Take a Lesson From Procter & Gamble

The message appeared in my e-mail from a young builder who had started working in his father's home building company when he was a teenager. Now, in his mid-30s, he had started his own business. His message said: "We need help. We built a model home, a glorious one for the parade of homes that received 95% approval on exit polls. Yet it hasn't sold, and the interest meter is ticking. Our advertising isn't working. We're not salespeople; we are builders. What do we do?"

His situation isn't unusual. For the most part, builders and developers have a habit of entering the marketplace with what is known as the "Field of Dreams" mentality - if we build it, they will come (and buy). Usually, they say, they followed their "sixth sense," a perception or "their gut feeling" in building what they perceived the market needs.

The Four P's

Construction, like sales, is a science, and with any science gut feelings and hunches do not play a role when entering the marketplace. A good business plan should be developed with a solid strategy and an understanding that selling and marketing new homes consists of four components. Labeled the Four P's, they were popularized by Procter & Gamble and used by giants such as General Electric and Microsoft. The Four P's are effective because they break the sales and marketing process into four parts: Place, Product, Price & Promotion.

Place

If you have been in real estate or community sales for any length of time, you have probably learned this adage: The three keys to real estate are location, location, location. Well, it's absolutely true.

The successful builder/developer understands that people don't just live in homes. They live in a particular area, within the confines of a neighborhood in which the homes are located. Location is what separates one neighborhood from another. Any builder/developer can, for the most part, construct homes at approximately the same cost per square foot, provided comparable materials are used. But the one factor that changes the perception of value is where one home is located versus another.

Product

Who is your competition? It is other builders, or, in the case of an established neighborhood, it might be the resale market. In either case, if you cannot enter or establish a market with a perceived value that surpasses your competition's, then consider "creative abandonment."

When evaluating housing designs and floor plans, study the area's sales history of the past 12to 24 months. If a distinct market share has been established with three-bedroom, 2.5-bath homes, do not attempt to reinvent the wheel. Enter the marketplace with a proven design and simply add enhancements such as vaulted ceilings, spa baths, walk-in closets or a better use of square footage. Then you are sure to gain your fair share of the market.

Price

Again, gut feelings and hunches play no role in determining the price point when you enter the marketplace. Price ultimately is not determined by your desire for a certain profit margin, but by what the consumer has paid in the past.

Price is easily determined by comparable values, which can be accessed through MLS. To disregard historical pricing data and produce a product at prices that are not proven in the marketplace would be writing your own invitation to disaster.

Promotion

Contrary to popular belief, promotion is not limited to just a good "sales process." To reach a target audience, you must effectively plan and budget. Your marketing, merchandising and products should be so good that they could almost make you, as a salesperson, obsolete.

Rethinking the Sales Process:

With housing products looking more like commodities and with stiffer competition, great salespeople have developed a new mind-set. They recognize that success no longer depends on communicating the value of the offering, but instead rests on the salesperson's ability to "create value" for customers.

Builders and developers who delude themselves into believing that selling is easy and strictly a function of foot traffic (and then transfer that concept to their sales team) will be beaten like a drum in the marketplace.

It is important to grasp this truth: A sales process is a series of actions and systems directed toward the end result, which is causing a sale on purpose.

In most cases, failure in the marketplace is the result of poor planning. The Four P's are like the four legs of a stool. If each is not weighted proportionately and then backed with a proven sales process, the stool will become unbalanced. If the four areas are not balanced, you might see your sales topple just like a lopsided stool.

Myers Barnes writes articles for many of the nation's top sales-related magazines and trade publications. Myers is also the best-selling author of Reach The Top In New Home & Neighborhood Sales and Closing Strong: the Super Sales Handbook. He is a nationally known motivational speaker and a consultant on new home and resort property sales. You may visit Myers' web site, www.myersbarnes.com or reach him at his e-mail address sellmore@myersbarnes.com.