyes of the buyer and retard future sales, it is important that the full spectrum of home designs be purchased for the optimal success and profitability of a community. 

I asked the client what had his updates to the original market strategy shown and he replied “we have not updated nor even looked at the report since we opened for sales”.  As this was a client with whom I have worked on several assignments over the past years, I gave him some free advice.  Here are the suggestions that I provided which I believe are valid whenever a community is not selling as expected: 

1.         Do an exit survey of your traffic and your buyers to determine why they chose a specific competitor’s community and home over yours or purchased one of your specific home plans versus another.  Understanding your prospects and buyers and their motivation is essential to determining and satisfying their needs and desires. 

2.         Shop your competition to determine which home plans they are selling and compare those to your product offering.  Do you provide all of the styles and designs of homes that the market desires within your targeted price points?  

3.         Examine your traffic and buyer profiles.  Has your prospect or buyer traffic changed from what you anticipated in your original strategy?  Are you providing the correct home designs, styles, features and pricing for what is now the realistic target market?  And is your advertising and promotion targeted to those markets? 

4.         Examine the competition to verify that your homes are appropriately priced for the perceived value they provide and make adjustments in pricing and features as required.  Raise the prices on the better selling homes and, instead of lowering the price on the other models (which usually tends to decrease the value of the entire product line), consider actions that increase the perceived value of these homes such as including additional features and incentives. 

5.         Examine the pricing of your homes.  Is the pricing spread between your homes too narrow so that a distinct value proposition is not being created for each plan with the result being that the purchasers are not required to make a “dollar” choice?  If all the homes are effectively the same (or very similar) price then a vital factor in the decision making process is eliminated.  Remember, pricing is determined by the market, not by cost. 

6.         If the better selling homes are those that you have selected to feature as furnished models, consider adding another furnished model.  Model homes typically outsell the other plans by two to one and the cost of an additional model can usually be recaptured with just a few additional sales as the “fixed” operating and marketing costs have already been covered. 

7.         Motivate your sales staff to make an extra effort to sell the less accepted plans through incentives, increased sales commissions and contests. 

8.         Make certain that the “available” homes (this builder’s market favors inventory or “spec” homes) provide a complete choice of home plans to those prospects needing short term occupancy.  All too often builders who create inventory favor the plan that last sold thereby perpetuating a prejudice in selection. 

9.   Restrict certain of the more desirable homesites so that only a few of the home designs are permitted there.  Often the choice of a premium homesite will help sell that home plan. 

10.  Keep the community new and vibrant by introducing new home plans and designs every year or two.  “New” sells and provides a valid incentive to the market for a return visit.  

I then reminded my client that the marketing strategy does not end with the opening of the community.  Instead it is an ongoing dynamic process that must be continually examined, analyzed and updated to insure the optimization and profitability of the development. 

sushi #3
The best news, at least from my perspective, was that after considering my advice the client retained me to perform the community and market analysis and provide an update to the marketing strategy so I will not be requiring a visit to the pain management clinic and can, instead, again return to the sushi buffet.

Please visit our company’s web site to learn more about our services – http://levitanassociates.net

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