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This article first appeared in the PB August 2011 issue of Pro Builder.

It was an ah-ha moment for Tim Kane, president of Irvine, Calif.-based MBK Homes. He and his wife were checking into a Ritz-Carlton. As they walked up to the front door, the doorman said, “Welcome back to the Ritz-Carlton, Mr. and Mrs. Kane,” as if he had remembered them from a previous visit. It happened again at the front desk. They walked up, the desk clerk handed them a key and said, “We have your room waiting for you, Mr. Kane.”

“I was blown away,” Kane says. So he asked how everyone seemed to know their names.

It was simple. When he parked his car, the valet asked for his name and asked if they’d been there before. That information was relayed to the bellman and the front desk. It didn’t take a lot of money or a gigantic database — just a system and a commitment to follow it.

Kane says that the lesson he learned from that experience was that you only have to be one step ahead of the customer to give great service. “It’s all about anticipating,” he says. “We all hunger for connection.”

The question on everyone’s mind these days is: does customer satisfaction matter? Is it worth it to spend increasingly scarce dollars on a measurement that is based largely on impressions?

Eliant president Bob Mirman asked that question last month at the Pacific Coast Builders Conference in a program titled, “Does Customer Satisfaction Matter in Today’s Market?”

“If you’re just generating people who are happier, is it worth it?” he asked. “I’m not so sure unless it generates something that’s beneficial to your business. Do you get additional sales you may not have received were it not for that positive word of mouth? We know where good builders end up when they do it right — a higher portion of sales from referrals. That’s the bottom line to me.”

MBK Homes has been able to cut back on the amount of money it pays buyers to refer friends and family — without any decrease in referrals, Kane says. Its quality control program also has yielded savings on its liability insurance.

In this special report, we talk with three very different builders when it comes to customer satisfaction: one with a long-standing record of good customer satisfaction, a start-up that has made customer satisfaction a central part of its business model, and a builder that used to be dismal in the area and is now one of the industry’s best.

Regardless of which category matches your company’s current position, you’ll find practical advice on how to achieve a higher level of customer satisfaction with your buyers.

The Perennial Power

Trendmaker Homes has made customer satisfaction a mission for 20 years

Once a week, the product-control team at Houston-based Trendmaker Homes sits down to talk about what’s working and what’s not. Lately, the discussion has been about a spate of leaking shower pans. At one time, it was a problem with water coming in around the back doors of their houses. They worked on it steadily “until we didn’t have water coming in the back on people’s wood floors,” says company president Will Holder. “We are evolving, and it involves everybody in the company.”

Evolution is an apt description for Trendmaker Homes, which consistently leads the J.D. Power ratings in the Houston market.

“It’s been a journey for us since 1991,” Holder says. “We thought it would be something you could just go do, but it’s taken us 20 years. It’s a big deal. We remained profitable through the downturn. We’re all on board.”

The product control team is only one part of the equation in Trendmaker’s success. Another area that gets consistent, ongoing attention is warranty. The builder tries to anticipate customers’ expectations of how the house should perform and builds the warranty to those perceptions.

“For example, we used to warrant roofs for a year,” Holder explains. “That is what it says in the Texas code. But when your roof leaks at month 18, people aren’t satisfied. We went to the subs and negotiated a two-year warranty.”

They also negotiated a longer warranty for their landscaping package to deal with the predictable mortality rate of trees planted in Houston’s blistering summer heat.

Along the way, there have been times when Trendmaker has seen its third-party customer survey results (conducted by Woodland, O’Brien and Scott) stumble into the poor/very poor range in some aspect of the buyer experience.

“We would attack an area,” Holder says. “There are no bogeys. For every customer, we would at least have to get them up to where they say we’re average. Once we’d focus on a category, we’d spend a year or two pulling the average up — and we wouldn’t go back. You’d think you would lose ground, but we didn’t. We mastered those areas and developed processes around them.”

Trendmaker’s commitment to prompt, courteous warranty service is a big part of its customer-satisfaction success story. Customers who submit a warranty service request can expect a response in as little as an hour.

