In the consumer products business, where the dictates of the marketing people trump all but those of the CEO and the CFO, there has been a wholesale rethinking during the past decade of how to approach and reach customers. Companies no longer create products and then advertise them to vast swaths of the population based on standard demographic measures such as age, sex, income, and education. They now identify consumers first; then they create the products those consumers want; and finally, though liberal use of behavioral research, they target the very specific customers who, according to that research, share certain attitudes, opinions, beliefs, wants, and needs.

Forced by the sharp downturn in the housing market to rethink their businesses, home builders are just now coming to realize that they have much to learn from these masters of marketing. Even though new-home starts have declined by 33 percent from 2.1 million in 2005 to just under 1.4 million now, builders still may be oversupplying the market. There are no more vast swaths of the population clamoring for new homes. Segmentation by price point alone no longer will cut it.

With a third of first-time buyers now unable to obtain a mortgage and household formation numbers that have plummeted 44 percent in the 12 months ending June 30, 2007, according to a new report from the U.S. Census Bureau, builders now more than ever need to know who their potential customers are. The first step in this process is to understand that they might not be who you think they are.

A good case in point would be an unlikely community located about 35 miles outside of the glutted real estate market of Naples, Fla. The builder is Pulte Homes; the target is Catholics; and the community is called Ave Maria.

On July 21, amid the worst downturn in the housing business in at least a generation, in one of the worst real estate markets in the country, more than 2,000 potential customers visited the community during a four-hour period, "exceeding expectations," according to Pulte. The draw: A compact, walkable, self-sustaining town clustered around a massive church and the country's first newly constructed Catholic university in more than 40 years.

To be fair, this wasn't entirely Pulte's idea. Touted as one of the most ambitious projects in the history of southwest Florida, it was driven by the vision of Jim Monaghan, a devout Catholic and the billionaire founder of Domino's Pizza. The town is expected to include about 11,000 households at build-out. At the July event, visitors strolled the European-inspired town center, visited model homes, and toured Ave Maria University's buildings. They also took advantage of the opportunity to look inside the yet-to-be-completed oratory, where choral music nonetheless filled the air.

At first glance, the idea of developing an entire town around a lifestyle associated with religious learnings might seem extreme. At one time, Pulte might not have looked closely enough to consider the prospects at Ave Maria to be distinctly different from those of any other potential master planned community in the general marketplace. After all, the potential buyers at Ave Maria are mostly suburban families, the perfect, stereotypical greenfield development target buyer.

But a look past the differences of income and age for first-time buyers, move-up buyers, and empty-nesters–all necessary ingredients for the town's ultimate success–will reveal not distinctions but common ground. Today, making that effort to understand the psychologies, conditions, and environments of potential buyers translates into success because builders understand what motivates people to buy.

Once a master planned community developer in Northern California, The Grupe Co. has recast itself as a "green builder" during the past four years. Shane Hart, senior vice president of land acquisition and marketing, knows that demand for his product comes from well-educated, higher-income buyers who like to be on the leading edge of the trend toward social consciousness.

Comprehensive sales training has given him a huge competitive advantage because, while buyers like to be a part of the green movement, they are also embarrassed to admit they are confused by the technology. And he knows that even though they profess allegiance to all things green, these customers are likely to choose upgrades over green amenities when confronted with an either/or choice. But if the choice is presented as an inclusive combination of upgrades and green amenities, "my buyers always go green," he says.

Understanding the lifestyle of his prospects, he motivates them and drives absorption by incorporating lower-cost features as standard then consistently and simply promoting his projects as green. When one won't pencil, he takes a look at what's already in play to find a marketing hook. Earlier this year, Hart created a marketing document resembling a deed that he presented to buyers. It showed how their impact fees, imposed at the municipal level, represented ownership of one-third of an acre of preserved habitat. The result was motivating, despite the lack of any tangible product inclusion.

At Grupe, the ability to play into buyers' desires to showcase status and environmental awareness is driving sales. In stark contrast, Ave Maria, the ability to provide the feel of a sheltered, small town, wholesome, neighborly lifestyle with modern amenities is driving Pulte's sales. Though on the surface the thinking may seem different, it is similar in one way: what these companies are doing is most certainly not segmenting the customer base with the once-typical slice-and-dice-by-price point metric.

"In years past, [builders] were probably guilty of focusing on only particular segments of the market," says Linda Mamet, vice president of sales and marketing at John Laing Homes. Really, diversifying and being more specialized in niches that serve a diverse audience is a better reflection of society."