The homebuilding industry, at least for many of the larger builders, has become far more sophisticated in recent years thanks in part to the almost limitless amount of data that we have available to analyze. New economic facts including employment data, balance of trade, inflation, CPI movement, consumer sentiment and all kinds of interest rates are published almost daily. Building permit and construction start reports are updated monthly as are the MLS statistics. Hard data on population changes is available annually and projections often are published on a more frequent basis. We are able to see the “macro” housing industry trends if we take the time to look and, if our marketing team is doing their job, we should be receiving updated competitive reports at least quarterly to provide us with a fairly good “micro” view.
Our own internal operational data should be equally accessible. Determining the actual number of sales we have achieved is easy and, with a little analysis, we can determine which communities, which models and which features are selling best. We tend to receive fairly accurate counts of the traffic that comes into our sales office and, if we have a decent analytics program we can determine the traffic that visits our web site, reads our blogs and visits our Facebook, Twitter and other social media pages. Validating our marketing efforts in terms of number of sales, traffic generation, cost per sale, media usage, etc. should also be simple. We can compare our performance to our original pro-formas and make the necessary adjustments that are indicated.
It is my belief that the homebuilding industry is reasonably adept at analyzing at least some of the available quantitative data, when they do it, but generally lacking in understanding and analyzing qualitative data. Do we really know the reasons why:
- People who are interested in buying a new home never find us on the web?
- Visitors locate our community on a search engine or referral site but never visit our web site?
- Prospects visit our web site but never come out to our homes?
- Potential customers come out to see us but never register in the sales office or interact with a live salesperson?
- And most important, why buyers come into the sales office, interact with our sales team and do not buy?
I had lunch at a Chinese restaurant yesterday and my fortune cookie contained this rather cryptic message – “Everything that we see is a shadow cast by things that we do not see”. After I had quickly looked over my shoulder and, for a brief moment, considered The Matrix as reality, I realized the fundamental truth in that fortune. What we know is based only on what we see. As there is far more that we do not and cannot see, there must be far more that we do not know and that is where the opportunities exist.
Homebuilders must perform buyer interviews and exit surveys and, if properly done, these will provide at least some insight into why the purchase is and is not made. But last month I shopped a mid-Atlantic housing market, visited twenty-two community sales offices and, although I had registered, I did not receive a proper follow-up phone call or email from a single one. I did receive one note in the mail from the sales representative at a national homebuilder but that was a form note (apparently computer generated – fill in the name) that merely thanked me for my visit and asked me to call with any questions.
Having checked the production and absorption data, I know this local market’s new home sales are still off 65% from peak levels and that most homebuilders are currently struggling to achieve acceptable sales rates. So I have to wonder why there is apparently no requirement from management to provide the proper follow-through in the sales office to obtain the information that is critical to a proper analysis necessary to formulate and implement a strategy to increase sales.
It is not just the sales follow-up that appears to be lacking in this market and, based on what I see as I travel around the country, most other markets. Professional shopping of the sales team has also often been substantially reduced or even abandoned. Even competitive shopping reports have fallen by the wayside. If the sales staff is not even doing basic follow-up with visitors, the sales staff is not being evaluated and the competition is not being shopped, it is likely that none of the other essential consumer research is taking place.
The homebuilder in the mid-Atlantic housing market with whom I was speaking last month prior to commencing a “Strategic Marketing Audit™“ on his behalf did not even know what the sales rate was at a competitor’s development across the street from his own office, let alone the actual overall market conditions. He had not visited the neighboring development, determined which homes were selling, where the buyers were coming from, who was buying or what models were selling best. In fact, he was somewhat clueless as to what most of the competition was doing yet he was apparently comfortable in preparing a pro-forma for his next community.
After I had completed my competitive shop and market analysis, the builder was rather surprised to learn that the facts did not support either the proposed development or the projected absorption rate and that substantive changes were required in product design, community facilities and pricing if the required sales results were to be achieved.
While I am not suggesting that it is necessary to bring in an outside expert to inspect and analyze a homebuilder’s market, someone who is impartial has to do it so that an honest evaluation is made from the customer’s viewpoint. And someone has to obtain, examine and evaluate all of the other information available.
Ignorance cannot be a strategy for success yet without proper information we are all ignorant of the facts that are essential to creating and implementing a valid strategy for success. We have to find out what we do not see. And the most important facts are not just “what?” but also “why?”. But that’s just my opinion.
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