“This is a great example of the Trendmaker response to any customer-satisfaction problem area,” says Keith O’Brien of Woodland, O’Brien and Scott. “The value of this total dedication to measuring customer satisfaction and responding to the patterns is best illustrated by the company’s results through the housing downturn. Past customer referral sales have nearly doubled through the worst of times, often reaching 40 percent of total sales.”

Holder adds, “That’s the way we’re staffed, we’ll come quickly and deal with the thing.”

The things that most often impress homeowners in warranty service, he says, are a prompt response to the request, carefully listening to their concerns instead of trying to explain them away, and following up to make sure they’re happy with how the problem was handled.

Every completed warranty service request is followed by a mail survey with a place for comments. If a survey comes back with “any kind of writing whatsoever,” it goes to Holder. “If it says there was trash left at the curb, we go get that trash,” he says. “If it specifically mentions a person’s name — Teresa was so helpful or Steve listened to everything we were worried about — I write a hand-written note to that employee.

When we get those, everybody knows about it in our organization. I make sure it gets circulated to his manager and the sales team.”
All the pieces go together, Holder notes, and “we measure it like crazy. It truly is a mission.”

Three pieces of advice from Trendmaker Homes president Will Holder:

  1. Treat the warranty department as a well-paying destination career position. “Don’t look at it as servitude where you pay your dues to be a builder.”
  2. The faster you respond to a warranty service request, the less it will cost you. “If you let it linger, the list will just keep growing.”
  3. Use your satisfaction scores and customer comments to promote yourself to area real-estate agents and developers.

2. The start-up

New builder DSLD Homes learns from the past as it starts over

When Saun Sullivan started building houses the first time in 2000, his Denham Springs, La.-based PCC Home Builders had “decent” customer-satisfaction scores, but didn’t make a point of tracking them.

In 2006, D.R. Horton bought the company and retired it. Sullivan and his partners switched to developing lots for the national builder. Within two years, the economy had tanked and D.R. Horton had pulled back. Sullivan’s team had a supply of lots ready to build on; DSLD Homes, LLC, started building houses.

“We knew it would be tough to get back in,” Sullivan says. “We had about a year to look at best practices. We came back with a little bit different culture. Before, you could do one or two things right and live. You can’t do that anymore. When you’re doing 25 percent of the volume you were before, you can’t have below-average scores on anything. You have to handle everything pretty well.”

“DSLD is a very unique company,” says Charlie Scott of Woodland, O’Brien and Scott. “It is unprecedented for a start-up company to grow from zero homes built to the state’s largest builder while simultaneously achieving industry leading customer-satisfaction scores on their initial customer-satisfaction audit. Most of all, we were incredibly impressed by DSLD’s extremely high customer enthusiasm, which measures the customers’ emotional bond to DSLD more so than just a willingness to refer.”

The builder’s customer-satisfaction scores run in the 95-percent range, which Sullivan attributes to the fact that they “don’t give up on any individual. A lot of people assume you’ll get those one or two who are crazy and you can’t do anything about it, but I believe, in many cases, we create those people because on the first day they moved in something didn’t work.”

Every call and every email from a customer is answered, and every comment on a survey is reviewed, regardless of what it says. Since buyers live with the builder’s decisions every day, their input can be invaluable. DSLD has changed the dishwasher it uses and researched different paints as a result of customer comments.

In the perfect world, Sullivan notes, a warranty department doesn’t exist. An extensive quality control process works to keep warranty issues to a minimum. DSLD also schedules warranty work on each home at four, eight, and 12 months after closing.

“We fix things they don’t ask about,” he says. Topping the list lately has been grout caulk.

Surveys are done at 45 and 360 days after closing. Sullivan likes to see the scores remain consistent in that time frame. They continue to follow up through 18 months.

He’s learned that it is important to look past the data and “see what people are saying.” As an example, he says, DSLD was getting poor scores on scheduling, which was a head-scratcher for him.

“We do even flow,” he says. “I can tell you to the hour when a house will be finished. People didn’t understand it. If I hadn’t seen it in our third-party customer survey, we would have thought it was fine.”

(As it turned out, the customers’ comments indicated that they desired more-frequent schedule confirmation updates from DSLD, even if the home was on the original delivery schedule.)

He finds as much value in the anonymous scores as the non-anonymous part of the survey. Those break down the steps in the process to identify problems that might be overlooked otherwise.

