“You can change anything you want, so long as it’s something we do”.  In a nutshell, that’s the approach most builders seem to take with a buyer’s request to change something about his home.

This and other viewpoints were described by the chief executive officers participating in Reference Pointä, our periodic study of management practices in the homebuilding industry.  This year’s study, undertaken jointly by SAI and Greene, Hollister, Inc., was conducted among a select group of building companies, including the nation’s 400 largest builders listed in Professional Builder’s 1998 Survey of Housing’s Giants.

When asked to describe their company’s furthest approach to handling buyers’ requests for custom changes, a solid majority (54%) of these senior managers said that their normal practice is to limit their buyers’ choices to color and finish selections, plus selections from a predetermined and pre-priced list of additions and options to plans and elevations.  Another 31% said that they normally allow buyers to specify any changes they wanted, so long as those changes were applied to the builder’s standard portfolio of plans and elevations.

In contrast, only 4% reported using what we described as a “white paper” process, in which the company’s designers work with the buyer to design the plan, elevation, specifications and finishes they want, and then price the home.  The remainder (12%) said their company’s normal practice was to limit choices to predetermined and pre-priced color and finish selections.

Regardless of their company’s approach to handling change requests, almost two-thirds (63%) said it takes two to three business days to get a non-standard change approved;  another one-in-five (20%) said that it takes their company a week to 10 days.  These responses sort of beg the question, if more than 95% of these companies establish parameters for the scope of change, why do 83% require more than two days to approve the change?

This orientation towards a predetermined and pre-priced process for handling buyer-mandated changes happens to fit the perspectives these executives hold about the underlying basis on which buyers select builders.  When asked how their buyers viewed the importance of factors typically involved in the selection of a builder, the consensus was that half (50%) of the decision was determined by best product design, quality, and location, one-third (32%) of the decision was driven by best price, and one-fifth (20%) of the decision was based on the ability of the builder to meet a buyer’s specific requirements (better than any other builder).

The collective opinion of these managers is that their buyers value good design over good design capability – that their buyers value practical approaches to personalizing their home over self-determination.  However, that perspective in part may be driven by their views of where they hold a competitive advantage over other builders in their market.  When asked about this advantage, less than half (46%) believed they had a competitive advantage in price, compared with about three-quarters (77%, 79%, and 69%, respectively) who said they had an advantage in terms of product design, quality, and location.  On the other hand, only about one-third (34%) believed they enjoyed a competitive advantage in customization, while (42%) said they were on even-par, and more than one-fifth (23%) felt they were actually at a disadvantage.

These builders may have the customization issue figured exactly right, but the danger that we see in all of this is two-fold:

First – builders need to make certain that their perspectives accurately reflect the factors that comprise the buying decision of their target markets.  The reasons for which homebuyers select builders has everything in the world to do with how the builder should design his processes.  Every day, we see builders with processes designed to satisfy internal requirements that don’t have anything to do with meeting their buyer’s requirements and expectations.

Second – push strategies are difficult and costly to maintain.  Almost every builder we work with spends enormous amounts of time and money supporting plan portfolios that nobody wants to buy.  Today, it’s simply a cumbersome and expensive way for most builders to do business;  tomorrow, they risk having their knees cutoff by builders that have implemented pull strategies that are simple and easy for buyers to use.

One final thought:  There is a lot of talk in the homebuilding industry today about even-flow production and improved cycle time.  Lost in all the hoopla is the understanding that even-flow production requires even-flow selling, and that improved cycle time has to come as much from the front-end processes – Prospect-to-Contract and Contract-to-Start – as from the Start-to-Completion process.

In the end, customization will become the standard when builders conclude that they don’t have to choose between fast, efficient building operations and the ability to let buyers determine exactly what they want;  they are necessary conditions for achieving the same objective – namely, a more profitable homebuilding company.
 

Fletcher Groves is a Vice President with SAI Consulting in Ponte Vedra Beach, Florida.  He can be reached at (904) 273-9840 or via e-mail at flgroves@saiconsulting.com.

Mike Hollister is President of Greene, Hollister, Inc. in Greenville, South Carolina.  He can be reached at (864) 370-0400 or via e-mail at meh@gate.net