Recipe for Success

Sidebars: Methodology And the Winner is... Establishing relationships first Setting expectations Best Practice Advice Neighborhood quality teams Passionate about communication Adding excitement to home One customer at a time Happy clients in the end Adding a personal touch

If successful home building was a recipe, the ingredient list might look something like this: one part skilled builder and trades; one part good land and floor plans; two parts satisfied customers.

Because customer satisfaction is such an integral part of the home building recipe, builders are focusing more than ever on improving their customer satisfaction ratings. High satisfaction ratings translate into lucrative referral business that can sometimes feed more than half of all future sales.

Now in its third year, the NRS customer satisfaction award goes to seven builders that represent customer satisfaction at its finest.

On the following pages, each award winner will share best practices for improving customer satisfaction ratings. Sit down and find out what it takes to be the best from those companies setting the bar in customer satisfaction.

Winning Ingredients

Each of the companies that won an NRS Award provided a truly delightful experience to their buyers. To measure the degree to which they accomplished this, NRS included a series of key questions to shed light on each company's level of performance. Three of the key questions highlighted in this article include:

• Would you recommend your builder to family and friends?
• How many actual recommendations have you made for your builder?
• To what degree did your builder care about you and building you a quality home?

This year's study dug in deep to find out what it takes to be the best in customer satisfaction by conducting a series of regression analyses to figure out what really matters to buyers when it comes to making them happy about their home building experience.

Regression Analysis Coefficients (degree to which key questions impact recommended levels) CARING 64% SERVICE 24% PRODUCT 10% Methodology The NRS Award program is conducted annually to measure homebuyer satisfaction among builders in the United States and Canada. This year's study was comprised of 241 building companies in 37 U.S. states and one Canadian province. The survey measured customer satisfaction levels with a 105-question mailer and an online survey administered to 59,684 homebuyers who closed on their homes in 2004. Winners were determined by adding their total homebuyer satisfaction score with their recommend score to calculate the NRS Index score. The NRS Award program announces only the winners in the award categories, and it holds in confidence the results for builders that subscribed to the study but did not win. And the Winner is... John Laing Homes Denver division received the 2005 NRS Diamond Award. This builder had the highest rating among all other builders, 50 closings or greater, on customer satisfaction.

A Heaping Spoonful of Care

The Results of the 2005 study reveal significant differences between the top and bottom five companies on genuine caring. High performers averaged 90.8 percent of customers indicating genuine caring from employees. Low performers averaged 32.8 percent of customers indicating genuine caring from employees.

As you can see in the Regression Analysis Coefficients to the right, if a builder raises its genuine caring by 1 point, it would see an increase in its recommend levels by .64 of a point. This is compared to an increase of only .24 on recommend for a 1 point increase in overall service and even less than .10 on recommend for a 1 point increase in overall product.

The power of genuine caring can also be found in the ratings of each of our winners. The top 2.5 percent compared to the bottom 2.5 percent in the study revealed startling differences in the amount of caring.

John Laing Homes Denver, this year's NRS Diamond Award winner, No. 1 Production Builder in Customer Satisfaction, had 100 percent of its customers stating that they felt John Laing's staff cared about its customers and building a quality home.

Caring obviously doesn't exist in a vacuum relative to the quality of the homes built; rather, caring is the sum of all that builders do for their buyers. A builder who runs around giving warm fuzzies without building a quality home will ultimately fail in customer satisfaction. However, a builder that builds a great home but fails to convey the level of caring it has toward the buyer will also under-perform. The lesson learned is that builders need a well built home with a lot of caring from its employees to reach No. 1.

Capitalizing on these findings will become more difficult as time passes. What qualifies as a "Wow" today will eventually become a "want" tomorrow and possibly a "must" in the future. Fortunately, there are strategies that have given builders a tremendous boost in their customer satisfaction ratings. The first step is to understand how "Wows" work with customers in today's marketplace.

Several Cups of "Wow"

Many building experts insist that customers don't really know what they want; they have to be told. These experts are wrong. Homebuyers, for example, do know what they want, but unfortunately they're not always proficient at describing their needs. When home builders understand the three types of customer needs and how to reveal them, the builder will be well on his way to understanding his customers' needs as well as, or perhaps better than, they do.

