During a question and answer session at a recent industry conference, a home builder asked Moody’s Analytics chief economist Mark Zandi for his thoughts about the labor
Guiding Customer Expectations
The better that custom builders understand their clients' expectations, anticipate possible areas of disappointment, and communicate with them about the realities, the more likely the entire experience will be one that is satisfying and results in referrals.
Potential home buyers enter a custom builder's sales office with a great deal of excitement and anticipation. They are eager and hopeful that the builder will be the one who makes their dream home come to life. They have an expectation of the final result as well as what the road to that final result will look like.
Unfortunately, their expectations may be entirely out of whack with the reality of the custom home building process. But the better that builders understand their clients' expectations, anticipate possible areas of disappointment, and communicate with them about the realities, the more likely the entire experience will be one that is satisfying and results in referrals.
Builders have an opportunity from the very first meeting to glean what clients expectations are and mold them toward reality.
"It begins with the first phone call or visit by the client," says Carol Smith, a home building industry customer relations consultant and author of several books, including "Building Your Home: An Insider's Guide," geared to consumers.
"One of the reasons we need to start early," Smith says, "is that when the customer is in the shopping phase, their minds are open. They are expecting to hear new information. They are out actively asking questions. They're in what I call information-gathering mode. We need to take advantage of that."
And builders need to ask good questions at this stage as well, paying careful attention to the answers.
"You might find that not saying much, just asking a few questions and really listening, is the most important thing that any builder can do," says Larry Cafritz, president of Laurence Cafritz Builders in Bethesda, Md. "[Don't'] impose your opinions or your tastes on anyone, but only offer advice after you hear their responses and their concerns ... then certainly address those concerns specifically."
This is the point in the process where, ideally, enough information is gathered and shared between both parties to determine whether or not to proceed.
"Every builder has their specific niche of what they're good at," says Cafritz. "People also have expectations about how well they are going to match with their builder personality-wise, management-wise, and how sensitive a builder is to their needs. ... They're spending a year of their lives with that builder. [They] have to be comfortable."
Working based on the customers' needs could be key as well.
"Are you selling for the close, or are you selling for the right fit?" asks Paul Cardis, CEO of the NRS Corporation. "I think the better builders sell for the right fit. Make sure that the buyer is aware of what you can deliver. Listen to what they want so you ... can make sure you're a good matchup."
Builders should give some thought to how the home-building process can best be explained to customers.
"I think it works best if builders sit down and devise a whole system so they see all of the parts," says Smith. "That way, they can create something that's cohesive."
"You need to decide what the messages are that you want to communicate," says Cardis. "There are a series of things that are critical to the buyer ... and the builder needs to identify those things."
Smith says creating a homeowner's manual that covers each step in the home-building process is a core element in directing customer expectations.
Important sections could tackle the purchase agreement, arranging a mortgage, the selection process, construction, homeowner orientation, the delivery process, the closing, maintenance and warranty.
Lawson P. Calhoun Jr., president and owner of Calhoun Properties, a custom builder in Marietta, Ga., put together a simple homeowner's manual — a three-ring binder with all the forms the company uses, preliminary floor plans, CADs, spec and allowance sheets and the like.
As he developed confidence that the book was a valuable guide, he began distributing it to clients at his first meeting with them, depending on whether they seemed to be good prospects.
"What I noticed, kind of subconsciously," says Calhoun, "when they came back for the second or third meeting, they came back clutching the book to their bosom."
One benefit of a written homeowner's guide is that it gives buyers an overview of a complex process with which they are usually unfamiliar. It also gives them concrete information they can refer back to throughout the process. It may, as the example of Calhoun's clients seems to suggest, provide a sense of security.
"[It gives] all of the people in the company who work with the customer in the early phases an excuse ... to open the homeowner manual and point to it in front of the customer," says Smith. "If I'm conducting the frame stage tour as their superintendent, I might open that book on the section on construction, turn to that page that talks about the frame stage tour, and say to the customer, 'Well, congratulations folks. You've progressed this far in our process. Here's where we are today — doing your frame stage tour.'
"The very subtle message there is this: What the company tells me in this homeowner manual, they actually do," says Smith.
Another benefit of a manual is that it repeats information that may have been previously discussed.
"The information that is provided needs to be repeated over and over," says Smith. "It needs to be given to the customer in writing and in conversation."
"Depending on which expert you look at," adds Smith, "you'll read anywhere from seven to 11 is how many times we need to repeat information to customers. We can't do that, but that explains to us the magnitude of our challenge. The problem is not that customers are stupid; it's just that they're so bombarded with information, like all of us are."
Once the homeowner manual is in place, you should develop a schedule of meetings with agendas that lay out specifics to be discussed with the customer.
"What are the subjects that we need to have the customer understand?" says Smith. "What expectations do we want to get into the customer's head?
"For that frame stage tour," Smith continues, "I would want to explain to the customer: 'Your home is going to go through what we would call ugly duckling stages. You'll come out when we're drywalling and you'll find little scraps of drywall and dust all over the place. Every home goes through that.'"
"You identify things that customers have complained about or you've had conflict about, and you find a way to educate them about what's going to happen before it happens," Smith says. "I call this process ... the teachable moment."
Anticipate those things that are likely to be distressing for the customer — weather delays, sub issues, the need for callbacks, and the like. Warn them beforehand, and tell them how problems will be handled.
