Bob Schultz shares how builders can build profitable and sustained growth for their businesses
2015 is projected to be a year of growth for many builders. To ensure that your growth this year is profitable, scalable, and sustainable, you must develop a thorough understanding of your marketing activity in terms of what you do, why you do it, and the ROI it's expected to generate. Why is that important now as things are picking up? Because when the market becomes more friendly and sales increase to a higher level of acceptability, it’s very easy to get distracted or complacent and lose focus on the process and activities that will help you maintain that optimum flow of sales and profit.
As you probably know, marketing can mean different things to different people. To clarify and simplify it specifically for our industry, I have created a model called the Marketing Circle. The graphic, above, illustrates what I have found to be the marketing-related functions and activities fundamental to a home builder’s successful business operation. None of the components in the marketing circle should be thought of as independent activities. Each in its own right is critical to your sales success and all are interdependent with one another. The circle respects the generally accepted five P’s of residential marketing: place, price, product, promotion, and presentation.
You must study your market to know what to build, where to build it, what to pay for the land, local sales price expectations, your relationship to competition, and more. A market assessment and your position within your market should be conducted and updated at least once a year, if not more frequently.
From the market research, you can determine size, style, design, and the variety of homes to offer, along with any additional recreational or other amenities that the research suggests.
Advertising and Promotion
These are activities you must perform to generate interest on the part of your target market as determined by market research and experience. Advertising and promotion are very important functions of marketing, but they are not marketing in and of themselves.
The Retail Store
New-home sales is a retail business. You must provide an inviting space and a professional staff to sell your homes to customers. This includes the look and feel of the place where customers are invited to see your products: the models, the sales office, and the website. It also includes the staffing appropriate for the anticipated flow of customers over time, during hours of operation that are convenient for shoppers.
Selling is a contact sport. When contact is made with a potential buyer through email, phone call, your website, or a direct in-person visit, there must be an interaction with a fully knowledgeable, well prepared sales professional who is skilled and capable of turning those contacts into sales.
The end result of all of the marketing activities enumerated in the circle, as well your ROI, can ultimately be measured against a predictable conversion rate of profitable sales to cost of promotion and other related expenditures. As Dr. Stephen Covey recommends in his book, The 7 Habits of Highly Successful People, you must begin with the end in mind. That occurs when a potential buyer and a salesperson make contact, when all of the costs and effort expended on everything else in the circle either comes together or falls apart. In fact, it is the most significant activity in relation to your ROI potential.
Industry awards for marketing excellence might look good on your wall, but I know of no bank that will accept them in lieu of cash when it’s time to make loan payments. In fact, I’ve never had a builder call me and say, “Bob, I’m not doing enough marketing.” It’s usually “Bob, I’m not making the number of sales I need to make.” Google the phrase “Nothing happens until somebody sells something to somebody” and you will find it attributed to a variety of ultra-successful people, from industrialist Henry Ford to Arthur H. “Red” Motley, the publisher of Parade magazine who said it in print in 1942, and from cosmetic sales icon Mary Kay Ash to the motivational speaker Zig Ziglar.
Over the course of 2015, in collaboration with industry experts, succeeding articles will focus in depth on each of the elements of the Marketing Circle, beginning with market research and continuing consecutively to demonstrate how, by making this circle seamless and congruent, you can expect to achieve a higher level of ROI in the form of profitable sales revenue.
If you would like to receive a complimentary form to begin tracking your advertising and promotion expenses against traffic and sales generated, including conversion ratios, and comparing improvements over 2015, send an email to firstname.lastname@example.org and request the Marketing Efficiency and Effectiveness Analysis.