TrueNorth Development
President

Scott Sedam, president of TrueNorth Development (www.truen.com), spends most of his time working in the trenches with builders, suppliers and trade contractors. His Lean Builder blog appears weekly at HousingZone.com. He welcomes your feedback at scott@truen.com.

Scott Sedam: How do you define value to the customer?

A discussion erupted this month on the LeanBuilding Group on Linked In about how do you define value to the customer? One of our members was assailing builders who go cheap, installing ubiquitous “builder grade” products. I replied that there are fine lines sometimes. One person's better value can be another's substandard. Not so long ago, vinyl siding was considered almost universally a cheap product. That is rarely the case now though. If a builder is using base grade products that are still competent and warrantable for the purposes of reaching a price point to get someone into a house who otherwise could not afford one, that is legitimate. It's a big "IF" though, I readily concede. Using the lowest base grade carpet and pad is almost always lose-lose. The customer hates it and when the builder adds up the true cost of warranty, not a dime was saved. Same with the very cheapest vinyls. I once did an analysis in Chicago with a builder and we found they could literally give away the 3rd vinyl upgrade and break even that's how much the base vinyl was costing him in service. And of course, all the customer ill-will is unmeasureable, yet very costly just the same. Even despite the clear evidence, we had a helluva time convincing the company President to go just ONE upgrade from the base! Dumb.

When CP Morgan was in its heyday in Indianapolis and Charlotte before their land positions took them down, they built a highly competent, well-constructed home at a bargain price and helped thousands become homeowners and others get more house for their money. “More House – Less Money” was their tagline. Sure, they used a lot of "builder grade" in their base packages, but a dishwasher with only 2 cycles and a painted front instead of 12 cycles in shimmering stainless does not significantly reduce the quality of life for most of us. They used competent stuff and they avoided anything that was simply cheap. Today, as empty-nesters my wife would not be thrilled if I took her to our new CP Morgan home, but when we had four kids in our 30's, that would have been a different story. CP Morgan knew who they were building for and they always provided value.

At the other end of the spectrum, there was a luxury production builder just down the road from me about 10 years ago who filled his house with goodies and hung gingerbread all over the exterior. They looked great from the curb, especially to the untrained eye, but the actual construction was 3rd-rate. They went through multiple suppliers, trades and superintendents who could not cope with the shortcuts forced on them. In time, this builder, now bankrupt, could only get the most desperate trades to do the work. Hardly anything "builder grade" went into the home but the execution was abysmal. I drove by one house in the pouring rain, and saw the windows set, with no roof on. Their flatwork was routinely a mess, with a heavy broomed-finish compensating for poor finishing skills. Looking up at the ductwork in the basement, there were holes and gaps everywhere. The list went on and on. Not much value, in my book.

I guess it all gets back to "How do you define value?" So how do you? To join this discussion (and many others on Lean Building,) go to www.linkedin.com, click on Groups and enter “Lean Building.”

Scott Sedam is a Contributing Editor for Professional Builder Magazine and President of TrueNorth Development, a building industry consulting firm specializing in Lean process & methods. You can reach Scott directely at 248.348.6011 or scott@truen.com .

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