FloorPop FloorPop (Flôr-pop) n. 1. The homebuyer who visits a Builder's community and writes a contract for sale the same day. 2. The sound made by a salesperson clicking their heels high in the air and returning to the floor after a prospect signs a contract the day they first meet.
Marketing Best Practices for Homebuilders, December 6, 2006 Vol. 7, Issue 9

How to Grow Your Volume by 10% without Competing on Price

IN THIS ISSUE:

If you have any feedback please let us know by emailing me at kuhnen@earthlink.net or you can let us know what you think of the article by taking our article poll.

How to Grow Your Volume by 10% without Competing on Price

If you are like most builders I work with, sales are off a bit. In a down market, we always struggle for ideas to improve our marketing. To maintain your volume and profits, you have to grow your market share. Unfortunately, other builders may have the very same goal. What if the pie were larger?

The new home sale market represented 22% of all homes sold in 2005 according to the 2006 National Association of Realtors® Profile of Home Buyers and Sellers. So, your largest competitor is the resale market. Could this share of 22% grow? Since 1999, the NAR survey showed new home sale share ranging from 21% to as high as 28%. A 2% share shift would mean a nearly 10% increase in volume for the new home market. But why would consumers shift their preference toward new homes?

The Relative Value Proposition Has Changed

New homes represent a better value than they did a mere five years ago, but most homebuilders pay little attention to this fact. Significant improvements in products, technology, and customer satisfaction leaves resale housing in the dust (see Your #1 Competitor is on the Ropes). Many advanced items in new housing can't easily be put into resale homes (e.g., house wraps, structured wiring).

We spoke with Sam Rashkin, Director of the E.P.A.'s Energy Star for Homes program, about some the benefits of new housing. "We have to really work on the marketing side to make sure this other great story [is told] about the persistence of value, long-term greater resale potential because homes are very hard to retrofit to this level of performance." said Rashkin. New products are shifting the balance of value and we need to communicate this better to consumers.

What if every sales agent communicates the same message to every prospect? What if that message were not only true, but was also obvious? Would most consumers accept the message? Well, this already happens today. What home shopper does not hear and accept that they are likely to have lower maintenance exposure in a new home relative to a resale home?

We can change the world, or at least affect the relative demand of new vs. resale housing, but only through a concerted industry-wide effort.

How You Can Communicate the Change

Of the 10 largest builders in the U.S., just 3 have any information that can readily be found on their websites about why buying new housing is better than the alternative. Centex talks well about energy efficiency, Lennar tells us mostly about their product attributes, and Ryland has a paragraph about energy efficiency. We sell ourselves way too short.

http://www.centexhomes.com/wccenergyefficiency.asp

http://www.lennar.com/build/buildhome.aspx

http://www.ryland.com/before-you-begin/new-vs-preowned.html

It is time to start communicating the superior value of new housing.

Perhaps these can give you some inspiration for things you can do on your website. For further inspiration, > let me share with you two video segments that will be seen by literally millions of new home shoppers who watch our HotOn!® Homes television program. Here they are:

View Green Building Video

View Old vs. New Housing Video

Getting Your Sales Team Moving

I spoke with Myers Barnes, Myers Barnes Associates, to get his recommendations on selling against your number one competitor, resale homes. According to Barnes, "You have three major competitors; your known competitors, the re-sale market, and apathy." Barnes sees apathy as the current hot issue, "The consumer feels no urgency to buy because the salesperson has absolutely no urgency to sell."

Rather than adding to customer apathy by confirming or even talking about market conditions, He recommends a different script. An honest script that explains why now is the best time to buy a new home is Barnes' prescription. He suggests a script something like this:

"Things are unbelievable here. We are pretty fortunate. Interest rates are the lowest they have been in 35 years. You can get a 30 year fixed mortgage for about 6 ¾%. The truth of the matter is that our inventory is the best it has ever been. And the truth of the matter is that since our inventory is the best it has ever been, our builders are more aggressive. You just couldn't be here at a better time." (see Barnes Interest Rate Dialogue below.).

Barnes sees brands and co-branding opportunities as a favored tool to differentiate new homes from resale homes. "First you have to position your home as brand new. There is also a brand list, a component list. Put all your brands into it." He sees warranties as a tool few builders leverage. Of course when you buy resale, you probably sacrifice 100 years of warranties the original owner received. He believes you should turn this differentiation into a powerful sales tool you can use to demonstrate the difference, "I'm talking printed, glossy, with the logo of every brand they could have and the number of years of warranty." says Barnes.

Has the balance in value really shifted toward new homes? "I would say that the balance of value has shifted." says Barnes, but he cautions, "What does it matter what you put in a home if someone is not willing to demonstrate it? Unless someone is there pointing it out, it doesn't matter."

Next Steps Online and Off Line

Barnes sees a strong opportunity for builders to have success in the current market. "Only the flipper has moved out of the market." Says Barnes. The key comes back to training. "It starts with proper education and it starts with proper demonstration." Here's Barnes' prescription:

  1. Educate your staff. "You are competing against apathy, the resale market, and then your traditional competitor."
  2. You need a script. "True sales education is what to say and how to act when you are face to face with a buyer." You have to do the role playing. Your scripts have to demonstrate the advantages of new over resale.
  3. Develop, in writing, your co-branding documents. The warranty value alone is huge. "If you add it up, it's astounding." Put it on your website and give it to your sales counselors.

