The Housing Chronicles Blog: Promoting New Over Used Homes

Saturday, February 16, 2013

Promoting New Over Used Homes

Without a doubt, the energy at this year’s International Builders Show in Las Vegas was characterized by an optimism missing in recent years.  At the same time, however, there was also a distinctive undercurrent that as the housing market foundered over the last half-decade, the world of communications and technology continued to evolve and transform many of its own major players.

What this means to the industry is that as the potential demand for new homes improves, not only will marketers have to become even more expert at digital initiatives such as Facebook, Twitter, YouTube and Instagram, but re-engage homebuyers to convince them of the benefits of new over existing homes.

According to Builder Homesite, Inc. (BHI) – the Texas-based consultancy and collection of Web sites owned by a consortium of 32 builders – while 19% of potential homebuyers prefer a new home and another 35% are somewhat agnostic to either new or used homes, just 7% of homes now sold nationally are new homes, or about half their historical average.

In the aggregate, market share certainly adds up, with each percentage point adding up to $8 billion in annual revenue.  BHI contends that if builders could capture two-thirds of those buyers who prefer new homes and one-third of the ‘agnostics,’ market share could more than triple to 25%.

While many builders would lay the blame of today’s relatively poor capture rate on a weak economy, high unemployment and tighter lending standards, BHI’s Tim Costello would argue that the primary problem is actually how most builders market their products.  To make his point during a brief presentation in Las Vegas, he showed a series of actual billboard and display ads that focused only on price or payment while ignoring those features which make new homes preferable to existing ones, such as lower energy costs, better floor plans, quality of construction and a warranty.

To address this issue, BHI is preparing a series of sample marketing materials in collaboration with GSD&M Advertising and public relations firm Edelman – at no cost -- which can be customized for a builder based on specific market needs.  Like the “Got Milk?” ads which became part of popular culture starting in the early 1990s, the idea for this three-year campaign is to reinvest in the entire industry in order to drive new sales for all builders.

By changing the nomenclature from “resale” to “used home,” the campaign also hopes to plant the preference for a new home in a consumer’s mind today even through a ‘trigger event’ such as getting married, a new child or a relocation may be years off.  Then, when the fateful day comes, the fact that a used home can force compromises on unsuspecting buyers such as inflexible designs, higher energy costs or unexpected repair and maintenance bills may be foremost in their minds.

For BHI, this is a brilliant marketing strategy for its own suite of marketing services by leveraging its unique niche in the marketplace, its comprehensive industry connections and 13 years of experience.  As the market continues to improve, I’m sure that BHI expects smaller and up-and-coming builders to turn to them for many of their marketing needs as opposed to beefing up internal operations or hiring local advertising and public relations advisors.  Of course, whether or not that’s a game changer for the industry itself remains to be seen.

BHI also plans to dramatically increase outreach to Realtors, who generally don’t show new homes to clients for two reasons: (1) new homes usually aren’t listed on local multiple listing services (or when they are don’t feature information on the overall community or amenities); and (2) builders have not been consistent on how they treat leads from resale agents, especially those catering to buyers.  I’ve long argued that when certain builders only offer commission splits to outside agents when times are bad and ignore them when sales are booming, that only serves to damage any long-term relationships; agents feel used, and who could blame them?

Moreover, many builders do little if anything to encourage agents to continue showing their product to new clients.  When I worked for a builder with operations in Arizona – a market in which outside agents were a key factor in driving sales – I came up with a loyalty program in which the ‘prizes’ got increasingly generous with each new sale.  By actively and consistently partnering with the resale community, builders could thus encourage outside agents to also start promoting the benefits of new over used homes.

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