Improve homebuilder brand equity for long-term success

If you think competition in the home building industry is tough now, you haven't seen anything yet. As the industry struggles through a recession, many home builders are slashing prices and offering free upgrades to preserve their piece of the pie. Predicting which companies will triumph, however, may be a matter of identifying the home builders with the strongest brands.

A brand is a quick way for someone to understand and trust what you are selling. When creating brand value, however, global brands [1] have it easier than home builders because global brands are not affected as easily by local trends and market conditions. Builders who invest time and money to create and maintain strong brands are most likely to thrive despite poor local economies.

How does a home builder build a strong brand? It takes years of product design, pricing, packaging, advertising, promotions and public relations to develop a brand that people recognize and feel good about. The challenge is to consistently communicate the benefits of doing business with you.

Writing for BusinessWeek.com [2], Steve McKee, president of McKee Wallwork Cleveland Advertising [3] in Albuquerque, N.M., points out that a brand is only as strong as its ability to pass six key tests: relevancy, simplicity, differentiation, believability, credibility and defensibility. A brand must be desirable to the target audience, easy to understand, different from anything else out there, realistic, trustworthy and something that can be defended when it comes under attack by the competition.

Even top brands can topple when they fail to pass one of these tests. Consider the demise of Levitt and Sons, a unit of the Levitt Corp. [4], which declared bankruptcy last November [5]. More than 60 years ago, the builder was responsible for building the first modern suburbs in the Northeast. Most recently it had been focusing on retirement communities for the children of the Levittown generation — using the brand equity and nostalgia of the Levitt name to sell hundreds of homes in the Southeast.

Now, people who trusted the brand are dealing with unfinished homes. Even if the company is able to emerge from bankruptcy, the brand will never recover.

Indeed, turning around a fallen brand is next to impossible. A few years ago, Avid Ratings conducted research for a regional builder to discover what consumers really thought of the brand. After we discovered the brand stood for inferior construction quality, the builder took strategic actions to turn things around. Despite improving its product quality and service, the public perception did not change.

The builder merged with another builder and relaunched the new enterprise under a different name, rather than maintain either name. Today, this company is known for great homes and service excellence, something it gratefully uses to survive the downturn.