Why It Pays for Homebuilders to Work With Their Toughest Customers

Homebuilders should address tough customer issues before they turn into PR nightmares.
By Paul Cardis, CEO, Avid Ratings | June 30, 2008
Cardis' Tips
Who's In Your SWAT Team?

A lot has been said about customer experience management and how builders can reap the biggest return on their investment. The issue came up following a recent Ontario Homebuilders' Association event, where one prominent consultant argued that home builders should not focus on satisfying their toughest customers. Instead, she argued, builders should devote their resources to making happy customers happier. Her rationale was that it's too difficult to turn disgruntled home buyers into loyal advocates and more fruitful to turn moderately happy customers into ecstatic ones.

While this simplistic view is rational, it ignores the positive impact strategic service recovery can have on the bottom line. The truth is, home building is a local business, and it doesn't take much to tarnish one's reputation in a way that kills future sales. A customer management strategy that addresses only moderately happy customers is not just ill-advised, it's dangerous to a builder's long-term success. Clearly, builders should focus their service efforts on the areas of greatest opportunity, but they also must have a process for dealing with those severely dissatisfied customers who can create a public relations nightmare.

How about Sprint Nextel, which last summer began dropping thousands of its cell phone subscribers who apparently complained too much? According to Sprint Nextel's own press release, 2008 first quarter revenues declined 9 percent compared with the same period a year ago, and declined 6 percent from the fourth quarter of 2007. "The declines are mainly due to lower average service revenue per customer and fewer post-paid subscribers," the company states.

On average, builders can expect 7.5 percent of its customers to make a negative referral. That's why I have always been a staunch advocate of stabilizing your toughest customers. At the same time, I recognize the value in appealing to your happier customers, too. The truth is, you need to strategically do both!

Go the SWAT Route

The best way to deal with tough customers is to establish a SWAT team, a group of employees that works with buyers to peacefully resolve problems. (Visit HousingZone.com and search for "Builder SWAT Team" for more on this concept).

No builder can turn around every disgruntled customer. But at the very least you should stabilize the situation. It still pays to care for your least satisfied customers. Leading builders who take a holistic customer approach have been able to reduce their percentage of hostile customers to less than 1 percent, while the rest of the industry hovers at 7.5 percent. The fact is, working with your toughest customers can yield tremendous return on investment.

To ignore hostile customers, however, is disastrous advice and anyone recommending this strategy is misguided. Don't let them put your company in harms way.

Author Information
Paul Cardis is CEO of Avid Ratings, a research and consulting firm specializing in customer satisfaction for the home-building industry. You can reach him at paul.cardis@avidratings.com.


Cardis' Tips

Focus individual efforts on all customers — not just the happiest.

Reserve the SWAT Team for your least satisfied customers, strategically targeting the potentially hostile ones.

Resolve problems proactively before they require SWAT intervention.

Hear the folks from Avid Ratings talk more about SWAT teams this fall at the Professional Builder Benchmark and Avid Leadership Conference, Oct. 5–7, in Phoenix. For more information, visit www.probuilder.com/benchmark.

Who's In Your SWAT Team?

Builder SWAT teams deal with sensitive situations that can touch all aspects of your company. Make sure to include a project superintendent/builder, warranty representative and executive from the main office. Having top-level staff involved shows disgruntled buyers you're serious about solving their problem. Plus, these managers have pull to quickly enact solutions.


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