The Kano Model of customer expectations is quite useful in gaining a thorough understanding of a customer's needs. Japanese quality expert Dr. Noriaki Kano has isolated and identified three levels of customer expectations — that is, what it takes to positively impact customer satisfaction. There are three needs: MUSTs, WANTs and WOWs.

The MUSTs

Fully satisfying the homebuyer at this level simply gets a home builder into the market. The entry-level expectations are referred to as the MUST level qualities, properties or attributes. These expectations are also known as the "dissatisfiers," because by themselves they are unable to satisfy a homebuyer. However, failure to provide these basic expectations will cause dissatisfaction. Examples include features relative to home safety, latest generation building materials and the use of branded fixtures and components. The MUSTs include customer assumptions, expected qualities and functions, and other "unspoken" expectations, such as plumbing and air conditioning that work as expected every time, and a roof that doesn't leak.

The WANTs

These are the qualities, attributes and characteristics that keep a home builder in the market. These next higher-level expectations are also known as the "satisfiers" because they are the ones that customers will specify as though from a list. They can either satisfy or dissatisfy the customer depending on their presence or absence. The WANTs include any "spoken" homebuyer expectations, such as Energy Star appliances and extra large cabinets and closets, returned phone calls and a house that will be serviced within the first year.

The WOWs

These are features and properties that make a home builder a leader in the market and produce the highest levels of customer satisfaction. As described by Kano, these expectations are the "delighters" or "exciters" because they go well beyond anything the customer might ask for or imagine. Their absence does nothing to hurt satisfaction levels, but their presence improves the overall experience — sometimes quite significantly.

Examples of WOWs include guaranteed utility bills due to quality construction, same day service, weekend hours, gift baskets, frequent informative communications, thoughtful gifts to the buyer, active listening, lending a helping hand and true caring for the buyer. All of these examples are are unspoken ways of knocking the customer's socks off.

Over time, however, unspoken WOWs can become WANTs and finally may end up as MUSTs. The home builders that get ahead and stay ahead, like many of this year's NRS award winners, are constantly monitoring their homebuyers to identify the next WOWs. Remember, the best WOWs, plenty of WANTs, and all the MUSTs are needed to become and remain an industry leader in customer satisfaction.

Mix it all together

It has been long suspected but never before proven with real homebuyer data that homebuyers over time will become less satisfied with their purchasing experiences and with their builders' performance.

In this study, randomly selected homebuyers were asked to evaluate their overall satisfaction with their particular builder at five specific points:

• At the contract signing
• One month before closing
• At closing
• Thirty days after closing
• Today

The good performers are those homebuyers who purchased from a builder ranking in the top 2.5 percent for overall customer satisfaction. The poor performers are those homebuyers who purchased from a builder ranking in the bottom 2.5 percent for overall customer satisfaction.

The performance values are the median scores for the good performers and poor performers at each point. For example, 9.06 is the median response for the good performers regarding their satisfaction level at the time when the sales contract was signed. This is based on a scale of 1 to 10, with 10 being the best score possible.

In this study, the good performers had minimal customer satisfaction decay over time. The median score from this group declined from 9.1 when the contract was signed to 8.7 today. That's a reduction of less than 4 percent.

The poor performers, on the other hand, experienced a much greater loss in customer satisfaction over time. According to the study, the poor performers' median score decayed from 8.4 to 4.5, a reduction of more than 46 percent. More importantly for the poor performers, the drop from 8.4 to 5.4 occurred during the period between initial contract to one month before closing. This level of performance did not turn around throughout the rest of customer experience, rather continued to decrease to the 4.5 level.

The main points we discovered to help builders improve their satisfaction scores include:

• Homebuyers who are most satisfied with their builders at the outset continue to be highly satisfied over time; whereas, homebuyers who are less satisfied with their builders at the outset become even unhappier with their builders as time progresses.
• The key satisfaction turning point during the entire customer experience is during construction to one month prior to closing.
• Customer satisfaction decay occurs more than 10 times faster among the losers (46 percent) as among the winners (4 percent). For builders, this means first impressions really do count, but consistency is even more important to be the best. Builders must design a complete customer experience that maintains and increases the satisfaction levels of its customers.
• Once a builder falls down during any period, it is very difficult to turn things around.