What if all large builders were reinforcing this same message on their websites and in their sales centers? Could we shift 2% of home shoppers toward brand new homes lifting the entire market by 10%?

Let me know what you think by dropping me a note at kuhnen@earthlink.net

How would you rate this article?

Great!

VGood

Good

Marginal

Poor

Awful
view results

Myers Barnes on the Market, Economy, and Interest Rates

Without fail, the question I'm being asked most frequently by company owners, management and salespeople is: "What do you think about the market, economy and interest rates?"

Because so many of you have asked, I decided to put my thoughts in writing and send it out as a "heads-up" for those of you eager to get a jump on the competition.

On the Market and Economy

Essentially, I'm not concerned. Why? Because, as "individuals," we can do nothing about the overall economy or the market. However, "individually" you can do something about your own personal economy. With preparation and a disciplined process that's oriented to your business, your personal economy will always be good - regardless of the market.

If you are overly concerned about the market, economy and interest rates, then that's probably an indicator that your sales have been market-driven, rather then self-directed.

So, take this opportunity to focus on personal development - to learn how to work smarter; not harder. But to work smarter, you must educate yourself. Without education, training and a strategy that employs growth and personal development, you'll continue in the same rut - working harder but digging in even deeper.

To repeat, "There is nothing you can do as an "individual" about the market and the economy. However, "individually" you can do something about your own personal economy if you do something about your own personal development. Remember, "essential selling skills" that boost your knowledge can subsidize an unstable market or a weak economy.

Move Now Before Interest Rates Do

Most consumers and sales professionals alike may not understand the urgency of moving now before the interest rates do. However, using the example of rates increasing by merely one percentage point, I'll illustrate why this is important.

Suppose a home is priced at $215,000. Naturally, the customers we consult with and salespeople we educate represent homes across America that may have prices as little as $150,000 or up in the millions of dollars. But we'll take the median $215,000 purely for example purposes. Now, keep in mind the difference between cost and price. The price $215,000 is a one-time event, while the interest rate represents a 30 year on-going cost.

Home Price:$215,000 Home Price: $215,000
Fixed Interest: 6% Fixed Interest: 7%
Terms: 30 years Terms: 30 years
Monthly pmt: $1,289 Monthly pmt: $1,430

Please note the difference in payment (cost). A mere one-percent increase in interest rates seems small at only $141 per month. However, an increase in the monthly payment (cost) over 30 years is a whopping $50,893!

Using this example, you may want to memorize and internalize the following script (Sales Dialogue) and use it to convey the urgency to your potential customers "to move now before the rates do."

Prospect: We need to think it over (or) sell our home (or) wait (stall) for whatever reason.

Superachiever: Miss Prospect, may I explain the benefit of moving now, rather than waiting?

Prospect: Yes.

Superachiever: The challenge with waiting involves several factors. First, if you are not aware, interest rates have been steadily and consistently rising. As a matter of fact, economists reported over the past few weeks that they are seeing the sharpest spikes in rates since 1987. With this in mind, consider how interest rates can affect the value of a brand new home.

When acquiring a home, you must always consider the relationship between cost and price. The price of the home is only $215,000 and is, of course, a one-time consideration and a fixed amount. However, cost is an on-going expense and can dramatically affect the final value of a home. A mere one-percent increase in interest rates represents an additional $141 per month or $50,893 over the entire term of a 30-year loan. When you analyze the situation, it's as if you can say the price of a $265,893 home will now cost $215,000 if interest rates rise by merely another percentage point. Miss Prospect, my question to you is, "Do you think it's possible that rates could continue to go up?"

Prospect: I suppose they could.

Superachiever: Then I suggest you consider moving now before the rates do. Does that make sense to you?

Prospect: Yes, when you put it that way, I suppose it makes perfect sense.

Superachiever: Let's do this. We'll work together and select the perfect home and place it on the ideal homesite, and simultaneously discuss the best financial program available to fit your unique needs.

With this information and selling strategy, you should be able to take advantage of any move the market and the economy make. Of course, the best information won't benefit you unless you put it into application. So take this information and, if it applies to your selling situation, change your selling strategy before the interest rates do.

Best personal regards,

Myers

How would you rate this article?

Great!

VGood

Good

Marginal

Poor

Awful
view results

Blair Kuhnen is the publisher of FloorPop. He can be reached at 817-658-7698 or via email at kuhnen@earthlink.net.


Subscribe to FloorPop

Do a colleague a favor and forward them this newsletter.



Builder Articles You
Don't Want to Miss

Virtual Reality TV - Videos using real people bring neighborhood lifestyles and amenities into focus for home buyers
- Big Builder, Nov. 2006

Long Day's Journey
- Big Builder, Nov. 2006

Customizing for Customer Satisfaction
- GIANTS, Nov. 2006






Recent Popular Articles


Contributors to FloorPop this Month

Myers Barnes, Myers Barnes Associates, Inc. can be reached at 800-261-7613 or via email at sellmore@myersbarnes.com. His website address is http://www.myersbarnes.com.