There is a veritable geyser of data tracking housing today. From existing-home sales, to house prices, to new-home permits, to starts—housing metrics abound.
Recipe for Success
If successful home building was a recipe, the ingredient list might look something like this: one part skilled builder and trades; one part good land and floor plans; two parts satisfied customers. Because customer satisfaction is such an integral part of the home building recipe, builders are focusing more than ever on improving their customer satisfaction ratings.
If successful home building was a recipe, the ingredient list might look something like this: one part skilled builder and trades; one part good land and floor plans; two parts satisfied customers.
Because customer satisfaction is such an integral part of the home building recipe, builders are focusing more than ever on improving their customer satisfaction ratings. High satisfaction ratings translate into lucrative referral business that can sometimes feed more than half of all future sales.
Now in its third year, the NRS customer satisfaction award goes to seven builders that represent customer satisfaction at its finest.
On the following pages, each award winner will share best practices for improving customer satisfaction ratings. Sit down and find out what it takes to be the best from those companies setting the bar in customer satisfaction.
Each of the companies that won an NRS Award provided a truly delightful experience to their buyers. To measure the degree to which they accomplished this, NRS included a series of key questions to shed light on each company's level of performance. Three of the key questions highlighted in this article include:
- Would you recommend your builder to family and friends?
- How many actual recommendations have you made for your builder?
- To what degree did your builder care about you and building you a quality home?
This year's study dug in deep to find out what it takes to be the best in customer satisfaction by conducting a series of regression analyses to figure out what really matters to buyers when it comes to making them happy about their home building experience.
The Results of the 2005 study reveal significant differences between the top and bottom five companies on genuine caring. High performers averaged 90.8 percent of customers indicating genuine caring from employees. Low performers averaged 32.8 percent of customers indicating genuine caring from employees.
As you can see in the Regression Analysis Coefficients to the right, if a builder raises its genuine caring by 1 point, it would see an increase in its recommend levels by .64 of a point. This is compared to an increase of only .24 on recommend for a 1 point increase in overall service and even less than .10 on recommend for a 1 point increase in overall product.
The power of genuine caring can also be found in the ratings of each of our winners. The top 2.5 percent compared to the bottom 2.5 percent in the study revealed startling differences in the amount of caring.
John Laing Homes Denver, this year's NRS Diamond Award winner, No. 1 Production Builder in Customer Satisfaction, had 100 percent of its customers stating that they felt John Laing's staff cared about its customers and building a quality home.
Caring obviously doesn't exist in a vacuum relative to the quality of the homes built; rather, caring is the sum of all that builders do for their buyers. A builder who runs around giving warm fuzzies without building a quality home will ultimately fail in customer satisfaction. However, a builder that builds a great home but fails to convey the level of caring it has toward the buyer will also under-perform. The lesson learned is that builders need a well built home with a lot of caring from its employees to reach No. 1.
Capitalizing on these findings will become more difficult as time passes. What qualifies as a "Wow" today will eventually become a "want" tomorrow and possibly a "must" in the future. Fortunately, there are strategies that have given builders a tremendous boost in their customer satisfaction ratings. The first step is to understand how "Wows" work with customers in today's marketplace.
Many building experts insist that customers don't really know what they want; they have to be told. These experts are wrong. Homebuyers, for example, do know what they want, but unfortunately they're not always proficient at describing their needs. When home builders understand the three types of customer needs and how to reveal them, the builder will be well on his way to understanding his customers' needs as well as, or perhaps better than, they do.
The Kano Model of customer expectations is quite useful in gaining a thorough understanding of a customer's needs. Japanese quality expert Dr. Noriaki Kano has isolated and identified three levels of customer expectations — that is, what it takes to positively impact customer satisfaction. There are three needs: MUSTs, WANTs and WOWs.
Fully satisfying the homebuyer at this level simply gets a home builder into the market. The entry-level expectations are referred to as the MUST level qualities, properties or attributes. These expectations are also known as the "dissatisfiers," because by themselves they are unable to satisfy a homebuyer. However, failure to provide these basic expectations will cause dissatisfaction. Examples include features relative to home safety, latest generation building materials and the use of branded fixtures and components. The MUSTs include customer assumptions, expected qualities and functions, and other "unspoken" expectations, such as plumbing and air conditioning that work as expected every time, and a roof that doesn't leak.
These are the qualities, attributes and characteristics that keep a home builder in the market. These next higher-level expectations are also known as the "satisfiers" because they are the ones that customers will specify as though from a list. They can either satisfy or dissatisfy the customer depending on their presence or absence. The WANTs include any "spoken" homebuyer expectations, such as Energy Star appliances and extra large cabinets and closets, returned phone calls and a house that will be serviced within the first year.
These are features and properties that make a home builder a leader in the market and produce the highest levels of customer satisfaction. As described by Kano, these expectations are the "delighters" or "exciters" because they go well beyond anything the customer might ask for or imagine. Their absence does nothing to hurt satisfaction levels, but their presence improves the overall experience — sometimes quite significantly.
Examples of WOWs include guaranteed utility bills due to quality construction, same day service, weekend hours, gift baskets, frequent informative communications, thoughtful gifts to the buyer, active listening, lending a helping hand and true caring for the buyer. All of these examples are are unspoken ways of knocking the customer's socks off.
Over time, however, unspoken WOWs can become WANTs and finally may end up as MUSTs. The home builders that get ahead and stay ahead, like many of this year's NRS award winners, are constantly monitoring their homebuyers to identify the next WOWs. Remember, the best WOWs, plenty of WANTs, and all the MUSTs are needed to become and remain an industry leader in customer satisfaction.
It has been long suspected but never before proven with real homebuyer data that homebuyers over time will become less satisfied with their purchasing experiences and with their builders' performance.
