The new home sales process is a science and, as with any scientific field, gut feelings and hunches do not play a role. A good business plan should be developed with a solid strategy and an understanding that selling and marketing new homes consists of four components.
Labeled the Four Ps, they were popularized by Proctor & Gamble and are utilized by industry giants such as General Electric and Microsoft. The Four P’s are effective because they break the sales and marketing process into four parts: Place, Product, Price & Promotion.
PLACE. You’ve heard the old adage: The three keys to buying real estate are location, location, location. It’s absolutely true.
The successful builder/developer understands that people don’t just live in homes. They live in a particular area, within the confines of a neighborhood in which the homes are located. Location is the factor that separates one neighborhood from another. Any builder/developer can, for the most part, construct homes at approximately the same cost per square foot, provided comparable materials are used. But the one single factor that changes the perception of value is where one home is located over another.
PRODUCT. Who is your competition? It is either other builders, or, in the case of an established neighborhood, your competition may be the resale market. You should only enter a market when your product has a perceived value that surpasses your competition.
When evaluating housing designs and floor plans, study the area’s past 12- to 24-month sales history. If a distinct market-share has been established with three-bedroom, 2.5 bath homes, then do not attempt to reinvent the wheel. Enter the marketplace with a proven design and simply add enhancements such as vaulted ceilings, spa baths, walk-in closets, or a better use of square footage. Then, you are sure to gain your fair percentage of market share.
PRICE. Again, gut feelings and hunches play no role in determining the price point for your homes. Price cannot ultimately be determined by your desire for a certain profit margin, but rather by what consumers have paid in the past.
Price is easily determined by comparable values, which can be accessed through MLS. To disregard historical pricing data and produce a product at prices that are not proven in the marketplace is writing your own invitation to disaster.
PROMOTION. Contrary to popular belief, promotion is not limited to just a good “sales process.” To reach a target audience, you must effectively plan and budget. My personal belief is that your marketing, merchandising, and products should be so good that they could almost make you, as a salesperson, obsolete.
Today’s great salespeople have developed a new mindset: They recognize that success no longer depends on communicating the value of the offering, but instead rests on the salesperson’s ability to “create value” for customers. Builders and developers who delude themselves into believing that selling is easy and strictly a function of building houses will be beat like a drum in the marketplace. It is important to grasp this truth: A sales process is a series of actions and systems directed toward the end result, which is creating a sale on purpose.
In most cases, failure in the marketplace is the result of poor planning. The Four P’s – Place, Product, Price and Promotion – are like a four-legged stool. If each is not weighted proportionately and backed with a proven sales process, the stool will wobble and become unbalanced. If the four areas are not balanced, you may see your sales topple just like a lopsided stool.
Myers Barnes is America’s favorite new home sales trainer, author, speaker and consultant. For more information, please visit www.myersbarnes.com.
