By Bob Mirman and Wyatt Kash. Arguably the industry's most important process innovation of the past two decades has been the insertion of "customization" (or, in current builder parlance, "personalization") into the production building environment. Indeed, with the exception of Lennar's "Everything's Included" program, it is difficult to find a builder today that has not embraced the "production-custom" model.

A new generation of design centers, merchandised like retail showrooms, symbolizes how far the personalization process has come. But it also has raised the stakes for builders, creating inherent difficulties in dealing with the expectations of these buyers.

Most daunting for builders is the challenge of establishing the value of the options and upgrades available to a buyer who has been exposed to a world of choices at discount retail prices.

A new analysis of new home buyer satisfaction indicates this challenge may be the single biggest hurdle builders face in achieving higher satisfaction scores.

It also represents one of the biggest opportunities, according to a new study prepared for Big Builder magazine by Eliant, formerly National Survey Systems, in Irvine, Calif.

The issue of whether construction options and upgrades were a good value was the most significant factor in determining how satisfied buyers were with the option and upgrade experience, which was the second most heavily weighted driver of total new home buyer satisfaction. As the accompanying chart (See Figure 2-1) clearly suggests, home buyers' satisfaction with this issue scores near the bottom of the chart.

Builder's Action Plan
...For improving options and upgrades satisfaction.
Referral 'Accelerators':
  • Sell the value of the options and upgrades to be installed/added in the design and options process.
  • Train sales representatives to sell the value of design center process.
  • Train orientation representatives to reinforce buyers' options selections.
Referral 'killers':
  • Compensating representatives based only on sales of product, but not including buyers' satisfaction.
  • Confirm typical buyer's distrust by actually overcharging.

This issue is not just about the value of products being offered; the survey questions used as the basis for these findings begin with the phrase "Considering both the services and products provided..." As the related chart about the design center experience indicates (See Figure 2-2), home buyers' expectations about the design center personalization experience, though less crucial to the overall satisfaction equation, nonetheless are also not being met. Ironically, despite the proliferation of design and option selections offered to today's home buyers, their satisfaction with the number of choices is below the average in each category. "Adequate selection" is the issue having the strongest impact on buyers' overall satisfaction with the design center experience. Builders apparently have failed to appreciate that, ranking it seventh (See Figure 2-3).

Although the three-year satisfaction trend, based on Eliant buyer surveys, for all design center and options issues is rising, the industry's biggest opportunity for improving satisfaction with these two categories is a continuing emphasis on enhancing perceived value.

Regardless of builders' misperceptions of home buyers' strong emphasis on perceived value, it's clear from the new findings that builders need to take a more strategic approach to the way buyers perceive and evaluate the value of the design and options experience.

A possible approach emerges from Big Builder's and Eliant's survey of the best builder practices. There are three members of the builder's team who have a significant impact on the buyer's perceived value of the design and options process:

Sales personnel need to set the stage for the buyer's perception of the design and options process, beyond an explanation of the process. Sales people should be selling the value of the builder's design center and options program (if separate), underscoring the reasons why the buyer is better served using the builder's service and not an outside vendor or retailer.

Design and options personnel need to do a better job conveying the value of their services by reminding buyers:

  • Design consultants are experts in design choices, color schemes, and styles; they offer a level of consultation not typically available at The Home Depot.
  • Costs for design and options selections can be placed on the loan and amortized over the life of the loan making monthly payments reasonable.
  • Compared to an outside vendor, the design center is better equipped to coordinate the installation schedule; delays are less likely.
  • Today's design center is a one-stop shop. Convenience is the key here.

Orientation walk-through personnel are the surprise element in this effort to ensure strong perceived value. The key word here is "perceived": During the orientation walk-through, these representatives can help cement the home buyer's positive perception of value by simply pointing out various installed options and telling the buyers why they made a wise choice. This is a small but powerful final step in the process. Due to the importance of this singular issue (i.e. value) to the buyer's overall impression of the design and options process, another suggestion is to structure compensation plans that pay design and options personnel bonuses tied to their buyers' perceived value ratings.

The key to cultivating home buyers who are delighted with the design and options process is to increase the perception of value for this service. That will inevitably require builders to lower prices that are clearly out of line, and use sales, design, and walk-through personnel to manage the buyer's expectations and perceptions.

Best practices: What builders are doing to...

...Demonstrate good value.
  • Explaining the benefits/quality of options and upgrades
  • Comparative shop competing builders and retailers
  • Provide comparison values to other upgrades, builders, and/or retail

New Urban West, Design/Options Manager:

Most people just need to understand the benefit. If a home buyer feels they are being provided with a quality product, installation and warrantee, most times they are willing to spend a reasonably higher price for the benefit. We provide our buyer with substantial standard allowances. They are also given printed information about the pros and cons of doing it themselves.

