Homebuilders are fighting back!
For as long as there have been hammers and nails, builders have waged the battle for customers among themselves, all but ignoring existing homes as true competitors. But now, with many markets still flooded by foreclosures and with the possibility that millions of wannabe sellers will list their properties once the logjam of distressed properties finally clears, builders across the country are about to change their strategy.
Starting next month, a group of perhaps 1,000 or more builders will launch a multiyear, multimillion-dollar, multifaceted advertising campaign aimed at persuading potential purchasers that new is better than used.
Not that it will take much arm-twisting. Research by Builder Homesite Inc. (BHI), a group of like-minded large builders that came together a dozen years ago to try to figure out how to sell more effectively, shows that a solid 19 percent of all homebuyers already believe new is better. An additional 35 percent are agnostics who don't have a preference one way or the other.
"That's a much larger share than we thought," says Keith Guyett, vice president of marketing with BHI, which is owned by a consortium of 32 of the nation's largest builders. If builders were able to sign just one out of every five of those buyers, they'd be selling 900,000 houses a year.
As it is, builders accounted for just a 7 percent market share last year, which equates to fewer than 400,000 sales.
Tim Costello, CEO of Builder Homesite Inc., says builders' wounds are largely "self-inflicted."
"It's not that people aren't buying; it's that they are buying existing homes," he says. "It's not a demand problem; it's a marketing and messaging problem."
The goal, then, is to "change the search path" by creating advertising around quantitative research that shows, among other things, that the quality of new construction is better, that new neighborhoods are safer and that new homes have better floor plans, cost less per square foot and are less expensive to maintain.
"We're not trying to convince more people to buy," says Guyett. "We just want our share. And we think we can really move the needle if we concentrate on the 35 percent of the market that is indifferent and forget the 46 percent who think existing homes are better."
The coming ad campaign is labeled "Start Fresh, Buy New." But in that the campaign will emphasize the notion that owners of spanking-new houses will enjoy the freedom to do more of the things they want in life, you could call it the "Got Milk?" campaign for the new-home market.
"We're trying to make the 'joy gap' as wide as possible," says Guyett, tossing out such catchphrases as "Everything Is New and Perfect" and "Do the Things You Want to Do, Not Have to Do."
With a new home, "You can be the first and only one to soak in your whirlpool tub or lie on your carpet," says Guyett.
His boss is a little more graphic. "People don't want to sit on someone else's toilet seat," Costello says. "Or pick someone else's toenails out of the carpet."
Will it work? Can builders pull together to speak in one voice while still drawing important distinctions between their own particular models?
BHI thinks so, if only because it plans to enlist the aid of local brokers and agents, the real estate professionals who hold sway over the vast majority of would-be buyers.
Research shows that 84 percent of all buyers are either working with an agent or plan to engage an agent to help find a house and negotiate terms. But for one reason or another, agents tend to be a thorn in the side of most builders. Until recent years, most builders were reluctant to pay agents full commissions. Agents aren't particularly fond of builders, either, largely because they lose control of the process when a builder is involved.
Either way, says Guyett, 84 percent is "a statistic we can't ignore."
The research shows that agents want to sell new homes and have better relationships with builders. But they need more information, information that often can't be found in the local multiple listing service because homes can't be listed until they are finished, floor plans can't be shown, and community information can't be listed at all.
So, as part of the "Start Fresh" campaign, BHI plans to engage realty pros more deeply and give them the education and knowledge they need to sell new homes against their normal bread-and-butter inventory of existing houses.
Will it work? A pilot effort conducted in Phoenix last fall to test BHI theories indicates it will. "The response has been phenomenal," Costello says. "In seven days, we fundamentally changed the relationship between builders and agents" and new vs. used.