Charlie Scott has more than 30 years of first-hand home building experience, much of it in senior management positions with an award-winning, nationally recognized Midwest builder. Currently, he's director of Woodland, O’Brien & Scott for Constellation Homebuilder Systems. Scott helps North American home builders grow their own customer-centric cultures, pursue operational excellence, and increase referral sales. Write him at Charlies@woodlandobrien.com.
Have you Drunk the Social Media Kool-Aid?
When I was part of a growing home building company we learned to be on guard for the newest “technology” coming down the pike that promised to revolutionize our home building business. We called the condition of falling for these fantastic technology claims the “allure for the sexy lady of technology.” Thirty years later, it is safe to say, some things never change. Before I expand on the latest siren of technology, let me give you the results of a couple recent studies.
First, each year before the International Builders' Show, we at Woodland, O’Brien & Scott survey 25 high achieving, geographically diverse home builders for benchmarking facts. In this year’s survey we found that the average builder increased year-over-year closings by 37%. We also found that the average builder had a year-over-year backlog (as of January 1st) of an astounding 67% increase. The third piece of benchmarking data we found was that top performing home builders obtain nearly 40% of their sales as referral sales (if they had satisfied customers and a referral sales strategy – which they did). Please remember this 40% referral sales statistic as it will become very important in just a few moments. We found out a lot of other stuff too, but I will save the remainder for another day.
In a second study conducted by Professional Builder Magazine (published on Housingzone.com in September,) readers of Professional Builder Magazine were asked what percentage of their sales came from Social Media. The biggest group (63%) of the 316 respondents – for the third year in a row said less than 5%, and 78% said less than 10%! The PB study suggests that Social Media is definitely used casually for social purposes, but contributes little to new home sales, at least when compared to Referral Sales. These two studies indicate that a home builder who concentrates on building clean/complete homes, with a customer centric process and with a referral sales strategy, will outperform Social Media 8 to 1. That’s 8 to 1! Unfortunately, too many builders have been lured into the rocky shores of Social Media, by the false promises of the sirens and have invested ten times the money/time/resources in Social Media than in Referral Sales – startling isn’t it?
An enlightened builder knows that Social Media is but a small part of a strategic marketing system which includes websites, search engine optimization, model homes, etc. Does a builder need a Social Media strategy – absolutely, but maybe with about 5% of the overall promotional dollars and man-hours. A wise builder would likely invest more heavily in the customer experience, referral sales strategies and staying connected to the most potent Social Network of them all – their existing customers; to capitalize on the Referral Sales 8:1 advantage. This experience centric suggestion is also consistent with a recent Ford Motor’s study that said customers are “tired” of e-life and desire a return to “real experiences.” Let me know if you want to know more about these studies or Referral Sales strategies.
In the meantime, I suggest that home builders carefully examine their 2013 marketing budget and allocations. Given these studies and their findings, be on guard for other sirens, make sure you are investing where it pays – your existing satisfied customers, and be a bit more discriminating in your Kool-Aid consumption.
This week’s management meeting question: “What is our sales generation rate from Social Media compared to our sales generation rate from Customer Referral Sales?”