THE COMPLEX RIDDLE OF MODEL and floor plan product mix can't be solved without a clear vision of who your customers are. The problem is that today your customer includes not only the home buyer, but the land developer, regional planners, neighbors, investors, and a host of others who must be satisfied in order for your product mix to be successfully marketed.

Fact is, all these customers want what they want, much of it contradictory. Ideally there would be a simple formula for coming up with the product mix that aligns the stars of home buyer, developer, municipal authority, financial stakeholder, staff, hired hands, and oneself. Sadly, there is no such formula; the situation is dynamic and evolving fast. Seeking to find the right formula for establishing product mix revealed a cadre of tactics ranging from gut instinct to reliance on meticulous market studies that show how some big builders make decisions on how, when, and for whom to diversify offerings in the months ahead—or cut back on them.

Looking at lot size formerly was the main ingredient in product mix, but not anymore.

“Twenty years ago, you could have standard home designs for 50-foot lots, 40-foot lots, and 30-foot lots,” says Steve McGill, vice president with McMillin Homes in San Diego, Calif. “Now, with all governmental requirements you almost have to customize your product for each jurisdiction.”

Not that that has been a problem for McMillin, which at its recently sold-out Liberty Station community in downtown San Diego, customized a “cluster home” to great success. The company previously offered detached homes in high-density clusters, but at Liberty Station, it placed two-story homes with attached garages on 2,500- to 3,500-square-foot lots. “These homes are at a density that has been in the domain of attached housing,” says McGill, adding that a three-story model was also part of the cluster product mix.

“The three-story detached cluster units were among the first to go,” says McGill, indicating the rewards of balancing the mix at Liberty Station.

MARKET WATCH: Market research has paid off for some builders when, for instance, data indicated a need for less entry-level product and more higher-end housing. A series of 80 single-family, detached homes and 140 attached townhomes complimented the 129 detached cluster town homes. “It is an example of how to increase total sales by offering variety of products,” McGill says. “There were very distinct products to appeal to different needs and price levels in a way that allowed for good sales at a rapid rate.”

McMillin liked the results of the high-density cluster home so much that it is planning on using a variation of the product at four other master planned communities.

INTERNAL PRODUCT COMPETITION While demographics and lifestyles are changing, three out of four home products are still largely determined by lot size, according to Tracy Cross, president of Schaumburg, Ill.-based Tracy Cross & Associates, a residential real estate market analyst and strategic planner. Jurisdictional requirements are a secondary factor.

Working with Town & Country Homes in Lombard, Ill., Cross helped establish a significant new product line for the company, which was recently purchased by Hovnanian Enterprises.

Learn more about markets featured in this article: Los Angeles, CA, San Diego, CA.