The Customer-Centric Home Builder

A potential customer walks into a model home and asks the agent, "Can you show me a new home?"

The agent responds, "Of course I can. I can show you hundreds of new homes, and it would be my pleasure."

The prospect says, "I don't want to look at hundreds. Just show me four or five that I will like."

"Fine," says the agent. "Tell me what you are looking for."

The prospect, puzzled, scratches her head and eventually responds, "I really like brick."

"Great," exclaims the agent. "This model is perfect for you. Notice the faux brick accents in the kitchen."

This dialogue probably sounds familiar because every day thousands of "product-push" conversations just like this go on between home buyers and agents across the country. Many in the home building industry still focus on the homes they are trying to sell because those homes are the root of most costs through days on market, finance costs, permits, construction materials and so on.

Customer-centric home building turns this old way of thinking on its head and focuses on the home buyer, the root of all revenue and profit. Traditional home builders look at homes and decide how to "move" them. Customer-centric home builders look at home buyer preferences and decide how to meet them. Traditional home builders have closings and agonize over punchlists. Customer-centric home builders forge lifelong customer relationships and find new ways to strengthen them, deriving new revenue streams as they go.

So why isn't every builder customer-centric? In short, it's not easy. Builders initially know everything about their houses and almost nothing about buyers. It takes work to overcome this information deficit. So, how to start?

You could buy a prospect list complete with demographic data (sex, age, income, etc.), but you would have to decide which list to buy and then deal with any inaccurate, outdated or incomplete data. So this information really doesn't help. In our dialogue above, would the agent have been better off if he had known the age and income of this home buyer when she came into the model home?

You could hire market-research firms to perform studies, but this is expensive, and you have to know which segments you want to target. Also, research results become obsolete quickly as the market changes.

A first-step solution is modifying the "contact card," which each prospect completes when he/she enters a model home. Remove some of the demographic questions that are of little use in really understanding home buyers' needs and driving their interests to the core of your business. This will make room for questions that ask about real-time (i.e., right now), first-hand (i.e., straight from the customer) preferences, the information you really need to collect and to which you really need to respond properly.

Let's think about the information that would really help:

• Preferred price range and preferred subranges within it: $175,000-$275,000, ideally at the low end $175,000-$200,000
• Preferred square-footage ranges: at least 2,000 but ideally 2,500-3,000
• Number of bedrooms: at least two but preferably three
• Number of bathrooms: at least 1.5
• Architectural style: Georgian is first choice, followed by Italian, then Federal.
• Type of financing: I have absolutely no idea.
• ...

Home buyers have "comfort zones" in their preferences; for example, a range for price. Also, a home buyer might not know anything about important features, in this case the type of financing. The customer-centric builder needs to provide education to understand what the buyer really prefers in these cases. Helping home buyers understand home features and express their complete set of preferences is difficult, but the payoff comes in having more home buyers who are confident enough to close faster and at closer to the asking price.

Modifying your contact cards will start you on the road to more customer-centric home building. It will serve you well when the housing market tightens as interest rates rise. Also, the National Association of Realtors has stated that 78% of home buyers use the Web to help them in the home buying process, so becoming more customer-centric on your Web site is critical, too. Buyers on the Web have more time to spend on needs assessment, and online tools exist that facilitate more sophisticated preference capture and processing.

Bradley Fordham, Ph.D., has held leadership positions in advanced technology and product development with Oracle, the National Institute of Standards and Technology, AT&T and General Electric. He advises U.S. government agencies and Fortune 100 global technology companies, and currently serves as the chief technology officer for  Online Insight Inc. in Atlanta. He received bachelor of science and bachelor of arts degrees from Furman University and his master's and Ph.D. in computer science from the University of Maryland.