6 emerging market research techniques

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New twists on standard market research methods help builders spot opportunities and more effectively pinpoint buyer groups.

April 20, 2011

In 2007, Teri Slavik-Tsuyuki went on a cross-country tour of more than 40 markets in which Newland Communities had developments. She went armed with a story and shopped them blind.

“Home sales in America had degenerated to a very sad, sad state,” says Slavik-Tsuyuki, senior vice president and chief marketing officer at Newland. “You get better service buying a $4 cup of coffee than the most-expensive purchase you’ll ever make.”
Typically, she was asked about her price point, and how many bedrooms and how much square footage she needed.

“I can’t even tell you what square footage means,” she says. “It’s totally a product-centric question.”

After completing her tour, she installed “a very robust CRM system” (they use Pivotal) that’s focused on three core pillars: customer profiles, submarket demand, and resident and shopper research.

“It’s core to how we operate the business,” she says. “We look at how people live and how their needs and motivations change over time. It drives our customer information gathering, lot inventory, relationship building, and nurturing with the home-buying customer. We can slice and dice the data in our CRM data from nationally to specific neighborhoods. If you said to me, ‘What do you see happening with Gen Y purchasers?’ I can tell you that nationally to locally.”

One way Newland does that is with consumer panels. Residents and shoppers are asked to sign up. They receive surveys asking them “all kinds of questions,” say Slavik-Tsuyuki. “Once they see we send them relevant information they’re more willing to answer questions. It’s really simple at the end of the day. It’s about listening and asking the right kind of questions.”

By studying submarket demand, Newland can compare it to customer profiles to see who is shopping its communities, who’s living there, and who the builder is missing. For example, at the Briar Chapel community in Chapel Hill, N.C., Newland found that the community was attracting, but not converting, empty nesters. They were 20 percent of the submarket, but accounted for only 9 percent of sales. Through focus groups, Newland found that the product being offered didn’t meet their needs and they weren’t prepared to settle for something less.

As a result, M/I Homes built an entire new line, M/I Villas, for Briar Chapel. A series of six emails were sent to an internal prospect list before the models were built. Web site traffic went up 35 percent and visitors stayed twice as long as usual. With no other marketing, 11 sales were made. “We sold more than a million dollars worth of real estate for our builder partner,” says Slavik-Tsuyuki.

Here are six more research tools builders are using — or could be using — to figure out who’s buying what, where, why, and for how much:

1. Google AdWords

We know what you’re probably thinking. Google AdWords are about marketing, not market research. Yes, they’re a powerful marketing tool, but they can also tell you a lot about the market in general by giving you insights into what terms are — and aren’t — coming up in searches.

New-home Internet sales consultant Mike Lyon saw this when he was working for a builder in the Tulsa, Okla., market. By combining the search term “new homes” with the names of several suburbs of Tulsa, he quickly learned that the city of Broken Arrow got the highest number of searches, but his builder didn’t have a community there. His advice: Use Google AdWords to see where the search traffic is high and then compare that information to the number of housing starts and existing homes for sale. If you really want to see how high the interest is in a particular product or location, launch a “coming soon” pay-per-click ad. “It’s free to sign up and free to throw out an ad until someone clicks on it,” Lyon says. “If they click on it, they go to your Web site.”

2. Online focus groups

Developers and builders have used focus groups for years, but sometimes the individuals whose brains you’d like to pick have full calendars.

“The limitation of high-income, affluent people you really want to approach is that their time is limited unless you pay them a lot,” says Mike Rinner, senior vice president of Centennial, Colo.-based housing market research firm Genesis Group.

His team used an online focus group to gain insights about the viability of a proposed project at Lowry, the former Lowry Air Force Base, which has been in redevelopment for years. “They’re doing the final stage and the infrastructure costs were going to be really high,” Rinner says. “How can we find out if anyone wants to live there? This was 25 to 50 units per acre — pretty dense for a suburban area. But it had really good demand and home prices had held. The question revolved around that density issue.”

Rinner wanted input from top-producing real estate brokers for condos and for new and resale projects in the Denver market. He’d heard about online focus groups. “This turned out to be the ideal situation to do it,” he says.

The brokers were asked to go online a few times during a two-day period. They read through a short PowerPoint presentation, read four sets of questions, read the responses from other brokers, and replied.

“You have the ability to pick a pseudonym and you don’t have to answer the questions at any one time,” Rinner explains. The participants were offered a $50 gift certificate or a $50 donation to a charity.

He’s considering doing another online broker focus group for a client who plans to build $1 million townhouses within two to three miles of $2 million to $3 million condos. The location is in an emerging market, and the builder isn’t sure it’s an area that will support the price point. “Maybe we can find that out through an online broker focus group,” Rinner says. “It’s one piece of the study. But it’s the real crux.”

3. Cost to rent versus buy data

Measuring the difference between the cost of renting and buying is actually “very, very old guard,” says Tracy Cross, president of Schaumburg, Ill.-based residential marketing research firm Tracy Cross and Associates, but it’s a piece of information that hasn’t been paid enough attention to for quite some time. “That’s an important technique that was lost during the go-go days,” says Cross. “It’s been lost since the 1980s.”

Now, he says, it’s very important to look at an area’s rental market and whether it’s a viable substitute for anything in the for-sale sector. In some markets, such as Atlanta, rental communities popped up in locations that were far superior than where builders could get land to build for-sale projects.

