Seattle-based home builder Quadrant Corp. was making all the right moves. It had improved production, cut home delivery to 54 days, tripled sales in six years, increased customer referrals, and achieved all-time high marks for customer satisfaction.
"But we felt as if we were somehow holding back our horses from an all out run," says Ken Krivanec, vice president of marketing. Then Krivanec brought in a branding specialist. Within months after measuring customer and employee perceptions and rolling out a more focused multi-media campaign, total sales increased almost 33 percent, galloping from 657 home sales to 967 in one year. That was last year, and sales, customer satisfaction, and referrals are still on a roll.
Now that new home building has come under the scrutiny of Wall Street as well as a more discerning public, many big builders find that establishing a corporate brand -- and reconciling how best to handle acquired brands -- is a crucial aspect of their continued success. According to big builders who implement branding initiatives, results are not only seen in increased sales but also with premium pricing opportunities, higher closing rates, better relationships with government institutions, and greater market share during slow economies.
While some established builders have an intuitive understanding of branding that has served them well over the years, others realize that a more formal approach to this business philosophy is beneficial. Both can benefit from a better understanding of the true meaning of corporate branding and the ways various big builders are adapting it to the unique proposition of buying a home.
While the corporate branding of a home building company is different than traditional product branding, great branding results can be achieved by big builders. The long-term commitment to quality home construction and community service has established John Wieland Homes, in Atlanta, as a highly recognized local brand. Company CEO Terry Russell says, "The Atlanta Business Chronicle conducted a brand survey in the metropolitan area and John Wieland Homes ranked 2nd best [privately held, Atlanta-based] brand, behind the Chick-fil-A, a popular fast food restaurant." Russell points to a consistent dedication to the concept of "Better from the Ground Up" and adherence to company core values of "Excellence, Passion, Presentation, Integrity, and Completeness" as contributors to brand success. Russell adds: "Anyone starting a branding initiative today has a long road ahead of them. It is not an overnight process, but takes years of good, consistent delivery of service to customers and community."
Ken Plonski, vice president of public relations for Florida's WCI Communities Inc., says that focus on core values is a necessary part of branding that home builders don't always understand. "Because home builders have been focused on construction processes and profitability, many still do not fully understand the nature and intrinsic value of a brand," Plonski says. But now that the building industry is more acquainted with the ways of Wall Street, according to Plonski, there is a greater familiarity with concepts such as the brand promise, setting expectations, and creating a corporate identity tag line that set customer expectations.
Toll Brothers' vice president of marketing, Kira McCarron, says that "branding is not just a tag line. It is not a big ad campaign. It's the uniqueness of a company being apparent in everything you do." McCarron says that Toll Brothers was an early adapter of branding and spent many years establishing itself as "America's Luxury Home Builder." "It takes time to establish a brand, you can't just throw millions of dollars at it and say now we have a brand," McCarron says.
What it takes, according to author and branding consultant James Gregory, is the creation of a brand promise and commitment to fulfilling that promise on a consistent basis. In his book, Leveraging the Corporate Brand, branding consultant James Gregory writes: "Corporate branding is much like the trademark of medieval times, which gave customers assurance that the tradesman's quality would be replicated for the buyer every time." A perfect analogy for big builders.
While some big builders have been repeatedly fulfilling brand promises by implementing repeatable business practices, branding itself is proving to be a repeatable process for home builders.
Quadrant's successful brand campaign mirrors that of C.P. Morgan Homes, in Indianapolis, and is similar to that of Oakwood Homes, in Denver. Each of these big builders have a tag line promising home buyers more interior space for less money. They all also promise more choice and a more enjoyable home buying experience than rival builders.
C.P. Morgan backs up its brand promise by making a 3,500-square-foot home available for $135,000. Oakwood has homes available in the Denver market for less than $200,000 and Quadrant has 2,000-square-foot homes in the Puget Sound area starting at $150,000.
All three of these regional builders are enjoying substantial business increases despite stagnant overall local markets. Not surprisingly, each builder shares an informal business education relationship and has used the same branding consultant, Denver-based Milesbrand.
They also share a similar story of successful growth. Quadrant, which was founded in 1969 and is owned by Weyerhaeuser, was growing in the late 1990s (see "Merging Brands"). "We sold 415 homes in 1999, but we wanted to get to the point of selling nine homes a day. We had positioned ourselves as 'the smart choice' and then changed to 'the most for your money,' but in 2001 we realized our identity did not fully match our capabilities," Krivanec says.
At the end of 2001, Quadrant began a branding exercise featuring internal surveying, customer focus groups, and branding concept reviews that led to establishing the brand tag "More House. Less Money." Also intrinsic to the new brand creation were the concepts of "more choice" and "a better home building experience."
In 2002, Quadrant not only reached the 967 homes sales mark, but customer satisfaction was at its highest point and customer referrals sales accounted for 27.8 percent of total sales. Through April 2003, customer referral sales were at 35.8 percent and total sales through mid-July were at 636, putting the company on pace for another 30 percent increase in total sales for 2003.
"The 35 percent referral rate is almost four times the industry average, and Realtors took notice of how easy our process was and now they initiate more than 70 percent of our sales," Krivanec says. As part of its brand promise of providing a better home building experience, Quadrant follows C.P. Morgan's lead and pays sales commission up front to Realtors.
Krivanec cites that committing to the simple statement of "More House. Less Money." in print ads, billboards, radio ads, and a new 30-minute televised infomercial was at the heart of the brand strategy success. "Our research showed that home buyers want more house for less money, but still it took courage to do things we had never done before in establishing that brand," Krivanec says. Some of the promotions include a billboard that only has the brand statement and a phone number and a radio commercial series that comically depicts people getting lost in homes with rooms "the size of Texas."