The most common source of poor scores today, he says, comes from the financing side of the transaction. “If they have a problem with anyone else, it becomes us in a way; we get painted with a broad stroke,” says Sullivan. “We do as much as we can to control that process. If the mortgage company drops the ball, we look bad.”

Sullivan says that customer satisfaction pays for itself in referrals if it’s done correctly. “It’s much cheaper than advertising,” he says. “A happy customer is worth a few dozen billboards. If you don’t do it right, you’ll pay for it through fixing things. They talk on all the social networking sites. Young people are going to check up on you. They should. It’s the most important purchase they’ll make.”

Three pieces of advice from DSLD’s Saun Sullivan:

  1. Keep your buyers in the loop about the progress of their home. They are much happier when you call them with information instead of them having to call you to ask for information.
  2. You may have to try to solve problems that aren’t really yours, such as issues with the loan. “If someone comes into the closing looking frazzled, we’re checking that.”
  3. Customer satisfaction has long-term, far-reaching effects. Your spouses go grocery shopping and your children play in Little League with the families and friends of your buyers.

3. The Underperformer

Grand Homes transforms its company — and its customer satisfaction

Stephen Brooks, president of Dallas-based Grand Homes, says that he had tried everything to improve the builder’s customer satisfaction — including attending countless seminars and hiring multiple consultants — and nothing had worked. The company was profitable, and he knew he built a good, quality house, but his customers hated everything about the experience.

Brooks replaced some senior-level management. It didn’t help. His advertising firm told him that the company’s reputation in Dallas was so bad that he should change the company’s name. His own son told him that if his customers weren’t satisfied, he didn’t deserve to make a profit.

“They were our worst client,” says Bob Mirman, president of Eliant. “That’s where they started. Stephen Brooks is a wonderful guy, but he just could never seem to put it together.”

With the economic meltdown in 2008, Grand Homes went four months during which it only sold two houses, and both the buyers canceled. At about the same time, Brooks was invited to hear Gary Kelly, the CEO of Southwest Airlines, talk about customer experience.
“It absolutely changed everything,” Brooks says.

What he took away from the experience was that customer satisfaction starts with employee satisfaction. He took the entire company to Southwest’s headquarters in Dallas for a tour.

“When you walk around their building, you can feel the positive energy,” Brooks says. “People want to work in a company where they’re respected and valued.”

He started by restoring the company’s profit-sharing plan and its 409k program. Performance bonuses were tied to customer-satisfaction ratings. Employee achievement is celebrated companywide, and awards are given out at quarterly “pep rallies.”

They also made a commitment to community involvement; Grand Homes now supports dozens of charities and Brooks is on the board of directors of Homes for Hope, a non-profit that raises money for micro-loans in developing countries.

Accountability has been another key. If a buyer doesn’t return a survey, a manager has to call them to find out why. “The managers don’t get off the hook,” he says. “That’s paid huge dividends for us.”

Looking back, Brooks says that he understands now why he had such a hard time understanding the concept of customer satisfaction. He saw himself as the provider of a product and the home-buying process as a transaction. The buyers got what they paid for, but not much else.

“They’re buying bricks and sticks, yes, but what they’re really buying is custom-building services,” he says. “It didn’t matter how good our product was. People want to be treated properly.”

With the change in focus, Brooks says the company’s satisfaction ratings have gone from being its Achilles heel — “our competitors would beat us to death with it” — to being a benefit that it uses in advertisements. And the profit margin that Brooks placed such a high value on has gone up.

“We can give good service and get paid for it,” he says. “What a concept. When you deliver that, the payback is huge. Then the referrals come, and the Realtors come. They want to do business with you. After awhile, it begins to feed on itself. I am absolutely overwhelmed by the payback.”

Three pieces of advice from Grand Homes president
Stephen Brooks:

  1. Value your employees. Do internal surveys to find out how they really feel. “Candid feedback from employees forces change,” he says. “Our first rounds of surveys were terrible.”
  2. Recognize employees for their contributions and achievements. It pays huge dividends.
  3. Fix what buyers tell you to fix. They’re not always right, but most of the times they are. They know what they expected and what they didn’t get.