What is Quality?

Answer the question, please, because itÆs really important that you know what youÆre after, especially if youÆll be among the thousands of builders who travel to the International BuildersÆ Show this month, looking for new products, materials and methods to create a competitive advantage.

Does quality mean fit and finish? Materials and workmanship? Familiar brand names on components and products? Margin points accrue to builders with strong word-of-mouth reputations for quality, but how do you get there? If precision and craftsmanship in putting the product together are all it takes, why isnÆt everyone building frontier-style boxes with windows the size of rifle ports?

Design certainly must play a role in forming a reputation for quality. And yet when J.D. Power measures customer satisfaction, design is way down the list of factors affecting a builderÆs score ù sixth out of the top nine, behind customer service, home readiness (at delivery), the builderÆs sales staff, workmanship/materials and price/value.

Maybe thereÆs a clue in the three factors that rank behind design on PowerÆs list ù the design center (options selection), recreational facilities and location, widely recognized as the No. 1 factor affecting new home shoppers. But remember, J.D. Power measures satisfaction among people living in houses they already bought. So while design might not affect your J.D. Power score, you probably never make the sale without it. It seems certain that design scores high on the list of factors affecting a reputation for quality among shoppers.

Searching for Answers
When we looked for that elusive list of housing qualityÆs components, customer satisfaction measurement experts Bob Mirman and Alex Roqueta of Newport Beach, Calif.-based Eliant Inc. cautioned thereÆs only one place to find the answer. ôQuality is what customers want and are willing to pay for,ö Eliant CEO Mirman says. ôQuality is only a perception, and only customers can define it.ö

ItÆs also important to note that the quality of the physical product ù the home ù is only part of what drives customer perceptions of the quality of a builder. The physical product starts out in a dominant position but gradually gives way after closing to customer relationship factors.

ôThe drivers of quality perceptions change as people move from shoppers to buyers to homeowners,ö Eliant president Roqueta says. ôBut all of those stages are important. You canÆt achieve a reputation for quality unless you exceed customer expectations at every stage, consistently.ö

Probably the hardest to discover is what constitutes quality to home shoppers. When people enter the market for a new home, the first thing they think about is location, the Eliant brain trust says, followed closely by price. Entry-level buyers worry most about monthly payments but also about appreciation and resale potential, which gets them concerned about both design and workmanship.

As for move-ups, practical considerations such as size, number of bedrooms and floor-plan efficiency jumble together with emotional appeals. For instance, what does the design of the home (curb appeal and exterior and interior finishes and details) say about the status and lifestyle of the new owner?

Most builders have no data on the quality perceptions of home shoppers. Those who pay third parties to measure customer satisfaction survey only buyers, and usually begin at closing and end 12 or 13 months later. But Eliant has data. The firm created a program for the California Building Industry Association during the past 12 years, presenting findings at PCBC each year.

Shoppers leaving model homes were asked open-ended, fill-in-the-blank questions to identify the factors they use to evaluate builders and product. (Remember, location and design had to be there to get them to the site.) In 2003, the exit polls garnered 2,450 respondents. HereÆs what they said:

Shoppers are most interested in those tire-kicking details of fit and finish. But Eliant was stunned by the importance of one measuring point on shoppersÆ minds before they drove into the parking lot. ôThe surprise is that the builderÆs reputation is such a factor,ö Roqueta says, ôsince that is really made up of the experiences of previous buyers, learned through word-of-mouth.ö

This means many home shoppers are predisposed toward a judgment in favor of the builderÆs quality before they walk in the model home door. ôTheyÆre looking for validation of an opinion they already hold,ö Mirman says, ôbut thereÆs a flip side to that. If they walk in with a preconception that this is not a great builder, they look for imperfections to validate that opinion.ö

ThereÆs another message here: People visit model homes specifically to evaluate the physical product against those preformed opinions. So fit and finish, materials and workmanship better be on display. And past buyers better be saying their finished homes match the spit-polished models.

In the case of what Eliant calls ôseriousö shoppers (those actively in the market), the builderÆs reputation moves into second place behind finishes and ahead of materials as a factor. ôMost builders would be uncomfortable giving buyers a right to enforce æmodel home quality,Æ but whether they acknowledge it or not, thatÆs already the standard to which they are held,ö Roqueta says. ôTo them, the model home is the standard the builder pledges to achieve. So they walk around opening and closing cabinets and inspecting fit and finish just the way car buyers kick tires.ö

ThereÆs danger in that. Eliant tells clients they should never build model homes to a level of quality in materials, workmanship, finishes and detailing that they canÆt achieve in the field. Rather, the models should display materials and products at the same level consistently seen in finished homes.

Changes After Contract
Shoppers become customers when they sign a sales contract, and perceptions of quality become much broader. ôWe donÆt know exactly when the changes occur,ö Mirman says. ôWe know thereÆs a big difference between what drives referrals at move-in and 10 months later, but weÆre just starting to measure the period between contract and closing. It may be that the conversion from buyers to homeowners occurs sometime during construction. At some point, they start to look at it as their home rather than the builderÆs product.ö

The conversion rate likely differs, depending on the builderÆs ability to set expectations and manage them up to closing. ôSome builders hardly communicate with people over the seven to eight months between contract and closing,ö Roqueta says. ôPeople show up for closing with the expectations and perceptions they had when they signed the contract. At orientation, if the home doesnÆt measure up to the model, itÆs a problem.ö

Builders donÆt do a good job informing buyers that houses are not manufactured products, Mirman says. ôWe donÆt tell people that a year after closing the stairs will start to squeak because the foundation has settled, and the molding will separate a little,ö he says. ôWe think buyers understand this, but they donÆt, and one of the reasons is that builders keep fixing those things in the models.

ôIf youÆre not going to do the same for buyers, donÆt do that in the models!ö

On the lists of what Eliant finds to be the key factors affecting buyersÆ willingness to refer people to their builder (page 130), notice how the factors affecting quality perceptions change from shoppers to buyers at move-in and finally to homeowners 10 months later. The aesthetics of design, the physical fit and finish, materials and installation workmanship give way to a service-oriented definition of quality.

Over 10 months, customer care (primarily warranty service) moves from fifth place to first and from .8 times the average factor to 7.6 times the average, more than twice the importance of the first-place factor at move-inùinstallation and workmanship. It should be no surprise, then, that service factors dominate the top 10 quality factors driving referrals.

Actual referrals occur mostly in the first year of homeownership, which is also when warranty work happens and customer service peaks as a concern. But donÆt lose sight of the fact that the goal remains a product that shines and lasts. See EliantÆs ranking of buyersÆ top installation and workmanship concerns.

All this means the search for new products, materials and building technology in Las Vegas this month really is important. You canÆt achieve a perception of quality without the right parts to tickle the fancy of targeted consumers.

But it takes much more than components. More even than the skilled craftsmanship of the best trades. Quality perceptions of the product cannot be separated from those of the business. Locations that show you understand the value dynamics of the local market are part of it. Design is a big part of it, and that involves more than house plans. You must design streetscapes and neighborhoods.

And of course, how you deal with customers ù from the time they walk into a model home until long after they buy ù is perhaps the most important contributor of all.