Customer Franchising: How to Build Referral-Based Sales

Brand loyalty. Procter & Gamble has it with “Crest.” General Mills has it with “Cheerios.” Fed-Ex has it. Nordstrom has it. Even Alpo has it, and if a dog food can establish loyal customers, why can’t home builders?


Sure, we’re different. We sell the most expensive product around; we offer the most difficult, emotional purchase experience; and once consumers buy our homes, they expect that our repair guys will need to make frequent visits to repair things which should have been built right the first time.


And we wonder why so many say they would not buy from their builder again. In our focus groups, home shoppers tell us over and over that they are heavily influenced by the recommendations of previous buyers. Many shoppers drive the streets of a prospective community in order to interview current residents.


Would you want them interviewing the residents in your community? If your answer is not an unqualified “YES”, then you need to consider how you can turn your unhappy buyers into non-payrolled sales people for your community.


No sales force is as effective as an army of very satisfied homeowners. How do you get your homebuyers to pro-actively recommend your products? How do you build this ‘base’ of loyal fans, loyal homeowners. How can you consciously develop a franchise of loyal customers?


Setting up a “Customer Franchise” doesn’t take extra money or extra manpower, but it does require commitment. To get your customers talking about you to their friends (and not their lawyers), here are some guidelines:

  1. Service and quality goals must be set by the people who deliver the service or product. The difference between simply reaching or exceeding goals is most often an issue of commitment on the part of the work force. Employees who are allowed input into the company’s goals are more likely to be committed to high achievement. Employees can only be held accountable to goals which they had agreed were reasonable and appropriate.


  1. Build what your customers want and need. And the $64,000 Question: How do you really know what your customers want? There is only one answer: Ask your customers! Why rely on intuition or what the builder up the street is doing? You can quickly find out what your customers want and why by conducting focus groups, shopper interviews and homeowner surveys.  The best consumer product companies in this country spend upwards of 2% of revenues on consumer research related directly to product development. How much does your firm spend? If your company simply uses shoppers’ reactions to your models as the main source of consumer feedback, it’s time to ask yourself whether or not you really are the consumer-driven company described in your brochures.


  1. Train all employees to consider themselves as salespeople. Remind them that every customer interaction is an opportunity to create a positive story about your company. Customers will share these stories with other potential customers (a la Nordstrom); before long, these stories help to define the legend. The receptionist, the escrow coordinator, the customer service technician and the project salesperson all have multiple daily contacts with customers. Each contact is an opportunity to sell ‘quality service’ to the customer and develop a customer base for the future.  Employees and contract personnel who participate in the development of your company’s vision, values and objectives are also excellent salespeople for your product. Give them substantial bonuses for referral sales and provide company-wide differential bonuses if your referral rate exceeds 30%/ 40%.  And don’t forget your sub-contractors, vendors and their employees! Give discounts to all of your employees and contract personnel. Involve your vendors and subs in the goal setting process and they will remain committed not only to these goals but to your company as well. The more they believe in the quality of your company and the product they are helping to build, the more likely they are to refer potential buyers.


  1. Define and measure ‘Quality’ from the customer’s perspective. Too often, builders rely on the “number of walk-through items” as the primary quality measure. A zero-item walk-through is not confirmation of a well finished home. The best measure is to ask the new buyer how he/she rates the quality of the home 1-2 months after move-in.  No one is in a better position to judge the quality of your product and service than your buyers. Ask them for their evaluation and suggestions a month or two after move-in and then again near the end of their first year in their home. Waiting for unsolicited comments is insufficient; take a pro-active position about actively listening to your customer’s opinions.


  1. Continuously measure the performance of those who are hired to represent you. How do buyers rate the performance of your salespeople, escrow officers, lenders, design center staff and customer service personnel? This information is important because it is the most valid and unbiased measure of performance. This information must be solicited continuously in order to identify significant trends and to cut off problems before they become significant.


  1. Provide better-than expected quality and service. Customers who simply receive what they expected will be satisfied, but will not make an extra effort to tell the story about their experience to their friends. However, if the experience exceeds their expectations, they will frequently repeat the story until, eventually, it becomes a legend.


Many builders provide excellent customer service, but it’s the “Maytag Repairman” variety of service: wait until the customer calls. Based on over 45,000 surveys of new home owners, homeowners are most impressed by a customer service program which actively seeks to identify problems even before the customer has a chance to complain. Based upon this customer survey feedback, Eliant has developed a list of customer service techniques guaranteed to generate a high level of customer satisfaction.

This list is part of the “Pro-Active Customer Service” program developed by Eliant.


The successful builder cannot wait for success to fall into his/her lap. Aggressive programs must be instituted to provide a service to home buyers which goes beyond the customer’s expectations. The main point that we have gleaned from these surveys is that customer service is the key towards generating higher referral rates and repeat sales.


Recent surveys have confirmed that consumers are feeling increasingly jaded by corporate America. They expect more from every purchase, but are becoming more and more disappointed. Consequently, their level of trust in sales people is at an all-time low. However, there is some good news here: In an environment populated by suspicious, cautious and questioning consumers, home builders who follow the guidelines listed above can differentiate themselves from the rabble. There are windows of opportunities in every downturn. Look through this window and you’ll see your “Customer Franchise” just waiting to be developed.

Category: Experience Management
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