"There are certain things that you need to inoculate the buyer about," says Cardis. "There are unpleasant things that may or may not happen, but we need to be very upfront about the realities of building a home.
"Most buyers are used to a different kind of purchasing experience," Cardis continues. "Most of the products that people buy today are done in a manufactured or controlled environment. And because of that they are able to reach the goal of defect-free product upon delivery. ... [Home building] does pose a different kind of challenge that a buyer has to learn to appreciate and we also have to educate them about."
Cardis says more than likely there will be a need for callbacks — and buyers often don't expect that.
Some inoculation points are common to the home-building process, and some are unique to the individual builder.
"Builders needs to look at and examine what their weak spots are," says Cardis, "and choose the ones they want to get in front of."
Guarding egos and being realistic are important. Don't tell the customer you'll do a better job than the other builder they dealt with or boast about above-average service.
Calhoun says if a client confides that a previous homebuilding experience wasn't good or that the builder was disorganized, "Most builders will automatically pat themselves on the back: 'Oh, I'm going to show them what a good, organized builder is like.'"
But the other builder may have, in fact, been very organized — according to some objective and reasonable standard — and the customer's perception of "organized" may differ. Those subjective opinions have to be accounted for to manage a customer's expectations.
"When you take a look at what makes up customer satisfaction," says Cardis, "[it] boils down to what people perceive, and then you have to subtract out what they expect."
"A buyer may walk into a house, and ... in a certain way we have to help them go through and perceive the right things, the good things we've done in the house," adds Cardis. "On the other hand, we can do all that — we can point out that we used 2 × 6 framing, that we used 3/4" plywood. We could identify all these wonderful quality features. But if the buyer was expecting something completely different in the process, then you still may have a dissatisfied customer."
At the other end of the spectrum, Kevin Estes, president of Estes Builders in Sequim, Wash., a 2005 NHQ silver award winner, says warning customers and setting lower expectations for certain aspects of the process might soften the blow if things develop according to those expectations — but it doesn't necessarily make them happy.
"One of the things we're trying to be very careful of," Estes says, "is that whenever we're setting an expectation ... [it's one] that is above industry standards. If we can point to other builders or industry standards that are lower than the expectation that we're setting, then I feel okay about it. It's when we can't do that," he continues, "by virtue of a system, or a supplier or a certain trade that we're struggling with ... that we're just barely making the industry standards and trying to lower their expectations to industry standards. That's where it doesn't work."
The goal is to align expectations with reality.
"If you are [giving] buyers a more accurate picture, one that is not perfect, I don't consider that a lowered expectation," Cardis says,. "I consider that an accurate representation, aligned with what they should be expecting."
Sometimes a manual, meeting schedules and agendas aren't enough. Emphasize to clients the part they play — the decisions they need to make at designated times that will hinder or move the process along.
"I had ... a calendar showing people week by week what activities were occurring and what weeks they needed to make certain decisions," says Calhoun. "I thought it would be real easy for somebody to look at it and see this is the week we're going to be framing and that's a time when we shouldn't be taking a vacation because if we want to change something later, it gets very, very expensive.
"For whatever reason," says Calhoun, "people ... couldn't understand it."
So Calhoun adapted a visual aid from a Builder 20 colleague, Jon Rufty of Rufty Homes, a custom builder in Cary, N.C.
Calhoun compares the calendar to two parallel railroad tracks. "On one track is the customer, the decorator and the builder; and on the other track is the construction crew. And along the way there are little stations...called phase meetings. At each one of those phase meetings, we discuss what has been done up to date, any problems that we've had, and any changes that need to be made. We also talk about what needs to happen between this phase and the next phase.
We also have a handout for the ticket," Calhoun continues, "and those are the selections that are due at that phase meeting. If the conductor doesn't receive the ticket that he needs to pass along to the other train, the other train can't leave the station. If we don't have those selections made, the construction people have to stay and wait at the station. ... For some reason, people relate to that."
Being thoughtful and proactive in communicating what buyers should expect during the building of their home isn't the only key to satisfied clients. If a builder's method of meeting or molding customer expectations is not shared among staff, customer satisfaction could be detoured.
"[Consistency is] critical," says Smith. "You can't have sales telling customers there's a two year material and workmanship warranty and have warranty thinking that there's a one year material and workmanship warranty.
"This is really a team effort," Smith adds. "Sales is the first step, but everybody else has to back them up: design, construction, warranty, closing — everybody. So that means builders need to cross-train their personnel so they all understand the big pieces of how this process works the same way."
Estes, with a staff of 10, has systems in place to make sure the company delivers on its promises to customers.
"For a small builder, I think it's important for them to have systems that repeat," Estes says, "so we're not relying on any one person to have a tremendous memory [about] what should ordinarily take place every time we build a home."
Builders also need a system for identifying new information and conveying it to customers so they can get those expectations aligned.
"There's always something new on our horizon in this industry," Smith says. "There was a time when we didn't talk about radon. There was a time when we didn't talk about low-flush toilets. There was a time when we didn't talk about mold. There's something out there right now that we don't know about yet, but it's coming."
"The 'teachable moment' involves finding the best person to put the information in front of the customer, deciding when to put the information in front of the customer, and then deciding how," Smith continues.
"Sometimes the how is just to put a paragraph in the homeowner's manual. Sometimes it's to put it on a meeting agenda. Sometimes it is so important we put it on an NCR form and get a signature on it because we want to be able to prove we told the customer about this.