In this study, randomly selected homebuyers were asked to evaluate their overall satisfaction with their particular builder at five specific points:
- At the contract signing
- One month before closing
- At closing
- Thirty days after closing
The good performers are those homebuyers who purchased from a builder ranking in the top 2.5 percent for overall customer satisfaction. The poor performers are those homebuyers who purchased from a builder ranking in the bottom 2.5 percent for overall customer satisfaction.
The performance values are the median scores for the good performers and poor performers at each point. For example, 9.06 is the median response for the good performers regarding their satisfaction level at the time when the sales contract was signed. This is based on a scale of 1 to 10, with 10 being the best score possible.
In this study, the good performers had minimal customer satisfaction decay over time. The median score from this group declined from 9.1 when the contract was signed to 8.7 today. That's a reduction of less than 4 percent.
The poor performers, on the other hand, experienced a much greater loss in customer satisfaction over time. According to the study, the poor performers' median score decayed from 8.4 to 4.5, a reduction of more than 46 percent. More importantly for the poor performers, the drop from 8.4 to 5.4 occurred during the period between initial contract to one month before closing. This level of performance did not turn around throughout the rest of customer experience, rather continued to decrease to the 4.5 level.
The main points we discovered to help builders improve their satisfaction scores include:
- Homebuyers who are most satisfied with their builders at the outset continue to be highly satisfied over time; whereas, homebuyers who are less satisfied with their builders at the outset become even unhappier with their builders as time progresses.
- The key satisfaction turning point during the entire customer experience is during construction to one month prior to closing.
- Customer satisfaction decay occurs more than 10 times faster among the losers (46 percent) as among the winners (4 percent). For builders, this means first impressions really do count, but consistency is even more important to be the best. Builders must design a complete customer experience that maintains and increases the satisfaction levels of its customers.
- Once a builder falls down during any period, it is very difficult to turn things around.
So what are some of the best practices that successful builders have used to ensure the ultimate experience for buyers and long-term customer satisfaction?
The top five best practices include:
- Frequent and Informative Communication. To alleviate the drop in satisfaction levels the poor performers exhibited at one month prior to close, builders need to implement a frequent communication plan with buyers. Ultimately buyers want to know what is going on with their home at any given time. The more buyers have to beg for
NRS discovered the magnitude to which buyers are influenced by one particular key factor — a "genuine caring for the buyer and building them a quality home." The genuine caring question on the NRS survey predicted recommendation levels better than any other indicator, including the product satisfaction average, service satisfaction average and all other individual questions on the survey. This kind of predictive performance on a satisfaction survey was never so strong. Prior to adding the genuine caring question, the best predictor of recommendation levels was service satisfaction average. With the caring question added, NRS was able to have nearly three times the predictive power of the service satisfaction average and six times the predictive power of the product satisfaction average.
Larry Webb, chief executive officer of John Laing Homes notes, "It makes a lot of sense, but most builders don't realize how important it is to buyers."
Genuine Caring Difference information, the greater the worry. This results in significant disappointment that may forever lower satisfaction levels. Those who excelled in customer satisfaction communicated with their buyers based on a regular plan and made sure every buyer knew what was going on with the progress of his home.
- Proactive Corrective Programs. One of the most important strategies used by the best in customer satisfaction is getting in touch with buyers before problems arise. Rather than waiting around for customers to call with complaints, the best builders have created a service model that uses scheduled visits to the home to inspect for problems before and after the buyer has moved in. More importantly, this model of proactive service is geared toward creating a sense of reassurance and bonding between the buyer and the representative.
- 24-Hour Confirmation Call. The best in customer satisfaction measure the hours — not days or weeks — it takes for their representatives to contact a buyer following a request for service. The key is to develop a fast response system that documents incoming requests, enables representatives to contact customers quickly and tracks the success in the form of response time. After all, the longer you make buyers wait, the more they lose confidence in your company's organizational skills and service quality. As Dan Green from The Green Company states, "each service request is an opportunity for our staff to delight our customers."
- Fix it on the spot. The best in customer satisfaction realize that homebuyers want repairs done quickly. That's why the winners have hired or trained service reps that can make minor repairs on the spot during the initial visit and inspection. Such immediate service assures customers that the home builder is serious about correcting problems quickly. It also makes homebuyers feel a sense of accomplishment for the time they invested waiting for the builder's visit. Another big benefit is that everything the rep fixes during his or her visit is one less thing the trade contractors have to worry about. This doesn't mean you're letting the trades off the hook. It just means you're making sure the buyer is taken care of first, and debates about the quality of the trades' work can take place after the buyer is happy.
- "Do the right thing" company culture. Nothing has a greater long-term impact on satisfaction than the culture of the company and department. Have you ever heard your employees say, "Buyers are liars" or some other derogatory remark? If you have, you may want to examine the culture of your organization. The best in customer satisfaction — every single winner in this year's NRS Awards program — maintains a company culture that supports employees "doing what is right" for buyers and holding the buyers in the highest regard.
Overall, investing in an exceedingly positive experience that satisfies the needs, wants, wows and genuine caring — from contract to close and beyond — is what this year's NRS award results point to as especially important to becoming first in customer satisfaction.
With all of the attention builders are paying to customer satisfaction, the all-important question must be answered. Does customer satisfaction matter to buyers? The NRS team conducted a study to examine this with homebuyers. We surveyed a random sample of 400 recent homebuyers to determine the level of importance customer satisfaction had in their buying decision. The results were startling.
More than 72 percent of buyers said that customer satisfaction ratings were important in their buying decision, and another 95 percent would seek out the customer satisfaction ratings of builders if they were to buy another home.
The results of this study show that customer satisfaction does matter and it appears that it is an important source for those looking to choose a homebuilder.