Add Heat

So what are some of the best practices that successful builders have used to ensure the ultimate experience for buyers and long-term customer satisfaction?

The top five best practices include:

• Frequent and Informative Communication. To alleviate the drop in satisfaction levels the poor performers exhibited at one month prior to close, builders need to implement a frequent communication plan with buyers. Ultimately buyers want to know what is going on with their home at any given time. The more buyers have to beg for

NRS discovered the magnitude to which buyers are influenced by one particular key factor — a "genuine caring for the buyer and building them a quality home." The genuine caring question on the NRS survey predicted recommendation levels better than any other indicator, including the product satisfaction average, service satisfaction average and all other individual questions on the survey. This kind of predictive performance on a satisfaction survey was never so strong. Prior to adding the genuine caring question, the best predictor of recommendation levels was service satisfaction average. With the caring question added, NRS was able to have nearly three times the predictive power of the service satisfaction average and six times the predictive power of the product satisfaction average.

Larry Webb, chief executive officer of John Laing Homes notes, "It makes a lot of sense, but most builders don't realize how important it is to buyers."

Genuine Caring Difference information, the greater the worry. This results in significant disappointment that may forever lower satisfaction levels. Those who excelled in customer satisfaction communicated with their buyers based on a regular plan and made sure every buyer knew what was going on with the progress of his home.

• Proactive Corrective Programs. One of the most important strategies used by the best in customer satisfaction is getting in touch with buyers before problems arise. Rather than waiting around for customers to call with complaints, the best builders have created a service model that uses scheduled visits to the home to inspect for problems before and after the buyer has moved in. More importantly, this model of proactive service is geared toward creating a sense of reassurance and bonding between the buyer and the representative.
• 24-Hour Confirmation Call. The best in customer satisfaction measure the hours — not days or weeks — it takes for their representatives to contact a buyer following a request for service. The key is to develop a fast response system that documents incoming requests, enables representatives to contact customers quickly and tracks the success in the form of response time. After all, the longer you make buyers wait, the more they lose confidence in your company's organizational skills and service quality. As Dan Green from The Green Company states, "each service request is an opportunity for our staff to delight our customers."
• Fix it on the spot. The best in customer satisfaction realize that homebuyers want repairs done quickly. That's why the winners have hired or trained service reps that can make minor repairs on the spot during the initial visit and inspection. Such immediate service assures customers that the home builder is serious about correcting problems quickly. It also makes homebuyers feel a sense of accomplishment for the time they invested waiting for the builder's visit. Another big benefit is that everything the rep fixes during his or her visit is one less thing the trade contractors have to worry about. This doesn't mean you're letting the trades off the hook. It just means you're making sure the buyer is taken care of first, and debates about the quality of the trades' work can take place after the buyer is happy.
• "Do the right thing" company culture. Nothing has a greater long-term impact on satisfaction than the culture of the company and department. Have you ever heard your employees say, "Buyers are liars" or some other derogatory remark? If you have, you may want to examine the culture of your organization. The best in customer satisfaction — every single winner in this year's NRS Awards program — maintains a company culture that supports employees "doing what is right" for buyers and holding the buyers in the highest regard.

Overall, investing in an exceedingly positive experience that satisfies the needs, wants, wows and genuine caring — from contract to close and beyond — is what this year's NRS award results point to as especially important to becoming first in customer satisfaction.

And Serve...

With all of the attention builders are paying to customer satisfaction, the all-important question must be answered. Does customer satisfaction matter to buyers? The NRS team conducted a study to examine this with homebuyers. We surveyed a random sample of 400 recent homebuyers to determine the level of importance customer satisfaction had in their buying decision. The results were startling.

More than 72 percent of buyers said that customer satisfaction ratings were important in their buying decision, and another 95 percent would seek out the customer satisfaction ratings of builders if they were to buy another home.

The results of this study show that customer satisfaction does matter and it appears that it is an important source for those looking to choose a homebuilder.

