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| The Power of Understanding New Home Buyers |
| Written by Jonathan Smoke | |
| 04.25.2008 | |
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Discuss this article on the forums. (0 posts) I spent a decade consulting to and then working in a variety of positions with national top 10 builders where I got great exposure to all aspects of a home building operation. I also invested part of a year doing a tour of duty through literally every function. I learned what it was like to “shoot pads,” deal with development and entitlement headaches, design communities and plans, sell homes, negotiate contracts, issue purchase orders, manage subcontractors, monitor results and profitability, build homes, and care for customers afterwards. One of the most important lessons I learned was that when every member of the home building team—including subs and suppliers—had a focus on the customer, good things happened. The right product was designed for the location. The optimal features were included in the home. The model “spoke” to the right pros  pects. Promotional activities made sense as everyone knew the target. The sales people were happy and energetic and connected with the buyers. The buyers made referrals. The local community embraced the project. And the project sold out at an expected or better pace with good margins and great customer reviews.And likewise, when no one focused on the customer, mistakes were made and compounded. With no clear target in mind, those with the loudest voices or most stubborn positions influenced the designs and features, which often reflected their personal tastes and not necessarily what customers liked. There was less team work, which led to less than ideal sales and margins. With less team work, there were more mistakes, more finger pointing, and more unhappy reviews. And there were fewer referrals, leading to more desperate promotions. My observations led me to not settle for the status quo when I became responsible for market research. It seemed only logical to me that the home buyer should be at the center of research, and that understanding of the home buyer should be clear to the whole team throughout the life of the project. With the customer as the central focus, individual decisions always had a simple but clear goal in mind: make the targeted type of buyer want to live there and tell other people about it. However, homebuilding and residential real estate are not industries where much emphasis is placed on the value and importance of data driven analysis. This was especially true during the first half of this decade as most markets and communities experienced brisk sales and rapid price appreciation. Now that tepid sales and price depreciation are the norm, the value and importance of market research and analysis are rising. Even though the perceived value is rising, most builders and developers have not had great experiences in seeing true value in research in the past. At best, they were happy with a feasibility study done by a traditional market researcher, which likely influenced their decision to go forward on a community and may have given them direction on how to position themselves relative to the competition. But chances are that the study ended up on a book shelf or in a file cabinet, never to be referred to again unless a lender or investor requested it. At worst, the research may have influenced a decision to move forward, but its conclusions about possible prices and absorption paces haven’t been met, resulting in the perceived conclusion that research just produces a bunch of fluff to justify brilliant or not so brilliant decisions made purely by experience and gut instinct. Although I’ve never seen a statistic to back this up, I would bet that most builders would avoid wasting time and money doing any research if they could. After all, research is produced by number crunchers, it distracts from the time in the field, and it’s filled with complex numbers and mumbo jumbo that doesn’t jive with their real experience and view of the world. But to me, housing market research should be focused on these three critical actions:
Knowing your buyers helps you determine optimal product offerings, how to design your product, and how to reach potential buyers. You can learn more about the importance of knowing your buyers on our Consumer Demand information page. 
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