By Bob Mirman and Wyatt Kash. Builders have come a long way in understanding the fine points of satisfying their customers. A decade ago, few builders bothered to systematically measure how satisfied customers were with their new homes, let alone the home buying experience. Fewer still seemed to acknowledge how their customers' expectations were increasingly being defined by a new era of customer-focused companies like Nordstrom, Fed-Ex, and Marriott.

Today, most major builders not only have well-established programs in place to measure customer satisfaction; they have made those programs a central part of their management systems. Performance reviews, incentive programs, and a variety of marketing initiatives increasingly rely on the steady flow of customer satisfaction ratings.

And with good reason: Referrals from satisfied customers can translate into lower customer acquisition costs, faster new-home absorption rates, higher margins, better cash flow, and improved long-term profits, not to mention greater brand value.

A new study, however, reveals that important gaps still persist between what builders believe is most important to buyer satisfaction -- and their willingness to make referrals -- and what buyers in fact say matters most to them. While most builders are earning higher satisfaction scores overall, it is also clear from the new study that builders continue to fall short on certain key issues, which if turned around, could have a dramatic impact on boosting overall buyer satisfaction.

The study is based on new analysis of tens of thousands of home buyer satisfaction surveys during the past year, and a new survey of 800 home building executives commissioned by Big Builder magazine. The study was produced by Eliant, formerly known as National Survey Systems, in Irvine, Calif., with analytical assistance from the University of Redlands, in Calif.

The analysis examined how dozens of specific issues impact a buyer's overall satisfaction with a new home. For example, if the buyer reports that he is "very satisfied" with the "storage" in his home, is he more likely to also report being "very satisfied" with the overall quality of the home; and is he also more likely to say that he will refer a friend to this builder? The results provide a road map for builders on where to focus resources.

Home Buyer Showstoppers

Odds Against Referral*

1 Wall alignment and framing 2.2
2 Buyer's comfort with number and scope of walk-through items 2.1
3 Sales representative(s) looked out for my interests, as well as builder's 2.1
4 Construction representative ensured that vendors/contractors met high quality standards 2.1
5 Quality of repairs/service 1.9
6 My home was completed and ready for move-in on my scheduled date 1.9
7 Builder's subcontractors performed quality work 1.8
8 Sales representative(s) knowledgeable about my home, community, and competition 1.7
9 Sales representative(s) kept me informed of construction progress without my having to ask 1.6
10 Interior lighting and switches 1.5
* Odds against referral -- statistically, these are the odds against a referral from a buyer dissatisfied with a given issue.
Performance Positives: The performance areas listed here are universal expectations shared by all home buyers. Poor performance on "showstoppers" will overcome all the other positive satisfiers.

The analysis confirmed that "installation and workmanship" is not only the most important category to new home buyers, but controls almost a third of the buyers' decision to refer the builder to a friend. When builders were surveyed, they correctly surmised that workmanship was the most important of the 11 major processes that contribute to overall new home buyer satisfaction. However, builders seriously underestimated the importance of the "option-and-upgrade" process, which was the second most important factor contributing to buyer satisfaction but one which builders ranked sixth, believing it was of much less concern (See Figure I-1).

These two single issues account for nearly half of what drives overall satisfaction with the purchase of a new home. Yet, importantly, both processes individually continue to receive below-average satisfaction scores from buyers (See Figure I-2). If builders concentrated on improving buyer satisfaction with these two issues, and more specifically, the factors that drive satisfaction within each of them, they would improve their chances dramatically of boosting overall satisfaction and referrals.

Ironically, builders overestimated the importance of customer care and service, ranking it third, while new home buyers ranked it sixth. The findings point to a broader misconception about service and customer care.

The level and kind of service that is important to buyers transforms significantly within a short period of time as buyers transform into owners. For the new home buyer who completes a survey in the first 30 days after move-in, customer service is only one-eighth as important as it will be to a homeowner 10 months after move-in. This differentiation makes it clear that the evaluation of "customer service satisfaction" is entirely dependent upon the point in the purchase cycle in which the buyer is surveyed.