Establishing relationships first Winning the NRS Diamond award, as well as Best in Class award, John Laing Homes Denver believes in building a strong relationship with each homebuyer. According to Larry Webb, John Laing Homes president, "creating the best new home buying experience in the business" is exactly what the entire company strives for as its fundamental moral core, which, of course, includes Denver division's president Rich Staky's team. So, establishing a relationship with each homebuyer falls right into the moral core. "I think, above all, we are very good at establishing relationships with our homeowners," says Staky. "From the moment they come into a John Laing sales office until the day we walk their home and turn the keys over to them." To start the relationship process, John Laing hosts community events for potential homebuyers. "We get them together before they ever make a decision to buy one of our homes, and they get a chance to see what other people are living in their neighborhoods," says Staky. "It's a pretty neat process because they will create friendships many times before they've actually signed a purchasing agreement." John Laing continues those relationships by arranging touch points, appointments throughout the building process with the customer and the builder. "Those five touch points are a preconstruction meeting, pre-drywall meeting, a homeowner orientation meeting, house to home orientation and a warranty orientation after the customer closes," explains Rich Larson, vice president of operations at John Laing Homes Denver. "It just reassures the relationship with the customer, and I truly believe every one of those touches adds trust to our trust bucket." Leading with your heart is a major best practice John Laing Homes Denver instills, which helps to establish that relationship to another level of caring. "We empower our people to also lead with their heart and soul," says Larson. "If something's wrong, fix it. If your heart told you to do that, then let's do it and we'll worry about how it's going to get paid for later." This heart-leading process starts at the top of the chain with Larry Webb. "Caring is something that cannot be faked," states Webb. "Caring has to be consistent over the entire experience of the homebuyer." Although Bill Probert, executive vice president of sales and marketing for John Laing Homes, refers to caring as "relationship selling and building," which ties back into the Denver division's philosophy of leading with your heart. "That is one of the things John Laing Homes does well as a company," says Staky. "If there is ever any question in something we have done, we follow our heart." Once John Laing has developed the relationship, it "Wows" its new friends with little details that show they care not only about the homebuyer, but also the home itself. "We do not install carpet in a home until it's 100 percent complete," explains Larson. "They get fresh carpet that's only been in for three days. The only traffic that's been on it is pretty much them." Helping the homeowner fill out its warranties on appliances is another little detail that shows John Laing cares. About a week after the homeowner moves in, a customer care representative visits the homeowner for its warranty orientation. "Our folks walk the house thoroughly to explain how everything operates and how everything should be maintained," says Dana Goodnight, vice president of sales.

Setting expectations The Green Company believes best practices are reached by setting expectations and how you deliver them through communication with the customer. Dave Caligaris, president of The Green Company, Newton, Mass., says there are two main practices that should be used to reach customer satisfaction. "One is how well you set expectations and obviously deliver them. But, probably a very close second, if not even first, is how well you communicate with the customer." Continuity throughout its daily processes helps The Green Company to achieve this communication with the customer. "The thing we do that really helps is the continuity of all our processes," says Dan Almas, senior project manager at The Green Company. "It starts in sales when they first walk in the door and it ends with our warranty department." Working in the "Wow" factor, The Green Company starts a photo album for each homeowner on the stages of the home bein g built. "It's a really nice photo album with pages inside that are printed of the different stages of their construction," explains Dominique Sampson, vice president of sales and marketing at The Green Company. "It keeps them informed so they know what's happening with their house." Building trust with each customer makes a huge difference too. "You have to build trust, do everything you can to build that trust and then you have to make sure you can perform so you don't let people down," says Sampson.

Best Practice Advice NRS winners give their advice on what they would recommend to other builders to achieve customer satisfaction. Communication with customers "It's building the trust and making them feel comfortable, not only with their home but with their builder," says Janet Jackson, vice president of customer relations for the central southeast division of Pulte. Hiring the right people "I think it all comes down to the right people," says George Geiger, president of Shamrock Builders residential division. "Our superintendents are very involved with our clients, they develop relationships with our clients. It's very rare that we'll close a house and the superintendent won't get a gift from the client." "Employees buying into all this is very, very important," states Randy O'Leary, president of Desert View Homes. "Initially, I think it was very difficult for us to have the employees understand what the importance of customer service was." Benchmarking "There has to be a formalized process with identified functions," says Eric Froelich, COO of Cambridge Isenhour Homes. "We'll go out there and benchmark the heck out of it with pride, copy, and put in place what other people have done." Passion to build "I think you have to have a love and passion for what you're doing," says Bob Schroeder, president and owner of Mayberry Homes. "Then, I think it's a matter of following through with that and continuing to learn forever. That's part of the passion." Reliability and consistency "I think reliability and consistency are very important elements," says Dave Caligaris, president of The Green Company. "In terms of delivering consistent, high levels of customer satisfaction, if you don't have the operating systems and discipline to do it day in and day out, it's just not going to happen." "Develop a systematic approach so that you do the same thing every time," says Chip Pigman, president of Pigman Builders. Are you prepared to implement change? "I think I'd ask a question," says Rich Staky, president of John Laing Homes Denver. "I wouldn't tell them anything. I'd ask, "are you really prepared to implement these [best practices]?" There's a lot of talk about best practices, it's the follow through that's the hard part."

