Adobe Sock / Worawut

In a dramatically different market environment, builders are suddenly looking high and low for new sales. What they might need is an entirely new sales force.

No, that doesn’t mean replacing the existing sales team. Rather, the opportunity is to add an entirely new sales team in the form of your existing customers. Referrals are by far the most cost-effective way to add new interest to a community. Think of your existing homeowners as a “shadow sales force,” fully capable of adding to your prospect pipeline.

Of course, referrals aren’t simply requested; they’re earned. A referral from a homeowner is the result of a focused effort by the entire community team. But such an effort doesn’t happen as a part of a program, but rather as an extension of the company culture.

Companies with the highest referral rates have this in common: a commitment to customer care from the top of the organization. The best builders understand that outstanding customer care comes at a cost of dedication, with a return of increased sales.

It comes down to an important reality that destroys a common myth, namely that referrals come from satisfied customers. They most certainly do not. Referrals come from elated customers.

Satisfied customers simply do not refer. Referrals come from a place of passion, and satisfied customers are simply not passionate. Quoting a “92% customer satisfaction rate” tells us only that 8% of the customers are ticked off. We need instead the answer to far more important questions: What percentage is elated? What percentage is delighted? What percentage would be so happy with their experience that they would be willing to refer a friend or family member?

That is where the consideration of referral drivers comes into play. Each year, Eliant conducts over 200,000 evaluations of home buyer and homeowner perceptions of their new-home purchase and ownership experience. Average response rates on these different types of evaluations range from 70% immediately after the move-in—with many builders reaching over 80%—to 46% after one year in the home. With such a high customer response rate, Eliant is able to achieve unusually strong levels of statistical validity in testing the causal relationship between each question on the customer evaluations and the primary question asked of every customer: “How willing are you to recommend your builder to a friend or family member?”

Eliant provides the data from its homeowner evaluations to the University of Southern California Marshall School of Business. Graduate student classes then conduct a large number of statistical analyses, including regression analysis. The results lead us to the six builder staff behaviors that have the strongest impact on consumers’ willingness to recommend their builder to a friend or family member.

The referral drivers listed below are all based upon specific activities of the community team members, those employees in the organization who regularly interact with customers. Those team members make or break the experience according to the following actions:

  1. Sales Associates: The frequency with which the sales associate keeps the buyer informed of construction progress before the buyer has to ask. (During the contract-to-close period, this is the No. 1 driver of willingness to recommend the builder.)
  2. Design Selection Advisers: The ability of the designer to sell the value of the design selection experience, even though prices are often higher than can be found in local retail stores or online (e.g., additional warranty; counseling or advice on products, model differentiation, colors; etc.).
  3. Loan Officers: The frequency with which the loan officer or processor keeps the buyer informed of loan and documentation status before the buyer has to ask.
  4. Construction Superintendent: Jobsite cleanliness. Buyers who can’t view the home’s interior during the build process assume the home is being constructed with quality only if the jobsite is clean and orderly.
  5. Home Delivery: The delivery of the home falls on the promised date, and the home is both complete and clean.
  6. Warranty Service/Customer Care: Repairs are completed right the first time, and the repair site is left clean.

The most effective way to create improved levels of customer delight—and thus referral likelihood—is to include the appropriate referral driver(s) in each department’s “performance bonus” plan. The adage holds true: Grab them by the wallets, and their hearts and minds will follow.

We’re moving into an economic environment where the ability to obtain customer referrals will mark the difference between success and failure for many builders. In a day and age when service levels seem to be slipping in front of our very eyes, customers are more likely to appreciate the concerted team effort toward incredible care that prompts an elated response.

We don’t just need more sales. We need an entirely new sales force.

This is the first iteration of a three-part article series by "From Contract to Close" co-authors Jeff Shore and Bob Mirman. The new book aims to help home builders and their teams revolutionize an outdated customer experience to realize increased referral rates and sales.