Trendy Incentive Plans

Abstract:

Here's a look at some of the incentives that builders are using to boost sales in the slow housing market.

Byline:

By Laura Butalla, Senior Editor

Publication Date:

Tue, 2006-10-31 18:00

Sidebars:
Tips for Successful Sales Promotions

The slowing housing market has created new incentives for home builders to boost sales, and builders are finding incentives that appeal to potential home buyers and Realtors alike.

Builders are promising some Realtors in Florida anywhere from $2,000 to $10,000 cash for each home they sell. Longleaf, a Florida master planned community near Tampa, offers Realtors gas cards to encourage home showings in their community. Other builders are offering shopping spree points to agents for drawing clients into model homes.

Realtors aren't the only ones benefiting from incentives though; potential home buyers are, too. Several Midwest builders offer to pay six months of mortgages to buyers. Other builders tack on upgrades such as basements. Some have gone as far as offering plasma televisions with the home sale.

Other builders' incentives include coupons and specials on their Web sites, including $125 toward a new home, $250 toward design centers and $5,000 toward closing costs. KB Home has already offered a free home, too.

Despite these incentives, NAHB and other housing industry analysts still predict home sales and housing production will slow for a few more quarters.

Tips for Successful Sales Promotions

Home builders throughout the country are employing various selling and discounting strategies to move their inventories.

Florida-based Mercedes Homes, which builds mid-range/move-up homes in Florida, Texas, North Carolina and South Carolina, introduced several promotional sale activities including its "You've Got the Power" inventory sale in July. This "Let's Make a Deal" type promotion encouraged buyers to go to sales centers and make their best offer while taking advantage of Mercedes Homes' financing programs, closing cost assistance, below-market interest rates and free upgrades.

The outcome of the promotion was less than what company heads had expected; however, Mercedes Homes did learn a few lessons in the process:

Lesson No.1

"Give consumers a particular price," says Scott Buescher, chief operating officer of Mercedes Homes. When you allow them to set the price they are not sure that they are getting the best deal. People need a more definite number, he says.

Lesson No. 2

Allow enough time between sales promotions. Conducting sales back-to-back can potentially water down the responses you receive from home buyers. The impact of the "You've Got the Power" promotion was weakened, Buescher says, because it followed too closely on the heels of Mercedes' 96-hour sale, which was held in June.

Lesson No. 3

Frame your promotions within short periods of time. Mercedes Homes held three promotional events: a 96-hour sale; a two-week, Sneak Peak promotion; and a nine-day Savings Spectacular. With such rapid-fire promotions, potential buyers were given a small window of opportunity to buy — and a smaller opportunity to delay purchasing.