Neighborhood quality teams The key element to Desert View Homes best practices required putting together neighborhood quality teams and growing from there. Although Desert View Homes of El Paso, Texas, has several best practices that led to its customer satisfaction success. The first step was implementing neighborhood quality teams (NQT). "These community teams are meeting and discussing what the problems and issues are in their communities and what needs they have in an effort to improve their customer service ratings," says president of Desert View Homes, Randy O'Leary. Total customer satisfaction goes along with Desert View's best practices. It accomplishes this by monitoring customer satisfaction through NRS, doing research through focus groups and making improvements through NQT. It will send a customer to another builder if it can't provide the home the customer is looking for. "Wowing" the customer is also key, but it must be done throughout the entire building process. "The only way a higher level of customer service can be reached, customer after customer, is with consistent processes and procedures," says O'Leary. "An important process is setting the expectation of the customer and making sure that we exceed those expectations." O'Leary says Desert View exceeds those expectations with its Homeowners Manual. "Our homebuyers receive this manual when they purchase our homes as a reference guide and a way to let them know what they can expect from us throughout the entire home buying process," says O'Leary. "This has become a very important tool to use because the majority of our homebuyers are first-time buyers and truly don't know what to expect."

Passionate about communication Cambridge Isenhour Homes, Winston-Salem, N.C., believes communication throughout the building process is a key best practice. Communication comes first in Cambridge Isenhour's building process. "From a best practice standpoint, we are passionate about communication," explains Eric Froelich, chief communications officer of Cambridge Isenhour Homes. This not only applies to the customer, but to its own employees as well. Training for the employee is a best practice that has helped to lead Cambridge Isenhour where it is today. "We have put a lot of resources and time into training the sales agents on the education process upfront," says Froelich. "When they sit down with our homeowners they map out the process and let them know this is a complicated process. It's not one that's going to go perfectly, that's our goal, but as a critical piece upfront, we have that homeowner education in our first meeting." Going along with communication and training its people is the quality of its people showing they really care. "We address any issues in a very timely fashion and let them know how important it is to us," says Isenhour. "This is part of our culture and what we create." Design is also a focus within Cambridge Isenhour's best practices. President and owner Todd Isenhour believes in constantly evolving with design change. "Todd is our CCO — chief creative officer," says Froelich. "We use our spec homes really as an R&D function to test new ideas and concepts. It's constantly evolving."

Adding excitement to home Only opening for business in 2002, Mayberry Homes, Lansing, Mich., wanted to offer product it would want if the roles were reversed. Bob and Karen Schroeder began Mayberry Homes three years ago with the vision of creating excitement for homebuyers. "We wanted product that excited us," states Bob Schroeder, president and owner. "We wanted product that would be what we wanted if we were the customers." With the philosophy of adding excitement, Mayberry Homes also follows the best practice of treating each homeowner as a part of the company. "We don't look at them as a number," says Karen Schroeder. "I truly believe that the majority of our homeowners believe we really care and that we're listening to them. They don't hesitate to call me or e-mail me if there's a question or concern." Staying in communication with the customer is important to Mayberry too. "We're in communication with them during the building process on a regular basis," says Bob. This communication includes a thorough walkthrough with the customer at the end of construction, before closing. "We make sure all the items are done." Mayberry ends its closing with a last-minute personal touch by presenting the homeowner with a cooler filled with food. "I give them a Mayberry Homes cooler and it's filled with lunchmeat, cheese, fruit, cookies, chocolate, pop and water," says Karen. "Anything they need to get through that first day and night to make the transition smooth." In addition to the cooler, the homeowner will also find a big basket in their home filled with toilet paper, Kleenex, sponges, hand soap, napkins, plates and silverware.