As with Quadrant, Oakwood Homes has reaped rewards from its branding exercise. Brooke Ray, Oakwood's marketing director, said its branding program was instituted in 2002 and contributed to the company's best first quarter in 2003, despite a decline in the overall Denver-area housing market this year. Brooke said that total homes sales of 557 through mid-July puts the company on a pace to exceed last years' total of 771 homes.
Oakwood has also created a 30-minute infomercial and humorous radio ads. Also, as a commitment to its brand promise, Oakwood created a Web site at www.morehouselessmoney.com. Brooke notes that the merger of two Denver newspapers resulted in higher advertising rates that guided the company toward bus billboards and less print advertising.
C.P. Morgan Homes has won numerous awards for advertising programs that have evolved out of its branding initiative, yet senior vice president of marketing Dan Horner says he is not allotted additional funds each year to build the brand. And like Oakwood, C.P. Morgan is not finding newspaper advertising a cost-effective means of building brand equity.
"I am [currently] spending one sixth of what I was spending on newspaper advertising prior to 1999," says Horner. Instead, the company is investing in billboards, radio ads, a fleet of branded sports utility vehicles, uniform design of sales offices, and a 12,000-square-foot design center.
These branding efforts have contributed to an increase in sales of 200 homes in 1994, before the initiative started, to 2,161 homes in 2002. Much of the growth occurred after the 1999 branding exercise led by Milesbrand, according to Horner. "After the launch of our program, the buzz was out of category and it continued each year as we continued to emphasize our promise of 'More square feet for less money.'" Horner says that in 2001 the overall Indianapolis housing market was down 20 percent, yet C.P. Morgan's sales were up 50 percent.
At What Cost
While Horner shifted his existing advertising and marketing budget around to execute his branding plan, what can builders starting a branding campaign expect to pay for a new program?
David Miles, president of Milesbrand, says, "Anyone who asks 'How much does it cost to create a brand?' doesn't clearly understand branding." Although Miles is referring to the concept that every impression of a company, every phone call, every house tour, every site visit contributes to creating a brand, he is willing to estimate the average cost of a brand consulting exercise is $40,000.
James Gregory, president of Stamford, Conn.-based CoreBrand, works more frequently with Fortune 500 companies than with home builders. However, he has developed a formula for establishing a dollar value for a company's brand equity that can be applied to publicly traded companies and private entities to share revenue information, advertising expenditures, and other financial statistics. Gregory states that brand consultation programs lasting from three months to 1 year can range from $40,000 to $150,000. Those costs are just for the branding concept development. New logo design, new stationary, the cost of running ads, and all other expenses are separate from the branding consultation.
The NAHB's "Cost of Doing Business" study results from 1997 and 2002 both indicate that builders with revenues of more than $25 million average 6.2 percent of total revenues on marketing and advertising.
Gregory indicates that some of those dollars earmarked for branding are well spent on customer surveys and focus group studies. "Interview senior management and key employees to see if what the company says and does are they same," Gregory recommends. "Talk to vendors, financial analysts, and media to learn the impression the company has with the business world. And conduct client side surveys and focus groups."
Jack Shoptaw, president of Hammer Communications, in Washington, D.C., states: "Not as many big builders are conducting focus groups and surveys to understand their brand equity as they should." According to Shoptaw, one rare big builder conducted 30 national focus groups with home buyers and Realtors to determine the perception of its brand, what formed the perception, and how it could impact the participant's home buying decision.
"Yes, it is an expense, but it is an investment in the future of a company," says Shoptaw. A future that is increasingly requiring a distinct brand to stand out from the competition.
However, some analysts feel that a return on brand equity is not what investors are seeking. "When talking about how brand affects the listed home builders, you have to differentiate between fundamental factors that drive their sales or valuation factors that drive their stock price," says Ivy Zelman, housing analyst at Credit Suisse First Boston. "From an investment standpoint, brand is not an important consideration, because brand is simply good will on the balance sheet, and investors don't want to pay for good will. They are far more concerned with the sustainability of earnings, revenue growth, and returns on invested capital, as those are the factors that drive stock price appreciation."
But many builders see a direct benefit to branding efforts. Top on the list of benefits, according to WCI's Plonski, is a higher selling price. "When you get it right, there is a lot of value, you can command a stronger price due to the inherent level of credibility you have created," Plonski says. "A strong brand is also a barrier to competition. Who wants to enter a market place that is already dominated by a standout provider?"
Toll Brothers' national operation benefits from a strong brand by retaining customers in this transient nation, according to Kira McCarron. "We became clearly aware of the power of branding as people moved cross country or were transferred," she says. "As we established new communities, we did not need to spend more on advertising than we did in our mature markets. People were looking for us as they relocated."
Terry Russell indicates a large benefit of branding for John Wieland Homes has been smoother relationships with local government agencies. "If you do what you say you are going to do, not only home buyers will respond, but municipalities will also," Russell says. "We get more favorable treatment from government agencies because we are perceived as being easy to work with, and we are."
Also, Russell notes, "In times of uncertainty, there is a flight to quality. If you have a history of protecting value and your brand is seen as the builder of quality, people are more likely to cross your threshold because you are considered a stable choice."
Russell indicates that an ultimate indication of a home builder's brand is not when they sell a home, but when their customer sells the home later in life. "When you open the Atlanta Constitution real estate section you will see ads with the line 'A John Wieland Home.' "
When your customers start using your name, you know you have established a quality brand.
Learn more about markets featured in this article: Denver, CO.