For some time, housing experts have been forecasting a cooling market. And now that COVID has turned things upside down, it seems more likely than ever. But what should we do to prepare for these changing market conditions?
Most new home sales professionals working today have no experience selling new homes in a down market. When the market is hot, the allure of high commissions from new home sales brings everyone out of the woodwork.
Many of these sales "professionals" are severely undertrained or, in some cases, completely untrained. As a result, they take on lazy habits that lead to a poor customer experience. After all, why should a sales person care about finding out what matters to the customer, when there are 5 more buyers lined up behind them?
But in a buyers' market, it's a different ballgame. As prices fall and builders struggle to meet projections, sales practices will have to change.
How to Prepare for Success in a Cooling Market is a guide to help your organization get back to the fundamentals of selling new homes, and break the bad habits that lead to diminishing sales and declining skill sets of your sales professionals.
In this new home sales guide, you'll learn:
- How to break bad habits by measuring human behaviors instead of sales numbers
- 10 important sales practices to stay on top of your profession
- How to look at the home buying experience from the buyer's perspective
- Sample tools for tracking / measuring sales professionals' behaviors
They say new home sales is all about the numbers.
Sales numbers, closing numbers, revenue, traffic counts, closing ratios, cancellation rates, cycle time, employee retention, employee turnover, survey scores, cost overruns, budget busters, and on and on. It’s all about the numbers.
When are we going to stop the madness and realize this numbers game is what got the industry to the point we're at today. The experience of buying a new home is often compared to that of buying a used car: a team of hungry salespeople fighting over the best leads, complete with misleading pricing and trap fences. Actually, car dealerships don't have trap fences.
Did we learn anything from the downturn?
2009 was not really that long ago. Yet now that the market’s rebounded, we're right back to the same old way of doing business. Top priority: hit the sales numbers. But where does this leave customers and the experiences we deliver as home builders?
Shouldn't our top priority be to deliver a better customer experience?
A better customer experience creates better home builder referrals, which lessens the cost of each sale, which stretches your marketing budget, which will produce better online reviews, which ultimately makes you the “builder of choice” by homebuyers, trade partners, and vendors.
As we look toward a possibly cooling housing market and an onslaught of Millennial buyers, we need to change how we sell new homes.
We need to put the customer at the head of the class.
Misleading metrics can lead to a false sense of security
One of Peter Drucker’s most famous quotes in business management is: "You can't manage what you can't measure." In most cases this is true. But as builders, we need to be careful going down that path. Metrics can sometimes be misleading. One example where the numbers can be misleading is traffic counts.
We're often misled to believe if you just get enough traffic walking into your sales office then the sales will come. With traffic counts, it's all about quantity, not quality. What's going to happen when the traffic counts are half of what we have seen in the past 4 years? Marketing says, “the community recorded 26 visitors to the model last week. This is a 60% increase over our weekly average. Woo-hoo! We did our part." In reality, most of the visitors were there for the hot air balloon rides and free food, not to look at the models or purchase a home. No increase in contracts.
Another time traffic counts can be deceiving is during a Parade of Homes event which spans over a 2-week time frame. Traffic numbers spike, yet salespeople are very distracted from prospecting. The event can actually be counterproductive for sales, yet the numbers make the event seem like a huge success. Quantity yes, Quality no.
Here’s another misleading metric: measuring time spent with each visitor. Prevailing "wisdom" states that for every 20 minutes you spend with a home shopper, it increases your chances of selling a home by 20%. So, does this mean if you spend 100 minutes or more with each visitor it will guarantee a sale? Of course not. Yet we find ourselves consumed with the numbers that justify our current bad habits.
Break bad habits by measuring human behaviors instead of sales numbers
Instead of chasing misleading metrics like the ones above, we need to start measuring the behaviors and activities of each salesperson while engaged with a home shopper to help tell a story of a successful interaction leading to customer success.
Collecting the right data is the beginning of a sustainable selling process.
When we measure the right behaviors of a sales professional we will develop the habits needed to find sustainable success.
For decades, builders have measured success by the following numbers:
- “How many sales did you make?”
- “Did you achieve your monthly, quarterly, and yearly sales goals?”
- “What is your conversion ratios?”
- “What is your cancellation rate?”
- “What is your retention rate?”
- “What is your average margin per sale?”
While these numbers are important to the success of the business, they are merely the by-product of behaviors. As a sales professional, we are not accountable to the actual numbers, we are accountable to the purpose, to the people depending upon you to be successful. The numbers are just a matrix, a scorecard. We need to stop focusing on the numbers as much as focusing on the behaviors that produce them. You won’t find the numbers you’re looking for if you have not paid attention and trained your staff to the behaviors needed to be developed to accomplish your goals.