Pardee Homes, Assistant Vice President:

We review our pricing in each community to determine how we compare to our competition, to Home Depot Expo, etc. If an option seems really high, we discuss with our subcontractors to see if they can lower their price. We also occasionally lower our mark up amount to make the option pricing more competitive.

D.R. Horton/Cambridge Homes, Vice President of Marketing:

Worked with vendors to price options more in line with the pricing they give us for the basic house costs.

John Laing Homes, Director of Purchasing:

Educated the sales and design team on the competition. Offered unique items that no other builders offer.

D.R. Horton, Production Assistant:

Heightened accountability: Scope of work is clearly defined and reviewed in depth with each contractor.

Centex Homes, Director of Construction:

Our vendors are aware of the quality we demand. We let them know through our inspection process if there are weak areas. We also share with them customer comments from independent customer satisfaction surveys that indicate quality concerns of our customers.

Best practices: What builders are doing to...

...Explain construction upgrades.
  • Computerized selections/online selections via Web site
  • Train salespeople to be thorough in their explanations of the process

William Lyon Homes Design Vendor:

We use an online catalog that buyers look at in the privacy of their own home with pricing and very detailed descriptions that they can understand. It allows a buyer to create a wishlist of items they are interested in while keeping a running tab of the total dollars they are spending and how much more their monthly loan payment will be increased by doing their upgrades now rather than after escrow.

New Urban West, Options Manager:

Designers must have accurate pricing and descriptions of the available options, prior to meeting with buyers and enough time to read, understand, edit, and correct the options lists. Designers also need a designated person they can always go to for questions and know that that person is knowledgeable and responsive to their needs. The sales team should sit in on at least one appointment with the buyers to fully experience the process. A good sales representative will also help "sell" the option/design center experience.

Pardee Homes, Assistant Vice President:

We review option popularity reports to see what's selling and what's not. We also visit other models and go to trade shows. We call buyers who do not feel the adequate number of options was provided and ask them what options they would like to see added.

Greystone Builders, Assistant Architect:

We've broadened our array of selections.

John Laing Homes, Director of Purchasing:

We run an analysis of what others are offering and for how much. We make sure our products are unique from other builders.

Don Simon Homes, Vice President of Purchasing and Design:

We are offering flowers, scents, water, and better displays with more information about the products. We also give buyers more time to browse.

New Urban West, Design and Options Manager:

We build our design center on-site. It's convenient for buyers, and the model homes are right there for viewing and touring. We have four cut-offs so the buyers can have plenty of time to meet with our designers and make decisions without feeling rushed.

Levitt and Sons, Design Center Manager:

We hire design coordinators with continual product training and who are experienced in design or sales. We keep training the design coordinators to give the customer a comfortable feeling that he or she is dealing with a professional and knowledgeable company.

D.R. Horton/Cambridge Homes, Vice President of Marketing:

We've chosen to provide our customers with a gas card to pay for the gas used to visit our design center.

William Lyon Homes, Design Vendor:

Education. We have a "lifestyle" appointment with the buyer and designer at the model prior to their first appointment at the design center. This is a non-selling appointment to get information about products the buyers saw and liked in the model. We also use this appointment to help us get a better feel for how the home buyer is going to live in the new home.

The articles in this special report were written by Bob Mirman, CEO of Eliant, and Wyatt Kash, editor of Big Builder magazine. Eliant (formerly National Survey Systems) provides customer satisfaction data and solutions to more than 150 of the nation's top home builders including D.R. Horton, John Laing Homes, Lennar Family of Builders, Shea Homes, and Standard Pacific Homes. The firm is considered the largest consumer research company in the country that caters exclusively to the building industry, conducting more than 200,000 home buyer surveys annually. Eliant is recognized for its use of sophisticated, high-tech consumer tracking tools and information management systems to provide builders with timely, actionable information and strategies to increase home buyer satisfaction and building industry rankings.

Headquartered in Irvine, Calif., Eliant was founded in 1984 by Bob Mirman. Mirman is a clinically-trained psychologist who translated the consumer perception tools he had developed while working at General Mills into a series of surveys designed to capture detailed information on the entire home buying experience, including satisfaction up to two years after move in. Builders use Eliant's tracking information to monitor, reward, and modify practices that directly impact home buyer loyalty.

For more information, contact:

18 Technology Drive, Suite 200 Irvine, CA 92618
949-753-1077 ext. 10; 800-814-9595

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