Marketing Ideas From Home Builders

By JOE CONNOLLY startupjournal.com
To increase sales in a slower market, consider creating the impression of greater value for your product or service. One way is to make your most popular option standard.

That was one idea from the recent International Builders' Show. Because the homebuilding business is slowing, there may be lessons in what builders are doing that other business owners can apply to their own industries.

You can also reduce the financial impact by dropping one of the standard features that customers seem to be interested in the least.

When sales slow down, it can be a good time to catch your breath and reassess.

That's why some home builders are conducting professional customer-opinion surveys to see how customers perceive them. They haven't had to do this in the past five years.

Some have found that customers don't value what business owners may see as their best features. For instance, one builder raved about all the time his crews spent crafting custom-made kitchen cabinets. But research showed that customers thought the cabinets looked as though they didn't match. The woods and the grains all looked different.

Sales rose when the builder started installing matching, uniform cabinets -- at lower cost.

Your image may not be what you think it is. For example, one builder thought that it was known in its area as the low-cost builder. But it wasn't. It was surprised to learn that two other local builders were perceived as the low-cost builders.

When the builder discovered how people really saw it, it started adding some optional new features to its products. When it no longer acted like the low-priced guys, its sales doubled.

One builder said it's worth the money to hire a professional to create a survey, because those it wrote didn't even receive responses, much less any insights. He said it's more difficult than it may seem to get objective and accurate findings.

'Deluxe'

One developer says whenever a townhouse sells, he automatically raises the price of the two units next to it, because the market has set a price for the unit that sold. He can always bring down the price of the neighboring units later.

Daniel Levitan, a Florida-based marketing and development consultant to builders and developers, says if he has 100 units to sell, he calls only six or 10 "standard" units. Then he finds an added feature on all the rest to justify charging a premium. The bonus may be the view, the location near the parking lot, or extra square footage. He'll call them upgraded, deluxe, luxury, elite, special, limited, select or another variation.

He also says to hold back your best units in a slow market, if you can, so that you can charge a premium for them when business improves. He says if you sell your best units in a down market, you'll be left with just the average inventory when business improves, and you'll never get out of the project.

Online Connections

Your Web site may be even more important than you know and can cut sales-time costs by hours.

Charlie Scott, the owner of Estridge builders, a smaller home-building business, says that he tracked the online activities of a customer who eventually hired him to build a house. (He told the customer about his research and the customer said fine.)

Mr. Scott could see that the buyer first looked at links for various neighborhoods. Then he looked at floor plans -- several times. Then he went back to neighborhoods. As the buyer became serious, the business owner could see the client spending more time researching the business's reputation online.

The buyer spent about nine hours searching the Web site over several days before he even called the company, according to Mr. Scott. Plus, this customer was doing all of his shopping around 9 p.m. -- long after the sales office had closed.

Leveraging a Sideline

The key to growth may be a small part of your operation that's not even your main business, but a new feature you're developing. Here's an example:

Estridge Builders found that more customers want new technology built into their homes. So it hired its own home-technology experts to advise clients. Then the builder started reselling its own monthly Internet-connection service.

Now the builder advertises that it will build a house and install and provide the service for you, as part of the deal.

As proud as it is of this service, it doesn't call it by the same name as the rest of the company. The reason: Estridge builders sells its technology know-how to its competitors.

The builder keeps its name off the trucks, and pride takes a back seat, to create a win-win deal.