5 Behaviors to Track for Success at Selling New Homes
We can't easily change the number of people walking in the door. So we should re-evaluate and retrain our sales teams instead. We need to focus on the behaviors that lead to all the numbers on our scorecard. The same behaviors we’ve ignored the past 4 years as a seller's market kept us from continuous training.
Most importantly, we must hone in on the salesperson's behaviors while engaged with a customer. Some might see this as the old critical path. I don’t subscribe to the critical path concept but I do believe the components of the critical path are essential to a successful sales journey.
1. Did we greet our visitor with a warm, sincere greeting?
There’s nothing more important to an on-site sales professional than having a customer in your model home center. Why then do sales amateurs pay more attention to the report they are studying or a homebuyer file they’re reviewing when a customer walks in the door of the office? I’ve witnessed this countless times in my travels. We have become complacent. The most important 10 seconds of your engagement with a customer is the 10 seconds before they walk through your door. This is why sales offices are designed with a full view of your parking lot/front of the home. As soon as they pull up you should clear your head (and desk) of whatever is going on at that moment and start focusing on your visitor.
2. Did we engage our customers to learn about their needs (discovery)?
Tell me if you have heard this before:
"What brought you in today?"
"How can I help you?"
"Are you looking for a new home?"
STOP! Visitors to our model home centers are looking for leadership from you. You should assume the buyer already knows 90% of what she needs to know to purchase a home before engaging you. If this isn’t the case, you will know very quickly in your conversation. Your goal is to learn more about why they are looking for a new home, and not so much what home they're looking for. You must be insatiably curious about their situation. Gain your customers’ trust by asking about them and their motivations to move. Get comfortable with the phrase “tell me more about that." Gain small agreements throughout your presentation that will lead to a positive outcome. Drill down to the “why” behind the “what” and you will become the trusted guide they need to navigate through the complicated process of buying and building a new home.
3. Did we help them understand our models by touring with them? (remember, it’s not about the home, it’s about the customer)
This is the place sales amateurs shoot themselves in the foot and sales professionals start to serve their customers. How is it that we feel the customer can figure out, by themselves, your model homes? They navigate through a fully decorated model trying to figure out what is an option, included (not standard) feature, decorator item, etc. This leads to a compromised buyer experience down the road. It is such a valuable time for a sales professional to learn most about your home shopper. This is, in my professional opinion, the least developed skill in new home sales. It seems many sales amateurs don’t demonstrate their homes because they haven’t been taught how. They don’t know how to bring value to a home shopper in the model home, so they turn them loose to tour the models on their own, thinking that's what they want. Sales Leaders, start sharing your expertise and train your team on model home demonstration. You can start with simple exercises to get your team comfortable engaging your customers through the model.
4. Did we tour our visitors through our community and to a specific homesite?
Sales amateurs believe home shoppers “buy” their homes in the model home center. They fall in love with a floor plan, they tour the model and the sale is made when your customer gushes over the wonderful kitchen, the fabulous master and master bath, the inviting outdoor living space. This would be a false assumption. This is only a third of it. Maybe the plan works, but the neighborhood is just as important and where they may live in the community is another piece of the puzzle. Being on-site, experiencing the streetscape, visualizing their youngest son riding his bike down the street, playing hoops in the driveway, this is where the emotion lies. This is where the decision to buy happens, not in the model. As Sales Professionals, you need to understand this and continue the sales process out into the community, to identify the unique, one-of-a-kind homesite just for them.
5. Did we help our visitor understand the home by “building it on paper?"
Buyers today are better informed about our homes than ever. But it's still a good idea to sit down with them and coach them through how they would like to personalize their home (aka "workup"). This process will easily lead to your closing proposition and naturally move into writing your purchase agreement. Without this step, you are putting a lot of pressure on your customer to try to navigate to the next step of buying a home. Be the reason your customer buys your home, NEVER wait for your customer to ask you. You might be waiting too long or worse, lose the sale to the builder down the street that understood the importance of guiding them through the process seamlessly.
By monitoring and improving these 5 behaviors, we’ll surely make meaningful connections with our buyers when they show up at a sales center.
But all of it’s for naught if we don’t follow up when they leave. That’s why it’s so critical we capture their contact details. Whether through a registration card, iPad, or old-fashioned notepad, it’s essential that we find a meaningful way to follow up (e.g. emailing them more photos of the plan they liked), and do it immediately through their preferred method.
It’s the immediate follow-up that will solidify the trust you’ve built, and set you apart from the other builders they visit. It is a sign of respect that you're interested in seeing the process through and not just interested in them while you’re face-to-face.
The key to producing effective change leading to lasting behaviors is to start immediately with your next visitor.
Remember, the road to successful change starts on the path of discomfort. This is where we grow. Practice and apply these behaviors and you will promote positive change in your visitors’ experience and find success for both yourself and your customer.
