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By: Guillermo Salazar • 06 December 2023

Building Beyond the Blueprint: Why Customer Experience is Deprioritized for many New Home Builders & how to fix it

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Builders may de-prioritize customer experience for several reasons, often due to a focus on operational, financial, or market-driven priorities. While the long-term benefits of a strong customer experience strategy are clear, including enhanced reputation, customer loyalty, and the potential for increased sales through positive word-of-mouth, several factors can lead builders to place less emphasis on this aspect:

1. Cost Concerns

Investing in customer experience initiatives, such as personalized service, high-quality aftercare, and advanced communication tools, can be costly. Builders facing tight margins may prioritize cost-saving measures that can, unfortunately, detract from the customer experience.

2. Operational Challenges

The complexity of managing construction projects, including dealing with subcontractors, supply chain issues, and regulatory compliance, can consume a significant amount of a builder's resources and attention. These operational challenges can lead to customer experience being overlooked or deemed less critical than immediate operational pressures.

3. Market Dynamics

In a seller's market, where demand for new homes outstrips supply, builders may feel less pressure to compete on the basis of customer experience. The perception that homes will sell regardless of the buying experience can lead to complacency in this area. Many years of bad habits from the housing boom are baked into builders approach to customer experience. Winners and losers will be made of how builders adapt to post zero interest rate period.

4. Lack of Awareness or Expertise

Some builders may not fully recognize the impact of customer experience on business success or may lack the expertise to develop and implement effective strategies. Without a clear understanding of the benefits or how to achieve them, customer experience initiatives may not be prioritized.

5. Short-term Focus

Builders focusing on short-term gains, such as immediate sales targets and project completions, may neglect the long-term benefits of investing in customer experience. This short-term focus can result in missed opportunities for building lasting relationships with customers and securing future business through referrals.

6. Underestimation of Negative Feedback

Builders may underestimate the impact of negative customer experiences and the speed at which negative feedback can spread, especially in the age of social media and online reviews. This underestimation can lead to a lack of proactive measures to address and prevent such feedback.

7. Cultural Factors

The company culture within some building firms may not place a strong emphasis on customer-centricity. If the leadership and staff are not aligned in prioritizing customer experience, it will likely be reflected in the company’s operations and interactions with clients.

8. Revenue Recognition and Financial Incentives

Revenue Transfer Timing: In the home building industry, a 99.5% of the revenue from a home sale is recognized at the point of closing or possession. This financial structure can create a scenario where builders prioritize activities that lead up to the sale's closing, focusing less on post-possession customer experience. The immediate financial incentives are aligned with completing sales rather than ensuring ongoing customer satisfaction.

9. Repeat Purchases Timing:

The nature of the home buying process is such that repeat purchases or referrals may not occur for many years, given the long-term investment nature of real estate. Builders may deprioritize post-sale customer experience due to this delayed gratification, underestimating the cumulative impact of positive customer experiences on brand loyalty and future sales through referrals over time. Unlike industries with shorter purchase cycles, where repeat business and customer feedback loop back more quickly into revenue, the extended timeline in home building can lead to a disconnect between customer satisfaction and perceived immediate financial returns.

Overcoming De-Prioritization of Customer Experience

To overcome these challenges, builders should:
  1. Recognize the Long-term Value: Understand that investing in customer experience can lead to higher satisfaction, repeat business, and referrals, which are critical for long-term success.
  2. Integrate Customer Experience into Strategic Planning: Make customer experience a core component of business strategy, rather than an afterthought.
  3. Leverage Technology: Use technology to improve communication, streamline operations, and enhance the overall customer experience without significantly increasing costs.
  4. Educate and Train Staff: Cultivate a customer-centric culture through ongoing training and by setting expectations for staff at all levels of the organization.
  5. Monitor and Respond to Feedback: Actively seek out and address customer feedback, using it as a tool for continuous improvement
  6. Follow the money: Gain alignment across functions as to how customer experience saves costs & drives revenue.

Addressing Revenue and Repeat Purchase Timing for Home Builders

To counteract the tendency to de-prioritize customer experience based on these financial dynamics, builders should consider the following approaches:
  1. Long-term Relationship Building: Emphasize the importance of building long-term relationships with customers, recognizing that referrals and repeat business, although potentially years down the line, are crucial for sustainable growth. Implementing strategies to stay engaged with homeowners post-purchase can enhance the likelihood of future referrals and repeat business.
  2. Aligning Incentives with Long-term Satisfaction: Adjust incentive structures for sales and customer service teams to reflect not just the achievement of sales targets but also customer satisfaction metrics post-possession. This alignment can help ensure that the focus on customer experience extends beyond the point of sale.
  3. Leverage Positive Experiences for Marketing: Encourage satisfied customers to share their experiences through testimonials and online reviews, which can serve as powerful marketing tools. Positive word-of-mouth can influence prospective buyers early in the decision-making process, potentially shortening the sales cycle and improving the overall brand perception. Make it easy to be an advocate. Host a party.
  4. Invest in Quality and Aftercare: Recognize that investment in quality construction and comprehensive aftercare services can reduce the long-term costs associated with warranty claims and repairs, thereby indirectly affecting the builder’s financial health positively. These investments can also increase customer satisfaction and the likelihood of referrals.
  5. Consider an after service program. Borrow from the auto industry, create compounding revenue by solving the customer maintenance problem that customers will be thrilled about; use that as a spiff; perk, or additional revenue.
By addressing the timing of revenue recognition and the long-term nature of repeat purchases, builders can better understand the value of investing in customer experience. This shift in perspective can lead to strategies that not only improve immediate customer satisfaction but also contribute to the builder’s reputation and financial success over time.
Address these factors and recognize the value of customer experience as a competitive differentiator, you can re-prioritize your strategies to not only meet but exceed customer expectations, fostering growth, sustainability and a defensible positioning in your market.

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