For most division chiefs, the metrics of growth are usually measured in the number of communities started, new homes ordered, and the average price paid for each home sold.
But increasingly, one of the most important variables in the equation is how successfully builders' sales, marketing, and design center teams can increase the value of options and upgrades that eventually become part of those homes and communities.
Option and upgrade sales, on average last year, represented 11.2 percent of the total sales prices builders grossed on new homes sold in 2003, according to a new Big Builder industry report. Builders say they believe that percentage has room to grow. Fully one-third of home building executives surveyed expected that figure will increase in the next 12 months. (About 60 percent expect the proportion will at least stay the same.) The study represented firms building at least 100 homes a year.
It's a business, however, that many builders concede they are still struggling to manage more effectively. Among the biggest challenges: Managing buyers' expectations and determining the right investment in staffing and showroom displays.
According to the study's findings, a majority of big builders continue to concentrate their sales efforts on big-ticket upgrades on flooring, cabinets, appliances, countertops, faucets, fixtures, and lighting (see chart). But these same categories remain widely promoted—and often more completely merchandised—at big box retail outlets. As a result, builders are still refining their pricing strategies, sales tactics, and training programs to overcome buyer apprehensions and the inevitable question about why these same products seem to cost so much less at the big box retail stores.
Asked how builders expected to upgrade their options sales, roughly three out of four said the most influential factors would be increased investment in their design centers, followed by increased sales efforts. High production builders—building at least 1,000 homes a year—who have already made those investments, believed the biggest factor influencing potential sales increases was the simple fact that customers continue to request more products and upgrade options.
Despite how much market research seemingly is available about consumers and housing, builders place a great deal of value in having good market intelligence on what various consumers are buying or will likely buy in their next new home.