Customer Satisfaction Nations Building News, February 10, 2002 Reprinted with permission.
A remarkable 39% of the 22,000 homebuyers queried in the latest survey by the NRS
Corp. say they would "definitely" recommend their builders to family and
friends. Only 7% said they assuredly would not.
But it is within those extremes - the 54% who said they are likely or unlikely to
endorse their builders - that builders are losing a lot of money, NRS President
Paul Cardis told a convention session on customer satisfaction Sunday.
Cardis, whose Madison, Wisc.-based research and consulting firm specializes in home
building, said the typical production builder spends $50-$150 to bring a prospect
in the door, yet closes only 4%-6% percent of them. "You're giving away one
hundred bucks per head just to get people in the door, and your sending 95% of them
away," he said.
It not only costs far less to reach referrals, he added, but the conversion rate
is twice as high as it is for marketed prospects.
Of course, the way to obtain referrals is to have satisfied customers. In another
study, NCR found that builders with a satisfaction rate of 91% or better received
six or more referrals from previous buyers. However, those with a contentment level
of 67% or less got none.
"They're getting killed," Cardis said of the latter group. "Their
customers are probably making negative comments. The unhappy customer is a trapped
customer who wants to lash out and spread the word."
All businesses strive for 100% customer satisfaction, and the housing sector is
no exception. But according to Cardis, few homebuilders know what percentage of
their customers are profitable to their companies, how many customers actually generate
referrals and what percentage of referrals per customer makes them profitable.
Many builders use exit surveys to gauge satisfaction. While such studies are good
because they are immediate, the results can be misleading, the research specialist
warned. Buyers just leaving the closing table are often too excited and emotional
to state their real feelings, he said, noting that the rating they give their builders
is usually 10-12 points lower when queried a week later.
Cardis isn't a great fan of phone surveys or other pressure-based studies because
most people don't want conflict so they won't say what they really feel. Consequently,
builders often don't know what they're getting with these types of surveys, he said.
"It's like flying a plane with instruments that are off."
Cardis suggested that builders survey their buyers 30 days after they complete the
purchase, then again at the 60- or 90-day service period, and a third time after
they've been in their homes a full year. And he warned against asking "yes"
or "no" questions, suggesting instead that buyers be given multiple choices
or allowed to explain their feelings.
If builders can reduce surprises by warning customers that things will go wrong
and it will take some time to make them right and then respond to their buyers'
calls within 24 hours, they will go a long way toward improving their satisfaction
ratings, the researcher also said. "If they are stunned something went wrong
and you let their problems fester, they will go through the roof."
On the other hand, if builders can reduce the surprises and take out the worry,
both their satisfaction levels and their bottom lines will soar. According to NRS,
the top half of the 200 builders covered in its big consumer study last year had
51% more closing that those on the bottom half of the satisfaction scale.
