It's newsworthy that builders in America operate more profitably now than in any year since the Great Recession.
National Association of Home Builders assistant VP for survey research Rose Quint writes of the latest edition of the Builders' Cost of Doing Business Study, which periodically benchmarks home builders' balance sheets in aggregate. From 40,000 feet, despite known issues around land, labor, finance, and materials costs, American builders are running their businesses as better operators than they have in more than 12 years. Quint writes:
The 2019 edition of the study shows that profit margins have continued to increase, reaching their highest point since 2006. On average, builders reported $16.4 million in revenue for fiscal year 2017, of which $13.3 million (81.0%) was spent on cost of sales (i.e. land costs, direct and indirect construction costs) and another $1.9 million (11.4%) on operating expenses (i.e. finance, S&M, G&A, and owner’s compensation). As a result, the industry average gross profit margin for 2017 was 19.0%, while the average net profit margin reached 7.6%.
Given the environment of volatility created by the vaunted cost and supply-side challenges, progress is progress.
Still, especially in light of the fact that intensifying volatility and a new raft of uncertainties and headwinds have surfaced on the immediate horizon lines for builders, all the focus on labor, lots, lending, and materials as profitability factors is, we believe, out of proportion to their importance.
Amid the emphasis and justifiable agida over supply constraints and related cost pressure, it's helpful to get strong reminders of what makes dealing with all those expense challenges matter, customers and their experiences searching for, buying, and living in your new homes.
This is why--smack in the middle of high-stakes, fanatical focus on sales per month per community pacing and pricing that goes with Spring Selling season--Eliant's Homebuyers' Choice Awards, spotlighting firms of endearment and individuals who set a high-bar of example for best practices in customer experience, come as a welcome point of attention.
Here, verbatim from Eliant's press statement, is the overview of this year's crop of Homebuyers' Choice Award winners and why:
The Homebuyers’ Choice Awards are presented annually by Eliant (www.eliant.com), a customer experience management company that has been surveying buyers of new homes for more than 35 years. For 2019, the winning builders were determined by analyzing the results of 125,000 surveys administered to homebuyers from more than 150 major homebuilders across the U.S. 27 first place awards were given. Although 40% of Eliant’s clients are east of the Mississippi, western builders dominated this year’s awards.
The event’s top award is The Eliant. A cumulative award given to builders who rate highest for Best Overall Purchase and Ownership Experience, this year’s highest honor was awarded to The New Home Company and Rosewood Homes for the multi-division and single-division segments, respectively.
Top Awards Recipients
The New Home Company was also honored with First Place awards for Purchase Experience, First Year Customer Service Experience, and First Year Quality among all large-volume builders. In addition, eight New Home Company representatives were identified by homeowners as the nation’s best at delivering extraordinary customer experiences.
“We are thrilled to recognize The New Home Company for its focus on and ability to deliver excellence in customer satisfaction,” said Bob Mirman, founder and chief executive officer of Eliant. Lawrence Webb, chairman and CEO of The New Home Company, added “The Eliant Award is the ultimate recognition of the service we provide because it is judged by our customers. Everyone at The New Home Company is committed to delivering outstanding customer experiences and this award is a great honor.”
For the fifth time in 10 years Scottsdale, Arizona-based Rosewood Homes earned The Eliant award for the single-division builder segment. Rosewood Homes received a grand total of six Homebuyers’ Choice Awards, winning First Place awards for Purchase Experience, First Year Customer Service Experience and First Year Quality among all qualifying medium- volume builders.
“This award can only be earned through an unwavering commitment to delivering outstanding customer service and we are honored to recognize Rosewood Homes for its excellence in exceeding homebuyers’ expectations,” declared Mirman. David Kitnick, president of Rosewood Homes, commented “We will never become complacent and we will always aim to deliver an unsurpassed level of service to our customer. This award reassures us that we are meeting our goals, and it’s great to be recognized at such a prestigious event.”
Premier Awards Winners
Another clear homebuyer favorite was Century Communities, whose divisions received a total of thirteen awards, eight of which were premier awards (1st, 2nd, or 3rd place in each category) including First Place for Design Experience in both the medium and large builder categories. Century also received premier awards for Purchase Experience, First Year Customer Experience, First Year Quality and Percentage of Sales from Referrals.
