MOST COMPANIES DON'T EVEN think about whether they should build brand equity. The answer seems so obvious. If customers are not aware of or loyal to your brand, they won't pick you, stick with you, or pay a premium for your product.
Up until a few years ago, builders tended to build their brands over relatively small geographic areas, and most still do. At a local scale, word of mouth, a logo slapped on a truck, a dose of local advertising, and an award or two go a long way.
But you know what? The world has changed. Builders have become regional and national, so a bigger push to build national brands is under way. Although some builders retain the brand names of all or some of the companies they have acquired, large builders increasingly build everywhere under a single brand. And well they should in most cases—building under one brand reduces consumer confusion and focuses energy and resources.
But building brand equity at the regional and national levels does not come cheap. It takes heavy advertising, clever and consistent marketing, and ceaseless pursuit of customer satisfaction to create and foster brand recognition and loyalty. Branding signals to consumers what you stand for and delivers relentlessly on that promise. Toll Brothers is a case in point. Positioned as the nation's largest luxury builder, Toll aims high—and highbrow—in building its brand. That's why Toll made the move in September to sponsor the New York Metropolitan Opera.
The high cost of playing in a national pond places a greater importance on being able to gauge the payoff of brand investments. And it heightens the premium on figuring out how to send the right signals to customers so that they go out of their way to shop for your homes.
SECOND TIME'S A CHARM A classic reason for investing in branding is to create brand loyalty. This is especially crucial for businesses that sell goods and services that need frequent replenishment. Brand loyalty matters greatly in these cases because consumers have ample opportunities to shop the competition. It is critical to keep customers from straying to other producers after tasting, so to speak, the goods.
Take Google, for example. Consumers use this free search engine continuously and can switch from it without cost. No surprise then that it came out on top of Brand Key's 2004 Customer Loyalty Survey. Google can't afford not to. But homes are not like soda, toothpaste, and Internet searches. Homes are durable goods that are not replenished often. Still, new home buyers move more frequently than some might think. Two-thirds of new home buyers in 1992 and 1993, for example, moved out of those homes by 2003. So it turns out that the new appliances and windows that come with new homes are likely to outlast their first owners.
This raises an important question: If appliance manufacturers invest so heavily in their brands but sell products to customers even less frequently than home builders, why shouldn't home builders care equally about building brand to earn repeat customers?
Here is the answer: People choose a location before they choose a builder. Therefore, scoring a repeat home buyer requires not only customer loyalty and that the customer decides to buy new again but also that the builder has homes for sale where the customer intends to move.
Ten years ago, and for most of the history of home building, there was only a remote chance a builder would build in the neighborhood where a previous customer was moving. But this is a new day. Now—and increasingly in the future—large builders may find that they do indeed have a chance to snare repeat customers. Branding to attract repeat customers is therefore becoming a potential motive and payoff for branding.