4. Ethnographic studies

A lot of market research relies on huge data sets of tens of thousands of people. Todd Ullom goes in the other direction and drills down to the things that we all have in common. He uses concepts from ethnography, the study and systematic recording of human cultures.

Ullom, a former vice president for WCI Communities, now has his own Palm Beach Gardens, Fla., home-building company, Couture Lifestyles. His average home starts at $2 million.

“What we do there is centered on understanding what’s the right product to build for the customer,” he says. “Historically, it’s been about square feet and bedroom counts. But the customer doesn’t know what he wants. We go into their home, spend the better part of a day and observe how they live. Then we design a home tailored to their lifestyle.”
So, how does this help predict market trends?

“We actually started it at a production level to find out how to build a home for a buyer type,” he says. “You only have to do it for six to eight people. You can design for young families. Their needs aren’t that radically different. You don’t need as many plans as you think. It’s amazing the difference it makes.”

Ullom also consults with other builders to help them figure out if there’s a buyer for a community before the builder commits dollars for the dirt. If so, he helps the builder tailor the product to the buyers he finds.

Coconut Creek, Fla.-based Minto Communities worked with Ullom to figure out what to build at Cascada at Monterra in nearby Cooper City, a project that had fallen into disrepair. Another developer had taken it over; they were doing the single-family homes, and Minto was in discussions to build the multi-family units. Working with Ullom, they were able to identify the specific socioeconomic group (Claritas clusters from PRIZM NE) to attract to the site. Cascada at Monterra opened in March 2010 and went on to be the market’s top-selling new project of the year.

“It really became a case study for us internally on the benefits of getting in early and understanding submarkets,” says John Carter, Minto’s vice president of planning and development. The builder has since developed its own set of buyer personas.

Before Minto started identifying specific submarkets, Carter says, “we tended to rely on what we perceived as our consumers and their needs.” That doesn’t work anymore, he says. “You could be off by orders of magnitude in terms of what the customer expects,” Carter says. “If you want to place a bet on an acquisition, if you have any ghost of a chance of making that pay off, you can’t rely on perceptions. You need facts.”

The result, says Carter, is that your buyer targeting becomes “a laser point versus a floodlight. It’s made us adapt our marketing, our site plans, everything. It’s almost falling off a log once you go through it, recognizing you need those fundamentals.”

5. E-mail surveys

Surveys remain a valid market-research tool for builders and developers. The change is in how they’re executed. John Schleimer, president of Roseville, Calif.-based Market Perspectives, has found that with targeted audiences, e-mail surveys produce a much higher response rate than printed ones.

“With a highly targeted list, a lot of people would rather go online than do it by hand,” he says. “We think that since people have iPads, they’re on the computer so much, the way to approach consumer research is going to be more electronic than printed.”

One recent e-mail survey sent to 600 members of a country club yielded 210 responses. “I thought we’d get 50,” Schleimer says. “We got 100 the first day.”

The advantage with an electronic survey is that you get instantaneous results, and there’s no chance of introducing errors while inputting results by hand. And with programs such as Constant Contact, pricing is based on the number of e-mail addresses you send to, not how many e-mails you send. 

Schleimer’s been so happy with the results that he’s decided to offer the option of taking surveys electronically on all of his firm’s mail-return surveys. And because the buyers they’re targeting tend to be more sophisticated and experienced, his company is starting to experiment with showing them elevations and floor plans. The survey respondents can click on the plans, enlarge them, and make comments on key rooms.

"That’s helpful to a builder,” he says. “So many builders are using the same product they’ve used for years because they can’t afford new architecture. This helps the builder see when he has a problem in his kitchen. He can see what has to be done and give specific instruction to the designer or architect to make improvements within the envelope.”

6. The National Association of Realtors’ Profile of Home Buyers and Sellers

Every year for the past three decades, NAR has produced this annual profile. For the current report, NAR mailed a detailed, eight-page questionnaire to 111,000 consumers who had bought a home within the previous 12 months. It yielded about 8,500 usable responses, providing information on an extraordinarily wide range of subjects. Insights in the 115-page report include the average time on market; the ethnic breakdown of buyers; their overwhelming preference for single-family detached houses (77 percent); the make-up of their households; their primary reason for purchasing a home; their prior living arrangements before buying a house; how far they moved from their previous home to their new one; and the factors influencing their decision on where to buy.

“It’s so rich,” says Walter Molony, senior public affairs specialist for NAR. “There isn’t a week that goes by during the year that I don’t get a question dealing with that study.”
Recently, NAR began factoring in additional data in building the annual profile. It now also looks at the shares of first-time buyers, all-cash buyers, investors, and cancelled and postponed transactions.

Another relatively new tool available is the Realtors Confidence Index, a monthly index similar to the builders’ confidence index produced by the National Association of Home Builders. On a monthly basis, it asks a random sample of Realtors three questions: How would you describe the current housing market in your region? What are your expectations for the housing market over the next six months? How do you rate the traffic in your region?

The index is helpful, Molony says, because it rounds out information coming from the Multiple Listing Services. “It’s become so important,” he says. “It’s a very good tool to quickly add questions as new situations come about. It’s a really good way for us to get our finger on the pulse quickly.”

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