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I got a letter several days ago from Tom, who was a client of mine during the years when I used to have people lie on my office couch to discuss their problems for an hour at a time. He was now asking me for help with a perplexing situation:

It seems Tom has several siblings. One of his brothers is in a Kansas penitentiary, awaiting execution as a serial killer. Another brother is a runner for the Columbia drug cartel. His older brother is a homebuilder here in southern California, while a younger sister runs a ‘dance and massage’ parlor in Las Vegas. Tom’s question to me: “I will soon be meeting the parents of the young lady I hope to marry. Should I tell them about my brother the homebuilder?”

Unfortunately, this anecdote works equally well if you use “...my brother the used car salesman...” or the universally understood “...my brother the lawyer...” What does that tell you?

In fact, in a national study in 1996, consumers were asked to identify how much trust they have in various occupations and institutions. Not only were homebuilders ranked near the absolute bottom of the list, but the “Federal Government” was ranked higher!

Now that’s depressing.

The Basis of Referrals

Providers of consumer goods live and die by their reputations. This is particularly true of consumer products at the upper end of the price spectrum. In fact, there is a direct relationship between price and the impact of reputation on the purchase decision. For items such as expensive watches, automobiles, and new homes, the brand or company name is critical to the sale. In Eliant home-shopper focus groups, these prospective buyers quickly identify those builders which are perceived as being ‘quality’ builders. They are just as quick to identify builders on the other end of the scale.

How do they form those impressions? Well, it’s certainly not from your ads which boast about your firm’s quality and service. Every builder paints himself with this same brush. Shoppers tell us they are tired of reading this over-used rhetoric. And remember: These shoppers come in to your market with the ‘distrust’ chip firmly embedded on their shoulder. They are cynical, at best. At worst...well, your sales people can tell you those stories.

While ads have some mild affect on your image, word-of-mouth has the strongest impact because it is perceived as believable, trustworthy, and unbiased. Above all, consumers trust other consumers. Prospective buyers love to talk with your current homeowners to find out the real story about your quality and service. After all, who knows more about the quality of your homes than the people who live in your homes?

So, the “Key Question of the Day”: On what basis do your homeowners make referrals? After over 900,000 Eliant home owner surveys, it is clear that the #1 criterion for referrals is “Quality of Construction.” (Editor’s Note: This article was written in 1998) No surprise here, you already know that. But how do home buyers define quality?

One clue comes from our “H*O*M*E” survey of home-owner satisfaction with quality and service, 10 months after move-in. We asked these home-owners to identify home elements which required repairs since move-in.

TOP 10 MOST FREQUENT NEW-HOME REPAIR REQUESTS*

(Ten Months Post Move-In) 1998

% Homeowners

*Source: 1996-98 “Home*Owner*Master*Evaluation” (H*O*M*E) Survey, Eliant

Interior painting and plumbing repairs were required by almost half of the 27,400 homeowners surveyed during 1996-98. New homeowners clearly do not expect to require repairs in plumbing or interior painting during the first year of ownership. This significant gap between initial expectations and the hard reality creates dissatisfaction. Dissatisfaction, particularly with ‘quality’ related issues, has a serious dampening effect on referrals.

Hot-Market Strategies

We are in a hot market and homes are being built faster to meet demand. Builder’s attention has most definitely swung to production speed. The size of the ‘quality’ labor pool has not increased quickly enough to meet the growing demand, so we pay higher wages for declining professionalism. On Eliant monthly surveys, buyer satisfaction ratings of quality and service have been declining; buyers’ ‘Willingness to Recommend’ scores have, consequently, also been declining. This is particularly true in the Northern California market.

Key Points:

1.       Hold the line on quality. Don’t dilute or ruin your reputation for short-term gains.
 

2.       Waiting lists and lotteries, sweet music to homebuilders’ ears, often yield callous, production minded sales people. Buyer complaints about “rude” salespeople are now at an all time high. Remind your sales personnel that their job is to sell each prospect this home...and his next one as well. Each prospect is a potential ‘customer for life.’
 

3.       No matter how good you are, you must shoulder the burden of your industry’s relatively poor reputation. Consequently, every customer interaction must be viewed as an opportunity to prove how good you really are.

And, as Woody Allen once said, “There’s nothing worse than a missed opportunity.”

It’s a sobering thought, to be sure, but all markets move in cycles. When the high point of this cycle is past, will your reputation be intact? The survivors of the next cycle will be those who paid attention to their reputation during the boom.

Copyright 1999, Eliant Inc.
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