New Home vs. Used: Redefining Value Through Energy Efficient Construction

 Redefining Value Through Energy Efficient Construction [30:00m]: Play Now | Play in Popup | Download

BuilderRadio speaks with Bill Webb, William N. Webb & Co., Inc.

Foreclosures, short sales and REOs (oh, my!)  Buyers might be re-entering the housing market but, as with every previous recovery, the first ones on the scene are the bargain hunters.  In a buyer’s market, price is the first driving force.

That might work for the existing home market, but the cost of building a new home simply isn’t governed by supply/demand economics.  The cost of building materials haven’t dropped in line with existing home values.  In fact, they are projected to continue to increase while supplies of many products become scarce.

So, how are builders supposed to compete with existing home prices?  Bill Webb, one of the best-known speakers and consultants in the new home industry, has an answer.  It’s all in the value proposition we create for our homes.  Even in a down market, establishing value trumps price.

“The concern for price starts with the idea in the customer’s mind that all homes are the same,” says Webb.  “Asking a builder to confront the idea that his customer thinks his homes are no better than anybody else’s is painful, and nobody that takes the risk to be a homebuilder is comfortable with the idea that they come out with a mediocre product – mediocre meaning just more of the same.”

In reality, most new homes are built to minimum standards as builders vie to become more price competitive.  “But that condemns homes to be the same as a competitors house down the street!  We’re feeding the customer’s perception that all houses are the same.”

The trick for marketers and salespeople is to reach past the most common points of differentiation – location and architectural design – and offer something that truly sets us apart from both the existing market and other builders.  “What I’m looking for on behalf of my clients is the ability to charge a premium for their product while enticing more people to want to buy it,” states Webb.

He maintains that, as has always been the case, price is only the most important thing if you fail to offer something unique and better, and that doing that is within the reach of most builders.

“What I’ve discovered is how much ground you can gain by creating a difference in the structure itself – a difference that is clearly demonstrable and that the customer grasps instantly, wants to own, and is willing to pay a premium for.  If I can combine a valid reason to prefer my product with a better way to of presenting that product, then I have a double barrel [marketing] shotgun.”

Creating Differentiation with Energy Efficient Construction
Relating his experience in working with Lifestyle Homes, a builder in central Florida, Webb offers this insight:  “In this market, our competition isn’t other builders.  Our competition is the homes that we built two, three, four years ago that are now for sale at 40% off their original purchase price.  When a customer asks why they should pay full boat for a new home rather than one of our new homes that looks just the same for 40% less, that’s a hard question to answer.  But we have an answer for them:  “It may look the same, but it’s not the same house at all.”

“We have discovered that, through a combination of equipment, components, and construction techniques, we can build a house that is markedly more energy efficient than a similar looking house we would have built two years ago.  We’re now building houses that are 40% – 60% more energy efficient, and from the customer’s point of view there is no increase in price.”

Webb finds this an easy sell to buyers that are comparing existing homes against a new home.  He presents it this way:  “With this approach to energy efficiency, there is no increased investment.  What you get is substantial cash savings in the operation cost of the home from day one.  Every month when you write your electric bill, it will be $60 – $100 less than the same house across the street operated in the same manner, and it only gets better as energy costs go up.”

“We’re in a market where everyone is demanding a discount. All we’re doing is giving less of a discount.  That’s where we recoup our cost.  From the customer’s standpoint, they are not paying a premium, but they’re getting a better product.  And they’re lining up at the door to buy!”

Delivering Differentiation; Building Your Brand
“In my experience there is an unfortunate disconnect between the people who build the product and the people who market and sell the product.  It exists in  companies, in home builders associations, and on a national level.  One of my life’s missions is to stamp that out.  We’re all in this business together, and we all need each other to prosper.  Taking the journey of energy efficiency is a marvelous way to get everyone on the same page and to get them pumped about what they’re doing.

It’s all about branding.  The premise behind brands like Rolex, BMW, Monte Blanc, and Harley Davidson is that you should be enthusiastic about paying a premium for for my product because my product has a charisma that is unavailable from any other competitor.  Well, there’s your ‘lifestyle and values’ approach, and that’s a powerful way to make a connection with people.  But how much more powerful when you combine that with demonstrable product superiority.  Rolex is a superior watch; it has the charisma, but is also has the credentials to back it up.”

The challenge, then, facing builders is to do what Webb and Lifestyle Homes have done, “to dig deep, go outside the box and find an answer” that allows you to offer something different, distinct, and of immediate perceived value to your buyers.  Webb feels that energy efficient homes might be that answer for many.

“Energy efficiency works in any market.  It delivers financial benefit, an increase in comfort and livability, and a huge increase in indoor air quality which, along with better ventilation and lowered indoor humidity, comes with the deal.  It’s a chance for people to save money, live better and do good at the same time.  Every dollar they don’t pay the electric company is a gallon of oil or a pound of coal this is not burned.

Energy efficiency is a way for homebuilders to take their position in leading the economy out of the doldrums.  It’s a way for individual builders to gain a competitive advantage in their local marketplaces.  It’s a way for us to provide a better quality product that costs less to own.  Everybody wins with every one of these homes that is built.”

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Contact Bill Webb at www.WebbOnline.com

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Wednesday, November 18  2:00pm EST
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