A satisfied home buyer is more precious than gold in a sluggish market, and builders clearly fortified their customer service programs in 2007, according to the 12th annual New-Home Builder Customer Satisfaction Survey, released this morning from J.D. Power and Associates. Nationally, the overall customer satisfaction index score jumped 38 points over last year, from 741 to 779 on a 1,000 point scale.
Among builders, Pulte brands, which include Del Webb, DiVosta Homes, and Pulte Homes, received platinum honors, ranking highest in customer satisfaction in 11 of the 33 markets studied. Centex Homes, which claimed the top spot in 2007, ranked highest in five national markets this year.
Pulte is the nation’s fourth largest builder, according to the most recent Builder 100. Centex is the third-largest.
“The past couple years have been dominated by a few builders, but lots of builders did well this year, contributing to the overall increase,” says Paula Sonkin, vice president of the real estate and construction industries practices at J.D. Power and Associates. “I suppose that’s the silver lining in a down market. A lot of builders achieved higher levels of satisfaction even as they were issuing layoffs and struggling to manage their costs and land holdings. They still figured out a way to keep their customers important.”
Markets achieving the most sizable customer satisfaction improvements include Palm Beach, Fla.; Tampa, Fla.; and Albuquerque, N.M. Overall, customer satisfaction increased in 28 of the 29 individual markets that were also surveyed in 2007. Minneapolis, which fell from first to fourth, was the only locale out of the 33 studied to see a reduction in its customer satisfaction score.
Hefty sales incentives, and the fact that many features once sold as upgrades (for example, granite countertops) have now become standard, no doubt fueled the overall rise in satisfaction scores. Nine out of 10 new home buyers in the study (92 percent) reported receiving sales incentives, with the average incentive topping $16,500.
Builders’ efforts to grow more sophisticated sales teams have also paid dividends. “Times were good for over ten years and builder salespeople weren’t even really selling homes, they were taking orders,” Sonkin observes. “Now they’ve had to learn to negotiate, and as a result, the price value perception has increased. Through negotiation, home buyers feel they are getting a better deal.”
Builders also stepped up to the plate with on time deliveries, turning the realities of standing inventory and smaller production pipelines into an advantage. The proportion of homes delivered both completely finished and on time in 2008 increased to 70 percent, up from 58 percent in 2007. The number of home buyers reporting that construction on their new home was finished when they signed the sales contract increased to 39 percent, up from 32 percent last year.
The big payback for builders boasting higher customer service ratings is the ability to command higher prices, even in tough times. “Their word-of-mouth goes up significantly. That includes the number of buyers who are likely to recommend, as well as the total number of recommendations,” Sonkin says. “A reputation for good service creates pricing leverage. This is the case in other industries across the board, not just homebuilding.”
The study polled 50,837 buyers of newly built single-family homes who have lived in their homes an average of four to 18 months. Customer satisfaction scores were based on nine factors, which respondents ranked as follows in order of importance: sales staff (15 percent); warranty/customer service staff (15 percent); workmanship/materials (14 percent); price/value (14 percent); home readiness (13 percent); construction manager (13 percent); recreational facilities (7 percent); design center (6 percent); and location (4 percent).
For the second year, the study also included break-out surveys on design and quality.
Design, the findings suggest, is another big differentiator in a down market. Overall, customer design satisfaction increased 36 points to 782 on a 1,000 point scale, driven largely by increased plan flexibility and a willingness among builders to make minor changes, such as moving interior walls or modifying room dimensions. Of the eight criteria driving customer satisfaction with the design of their homes--floor plan, master/primary bathroom, kitchen, ability to customize, interior comfort/environment, flooring, exterior architectural design, and windows/exterior doors--floor plans were weighted most heavily by respondents in 2008, whereas such features ranked only sixth in importance in 2007.
Home quality held steady in a year over year comparison, with the rate of customer-reported problems decreasing slightly in 2008 to 1,151 issues per 100 homes, down from 1,345 in 2007. Centex and Pulte brands ranked highest in new-home quality in seven markets.
Click here for a market-by-market breakdown of which builders ranked highest in customer satisfaction, new-home design, and new-home construction quality.
Jenny Sullivan is a senior editor for BUILDER magazine.
Learn more about markets featured in this article: Minneapolis-St. Paul, MN.