Other highly awarded builders include Grand Homes, winning a total of eight awards, and the TRI Pointe Group, winning a total of seven awards. The majority of the TRI Pointe Group’s recognition was achieved in awards for First Year Customer Service and Percentage of Sales from Referrals. Grand Homes took First Place in Percentage of Sales from Referrals in the medium volume builder segment. The company’s Dallas-West division earned the Most Improved Division honor, based on homebuyer surveys from the 2017 to 2018 year.
Irvine Pacific won six awards, garnering three First Place Homebuyers’ Choice Awards in the high-volume segment. Other big winners in this segment included William Lyon Homes with five awards, and The Olson Company and Minto Communties-USA with four awards, respectively. In the medium-volume builder segment, Giddens Homes distinguished itself with four awards.
Percent of Sales from Referrals Award
Eliant’s experience management solution helps builders improve their customers’ purchase and ownership experiences to such a degree that homeowners become a leading source of referral sales.
This generative referral cycle is captured in the Percent of Sales from Referrals awards category. Taking home First Place was Grand Homes in the medium-volume segment, McCaffrey Homes in the large-volume segment, and Irvine Pacific in the high-volume segment. McCaffrey Homes sold 48% of their homes from referrals in 2018.
Each year, Eliant analyzes its builder clients’ sales from referrals. In 2009, 32% of the top ten builders’ sales were sourced from referrals. This year the number has grown to 42.4%, a more than 30% increase. These numbers indicate that top- performing builders are increasingly implementing Eliant’s key referral driver recommendations.
Individual Representative Awards
The Eliant Homebuyers’ Choice Awards also recognize the nation’s top performing sales, construction, design and customer service field representatives as voted by homebuyers who purchased new homes in 2018. More than 4,600 representatives were evaluated in Medium (MR) and High (HR) response categories.
The recipient of the 2019 First American Customer Experience Leader of the Year Award was Sabina Schleicher, Customer Excellence Manager, from Minto Communities-USA. Sponsored by First American Title Company, this award recognizes exemplary leadership in customer experience excellence across all qualifying builders.
The top sales representative race was a two-way tie between Farrah Larson of The New Home Company-Southern California and Terri Mendoza of Irvine Pacific (MR), and Heidi Chiang and Leticia Romero, both from MBK Homes/The New Home Company (HR). Joy Gorey of The New Home Company-Southern California (MR) and Angela Rinaldi of Minto Communities-USA (HR) were named top design representatives. The top customer service representatives were Haissam Baayoun of Irvine Pacific (MR) and Paul Drake of Century Communities-Central Valley (HR). Finally, Melvin Barahona of Century Communities-Houston (MR) and Scott Law of MBK Homes/The New Home Company (HR) were named the nation’s number one construction representatives.
Kudos to the award winners!
But, equally, encouragement and support should go to every builder among the 150 firms Eliant counts as its survey universe, as well as those who engage and invest in Avid Ratings, and Woodland, O'Brien & Scott, and other tools to measure and help manage customer service, satisfaction, and experience.
Marketers and sellers of new homes may know it or not, but they're appeal is to powerful, primal, and meaningful emotions that move customers to search, to act, and to try to improve their own lives by becoming your customers. Important work on this topic was featured in a Harvard Business Review article by Scott Magids and Alan Zorfas, co-founders of consumer intelligence firm Motista, and Daniel Leemon, a director of CEB, an insight and tech advisory firm. They write:
Our research across hundreds of brands in dozens of categories shows that it’s possible to rigorously measure and strategically target the feelings that drive customers’ behavior. We call them “emotional motivators.” They provide a better gauge of customers’ future value to a firm than any other metric, including brand awareness and customer satisfaction, and can be an important new source of growth and profitability.
At the most basic level, any company can begin a structured process of learning about its customers’ emotional motivators and conducting experiments to leverage them, later scaling up from there.
So important is that "structured process of learning about ... customers' emotional motivators."
Are you doing that? It may make a difference when you report your Cost of Doing Business data to the NAHB the next time they come calling for it.
