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.