“No one cares about how much you know until you show how much you care”
~~ Theodore Roosevelt
Sample sales report showing how to track key behaviors
(note the section at the bottom)
A practical application
I have used this method in the past and after a couple of months examining the numbers behind the behaviors, I found my sales team realized why they achieved success and why they might have struggled. For example, I visited with David, Community Manager at Sterling Point, and he wondered why his conversion rate has slipped.
When we looked at the numbers behind the behaviors, we recognized he fell short of touring visitors on site (#4). A lower percentage of David’s visitors were escorted through the community and to an individual homesite in that quarter compared to previous quarters. It was very eye-opening for David. We then worked on ways to incorporate the community tour in order to help buyers visualize their new home.
In this example, David at Sterling Point saw 20 people this past week. How many of the 20 visitors did David:
- Greet with a warm, sincere greeting: 18 (90%)
- Learn about visitors needs (Discovery) 15 (75%)
- Tour the models with the customer 12 (60%)
- Tour the community, visit homesites 7 (35%)
- “Build on paper” 2 (10%)
We all know, the more time we spend with a customer, the more we learn about their dreams, aspirations, fears, and challenges. But don't leave these critical discussions to chance. Incorporate them into your process, and track them over time. By monitoring these critical behaviors, they will start to tell the story of why you're either meeting or not meeting your target numbers.
10 important sales practices to stay on top of your profession
As leaders, we continually encourage our team members to look for opportunities to grow and develop professionally. As sales professionals, we should be seeking out learning opportunities to grow so that we can service our customers in the best way. The more prepared we are, the more confidence we exhibit, the better we will serve our customer.
Here are some areas new home sales professionals should focus on to stay polished:
- Read 30 minutes a day in your professional field
- Take an ownership mentality. If it needs to get done - do it! If your model home hours are 10:00 - 6:00, you arrive at your office no later than 9:00 - Walk your community, walk your models. Be ready for showtime at 10:00. Be hyper-critical of your presentation. Be the resident expert.
- Continually focus on your CRM - it's your lifeline
- Be insatiably curious about your customers' “why”
- Commit to your follow-up program. Your buyers deserve your best.
- Record yourself in your presentation - the take-aways will be amazing.
- Be a part of your professional community. Join your local HBA, be active in your local Sales and Marketing Council.
- Seek to understand your customers and all disciplines in your organization. Operate holistically.
- Commit 10% of your income to professional development.
- Be humble and be thankful. Stay grounded
How many visits does it take to buy a new home?
A survey was taken by Shore Consulting of new home sales professionals regarding the number of visits it takes for a home shopper to become a home buyer. This survey asked the question to hundreds of new home sales professionals across the country, “What percentage of people do you think buy on visits 1, 2, 3, and 4?" The second question on the survey was: “Think of the last contract you wrote, did the customer actually purchase on the 1st, 2nd, 3rd or 4th visit? The answers to both of these questions were very interesting. The responses from the salespeople on when they thought people buy are shown in the first column. The second column reflects when the customer actually purchased
Sales professionals think it takes more visits to get to contract than it actually does:
Add those first 2 lines and 61% of your customers bought by their 1st or 2nd visit. This is a very powerful message. You can see the perception of the sales professional is one of caution. We often hear, “let the customer buy on their own terms.” When in reality, the buyer is counting on you as the sales professional to lead them through this buying process.
When you change your mindset, you will change the experience your customer has with you.
- Always assume your customer is ready to purchase. They will let you know if they are not. What is worse, is if they were ready to buy and you missed the signs because you believe “buyers don’t buy on the first visit.” (1 in 5.5 buyers do. What is your ratio?)
- Focus on your customers’ “why” and make it about them. It’s not so much what they are looking for, find out why they are looking for it. Don’t assume, the more you learn about their why, the more you’re able to assist them.
- Always suggest the next steps in the purchase process. Never let a customer leave your presence without knowing what the next steps are. Even during those moments you feel the sale isn’t happening today, you would be advised to suggest next steps and what will be covered so your customer knows where you’re going.
- Don’t be the reason the sale was stopped. Ask yourself after each encounter with a customer, “who stopped the sale?”
- After each encounter with a customer, rehash the visit with your selling partner, what the customer’s story is, how did the visit end, and what are the next steps. Sales Leaders: It would be advised during your coaching session to do the same to lend your professional insight.
Look at it from the buyer’s perspective
In today’s competitive home buying environment, the visitors to our communities are more prepared than they ever have been. They are aware of your prices, they are aware of your homes, square footage, and style. They know the surrounding area, where the grocery store is, the church, where the local schools and restaurants are. Most likely, they have driven your community 2 or 3 times to confirm what they already believe. In fact, they probably have walked through some of your inventory before walking into your sales office.
The reason they visit a sales office to see if they are comfortable with you as their trusted guide that cares enough to carry them through the buying and building process. So, yes, they are ready to make the decision to buy more than you think.
You never want to be the one that stops the sale. Learn to make a difference and be the reason the sale is made.