I was recently talking with a builder who was incensed by the demands of prospective buyers. “They want me to just throw in a furniture package with the deal,” he sputtered.
I listened and empathized with his plight. I’ve heard this same frustration voiced by many builders, developers, and new homes sellers in this market. Buyers want ridiculous discount and absurd freebies in order to close the deal. They’ve been handed a market where the buyer dictates and they are feeling choked by the heightened demands.
Let’s take a look at the situation though. The leak in the housing market started to trickle in the first quarter of 2007. Now, 25 months later, the sellers are scurrying to plug that gaping hole in a market that is flooded with short sales and foreclosures. The media, real estate agents, and mortgage companies are telling these buyers that now is a great time to buy. Have you ever heard them advise buyers that it’s not a good time?
As a result of the economic crunch, buyers are making offers that would have been swatted away like a pesky bug just two years ago. But these buyers, while they may appear vulture-like in their approach, are not fools. They resisted the top-of-market buying frenzy, sat on the sidelines to gauge the action, and are now quite enlightened about the status quo of the buyer’s market. They’re ready to play the buying game like a battle to the death. What you call “absurd”, these savvy buyers call “realistic.”
My advice to you is to be prepared. Know that these crazy offers will come, and that they arise from hopes but not necessarily expectations. Sharpen your negotiating skills and respond to those offers respectfully—because at least you have an offer to negotiate! Communicate the value of your property and justify the price. Work harder to see where you can cut your margins and where your buyer is willing to bend. A ridiculous offer just means you have to work harder and smarter.
Memory… it’s the final frontier. We all know where it is; now we need to know more about how it works from a marketing perspective.
Let’s begin with the RAS (Reticular Activating System). The RAS is the “key to turning on your client’s brain.” It is a complex collection of neurons at the base of the spinal cord that serve as a point-of-convergence for signals from the external world (our five senses) and the inside world (our intuitions, emotions, etc.). So what’s it have to do with marketing and selling? There are three important aspects of the RAS:
1. Positive Focusing – Allows a mother to hear her whimpering baby while dad never hears a thing.
2. Negative Filtering – Allows the person who lives next to the busy railroad or airport to screen out the annoying noise.
3. Individual Perceiving – This explains how five people who saw the same accident can have five different stories of what happened.
The RAS tends to allow three types of information through to your perception on a regular basis: things you value, things that are unique, and things that threaten you. My point is this; you need to clearly understand what is unique, compelling, and memorable to your prospective clients in order to get their attention. Then denominate that message powerfully and in a compelling manner to get the consumer’s attention.
A unique selling proposition (USP) is a marketing message that clearly communicates your building company’s distinctive and compelling selling point. A USP is not a headline, slogan or a catchy phrase. Forget words like value, quality, leading, and newest; they are too broad, too generic, and are too easy to emulate.
Your USP must be yours and yours alone. If your competition can claim to have your USP then drop it. If it requires complex analysis to validate, forget it. If it doesn’t fit your customer’s perceptions, don’t use it. In short, your USP must be memorable, distinctive, and it must sell! It must sell benefits, not features. It must talk about the consumer’s interests, not your ego. Appeal to the buyer’s desires. For instance, Hershey Chocolate has been an American candy staple since 1884. Hershey’s mission statement is: “Our mission is to be a focused food company in North America and selected international markets and a leader in every aspect of our business. Our goal is to enhance our #1 position in the North American confectionery market, be the leader in U.S. chocolate-related grocery products, and to build leadership positions in selected international markets.”
Godiva Chocolate, on the other hand, was first to create the concept of premium chocolate. They did it by combining great chocolate, effective marketing, sophisticated packaging and selective distribution. Simply stated, Hershey’s Chocolate is to eat, Godiva is to give away as a gift. Note the subtle, but effective differences. None of us will purchase a bag of Hershey Kisses for a top client or a special date. Instead, we opt for the more expensive Godiva package that comes in gold packaging with a ribbon and special tag. It’s not so much about the chocolate, it’s more about the messag our choice sends. It’s about the USP.
When creating your USP make it compelling. Avoid superlatives, sweeping generalities and gross exaggerations; it must be believable. If you have the right message and the wrong audience or the right audience and the wrong message you have failed. You must have the right audience and the right message.
Creating a USP is about more than knowing your customers. It’s about your customers knowing you! Ask these questions: What is unique about our building company? What aspect of what we do is meaningful to our customers? What positive message seems to exist in the market about our company? The bottom line is this: your USP must answer the question every consumer asks: Why should I do business with this builder and not the guy down the street? Remember; customers don’t come to buy from you, they come to eliminate you. The process of elimination is mush less painful than the process of selection. Too often it comes down to who gets eliminated last.
You must thoroughly understand both your customers and your product in order to create a powerful USP. Denominate the message powerfully and repeat it often. Repeat it everywhere. Get into your customer’s mind and make an impact. Remember, you must appeal to their wants and desires with a message that can get through all the marketing noise. Your message must get past the RAS by appealing to things your customer’s value or being unique. That message will get through and it will be memorable.
Brian Flook, MIRM
President, Power Marketing & Advertising, Inc.
301-416-7861
The message appeared in my e-mail from a young builder who had worked in his father’s homebuilding company from the time he was a teenager. Now, in his mid-thirties, he has started his own business. His message read: “We need help. We built a model home, a glorious one for the parade of homes that received 95 percent 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 Proctor & Gamble and utilized by industry 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.
If you have been in real estate or community sales for any length of time, you have probably learned the 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 the factor that 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 single factor that changes the perception of value is where one home is located over another.
Who is your competition? It is either other builders, or, in the case of an established neighborhood, the competition may be the resale market. In either case, if you cannot enter or establish a market with a perceived value that surpasses your competition, then consider “creative abandonment.”
When evaluating the types of housing designs and floor plans, study the area’s past 12 to 24 month sale’s history. If a distinct market-share has been established with three-bedroom, 2.5 bath homes, then 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 percentage of market share.
Again, gut feelings and hunches play no role in determining the price point when you enter the marketplace. Price cannot ultimately be determined by your desire for a certain profit margin, but rather 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 is writing your own invitation to disaster.
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. My personal belief is that your marketing, merchandising and products should be so good that they could almost make you, as a salesperson, obsolete.
Rethinking The Sale’s Process:
With housing products looking more like commodities and with stiffer competition, today’s great salespeople have developed a new mindset. 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 sale’s team), will be beat like a drum in the marketplace.
It is important to grasp this truth: a sale’s 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 - Place, Product, Price and Promotion - are like a four-legged stool. If each is not weighted proportionately and then backed with a proven sale’s process, the stool will wobble and become unbalanced. If the four areas are not balanced, you may see your sales topple just like a lopsided stool.
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