Among other satisfaction drivers in which builders' estimates of importance fell way below buyers':

  • Construction managers ensured that contractors met high quality standards.
  • Perceived value of the options and upgrades process andproducts.
  • Service personnel cleaned up after completing repairs.
  • Sales people looked out for the buyer's interests.
  • Design center provided wide enough selection from which to choose.
  • Community appears orderly and safe, even if other homes are still being built.
  • Wall alignment and framing appeared straight.

The study breaks new ground by also focusing on the factors known to have the greatest impact on customer satisfaction and then surveying builders to identify what they are doing to improve those factors.
When it comes to working with sales representatives, for instance, buyer satisfaction evaluations of more than 2,100 individual sales people revealed the driving factor separating a good sales person from a great sales person was the sales person's ability to keep the buyer updated about construction progress before the buyer has to ask; and demonstrating they had the buyer's interests clearly in mind. The builder survey showed how successful sales personnel are effectively increasing their active communication scores by counting on buyers being away from home during the day and leaving brief messages on their answering machines (See "Sales Experience").

Cashing in on Customer Satisfaction Series
The Referral Equation
The Sales Experience
Design Center and Options Process
Construction Management
Orientation Walk-Through
Installation and Workmanship
Home Readiness
Initial Customer Care
One Year Later

In another example, the best opportunity to cultivate buyers who are delighted with the design center and options process is by enhancing the "perceived value" of the entire experience. Analysis revealed buyers often face conflicting expectations and experiences between sales people, design consultants, and walk-through coordinators. The builder survey of best practices suggests it takes a coordinated, team effort by all three groups of personnel if builders are to boost satisfaction scores. The study reaffirms that builders do not earn points for performing well on issues in which buyers expect performance excellence. However, there are some issues for which poor performance will absolutely eliminate future referrals from home buyers. These "showstoppers," as Eliant calls them, include: multiple service visits for same repair; poor wall alignment; poor quality of cabinets; failing to meet promised time frame in completing repairs; and disrespectful service personnel (See Home Buyer Showstoppers chart).

The study's chief findings are reported in eight sections of this special report. Each section examines the issues or processes which have the greatest impact on a buyer's experience -- from dealing with the sales, design, construction, and walk-through representatives through the move-in -- and how perceptions change a year after living in a new home.

Each section also looks at how builders' perceptions match, or don't match, buyers' feelings. Sections highlight builders' best current practices and a "Builder Action Plan" summarizing the issues that can "accelerate" referrals or "kill" them, based on the new analysis.

A key lesson that emerges across all the phases is the critical need to place equal importance on managing buyer expectations as on performance improvement. According to Eliant's analysis, the builders earning the highest satisfaction ratings typically are those which also do a better job of actively defining standards of expected performance, before buyers are allowed to determine their own expectations.

The study's conclusion: If builders are to convert satisfied customers into delighted customers, and boost referrals, they will need to focus on two things: first, the fine-line elements which can "accelerate" or "kill" the kind of satisfaction that leads to referrals; and second, train and develop their associates to manage customers expectations on those issues with the aim of beating them 95 percent of the time.

The articles in this special report were written by Bob Mirman, CEO of Eliant, and Wyatt Kash, editor of Big Builder magazine. Eliant (formerly National Survey Systems) provides customer satisfaction data and solutions to more than 150 of the nation's top home builders including D.R. Horton, John Laing Homes, Lennar Family of Builders, Shea Homes, and Standard Pacific Homes. The firm is considered the largest consumer research company in the country that caters exclusively to the building industry, conducting more than 200,000 home buyer surveys annually. Eliant is recognized for its use of sophisticated, high-tech consumer tracking tools and information management systems to provide builders with timely, actionable information and strategies to increase home buyer satisfaction and building industry rankings.

Headquartered in Irvine, Calif., Eliant was founded in 1984 by Bob Mirman. Mirman is a clinically-trained psychologist who translated the consumer perception tools he had developed while working at General Mills into a series of surveys designed to capture detailed information on the entire home buying experience, including satisfaction up to two years after move in. Builders use Eliant's tracking information to monitor, reward, and modify practices that directly impact home buyer loyalty.

For more information, contact:

18 Technology Drive, Suite 200 Irvine, CA 92618
949-753-1077 ext. 10; 800-814-9595