One customer at a time Pulte Homes Phoenix division believes in reaching their customers one at a time is a prime example of best practices to follow. Pulte Homes Phoenix strives to develop one-on-one relationships with each of its customers. Not only do they constantly drop by during the different building stages, but they also make sure to have the superintendent meet with each customer to discuss what to expect during each stage. When it comes to best practices, Pulte's Phoenix division has them down to a science. It all stems from the customer relations department. First, and foremost, the customer relations department tries to get involved in the preconstruction meeting, when the customer comes in to understand the process. The department also takes strides to helps customers understand their home. "We want to make sure they're comfortable coming to us if there's a problem with their home, or questions they have related to their home," says Janet Jackson, vice president of customer relations for the central southeast division of Pulte. Pulte also "Wows" its customers by focusing on workable rooms that pack a lot of punch — kitchens master bathrooms. In the kitchen, Pulte works on improving countertop space, cabinets and pantries to meet the customers' demands. With master bathrooms, it's important to the customer to include dual sinks and a shower separate from the tub.

Happy clients in the end Indianapolis-based builder, Shamrock Builders depends on developing a strong relationship with each client to reach happiness. Shamrock focuses on each relationship and meeting each potential customer's needs. Creating this need starts with steering away from the word "salesperson." "We try to stay away from the word salesperson or sales because I don't think it's a good representation of what our people do," says George Geiger, president of Shamrock Builders residential division. "We have seven or eight hostesses that work with us and they will be in our models and in our spec homes. People wander in these homes and they pre-qualify them, then Pamela (vice president of residential construction) meets with qualified leads." Once the relationship begins, Shamrock must continue to show that it really cares about each customer. Of course, this practice isn't possible without the right staff. "I think it all starts with having the right team of people," says Geiger. "You have to hire people that have the right personality and that truly care about their clients." Responsiveness must also fall into place with the client. "We've got to respond when people call," states Geiger. "We pride ourselves in not only taking the call right away, but responding, getting out there and looking at the situation and seeing how we can help people." Being flexible with each customer also makes a difference. "We'll do pretty much anything the client wants," explains Geiger. "We have very high-quality standards, but if there's something that really bothers a client, then we'll try to gauge or understand how big of a deal it is to them. We'll do whatever it takes to make the clients happy."

Adding a personal touch Montana-based builder, Pigman Builders, believes personal touches help "wow" the customers into satisfaction. For Pigman Builders "Wow" Factors seem to make an impact on its homeowners. "We give each of them a leather bound home book that has all the product, process and warranty information in it," says Chip Pigman, president of Pigman Builders. "We spend an in-depth period in the homeowner orientation explaining the features and benefits of the home." Before each closing Chip's wife, Corky, manager of customer service and design selection, presents the buyers with a basket and a large bag with the company's logo on it. "The bag has toilet paper, paper towels, dish soap and all kinds of cleaning supplies in it," states Pigman. "Each toilet paper dispenser has a roll of toilet paper that has our silver logo on it. It's a goofy thing, but we have people ask, "do we get Pigman toilet paper?"" The basket contains a number of other goodies including "a one month certificate for the local newspaper and a certificate to a local place to eat or certificates to one of the local gyms," says Pigman. Besides "wowing" the customer, Pigman believes that best practices work with specific processes in place. "We have checkpoint inspections where the field superintendent has to check on the framing, the finish, etc," says Pigman. Critical path scheduling is another process Pigman strongly believes in. "One process cannot start if it's linked to another process," says Pigman. "If we lose a day in framing it's going to push everything dependent on that back. If we lose a day on cabinets, it may not effect your closet shelving going in. So, by linking the critical events, we're able to not have a lot of wasted time, which is key to delivering on time to the customer." "Develop a systematic approach so that you do the same thing every time," says Chip Pigman, president of Pigman Builders. Are you prepared to implement change? "I think I'd ask a question," says Rich Staky, president of John Laing Homes Denver. "I wouldn't tell them anything. I'd ask, "are you really prepared to implement these [best practices]?" There's a lot of talk about best practices, it's the follow through that's the hard part."