Option Selling For Profit: The Builder's Guide To Generating Design Center Revenue And Profit
By Gina Gullo and Angela Rinaldi
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Option Selling For Profit - Gina Gullo
www.betterbuilderstrategies.com.
Introduction
Give me the luxuries of life and I will willingly do without the necessities.
– FRANK LLOYD WRIGHT
After seeing their neighbor’s house, home owners commonly will remark that they didn’t know that a particular feature was available and that had their home builder told them about it, they would have purchased the option for their home. Could this be 10% of your customers? 30%? 50%? Can you even guess? Even if it is only a small minority of customers, profit is profit. Many builders have found that in tough markets, option sales are adding significantly to their bottom line, generating 5 to 25% of revenue.¹
Helping customers create a home that reflects their personal vision and individual style is the goal of option sales. A house is a shelter, but a home is a reflection of the owner. As such, it embodies the owner’s lifestyle, tastes, hopes, and dreams. Therefore, once customers settle on their ideal location and preferred floor plan, the next step is choosing the optional home features and finishing touches that reflect who they are and what they want. By adding the features they choose, home buyers can customize even the most basic floor plan. They walk away happy because they have made the right choices and they know they are getting what they truly want in their new home.
In today’s market you must appeal to customers’ emotions and inspire their confidence. Creating an outstanding program of option choices, presented in a well-organized design center backed by a well-trained sales and construction team, will provide the competitive edge you need.
Unfortunately, what should be a fun part of home construction—for customers and builders—is fraught with potential for missteps. With all of the advances in home design, customers still commonly make remarks like, Oh, don’t buy it from the builder, the products are overpriced and it is much cheaper to do it after closing.
From a builder’s perspective, it’s better to hear them say, I was able to design my new home just how I imagined it to be! My builder had great products to choose from and good prices. We were able to roll everything into our mortgage payments and move in to a completely finished home.
An exciting option program with established business practices and trained design and production teams will lay the groundwork for getting this kind of customer referral.
With a professional option sales program, builders—even in a down market—have reaped healthy profits by improving their processes for selling optional features and upgrades. Arizona-based Fulton Homes, for example, was able to consolidate design operations and streamline the design appointment for customers, contributing to a 61% boost in income from option sales.²
Without a professional system for selling options, customers are likely to feel hurried, ill informed, overwhelmed, and wary of buying what you are selling. An organized, individualized option sales program, on the other hand, allows a builder to uncover details about market preferences and helps build customers’ emotional attachment to their new homes. When customers feel this emotional connection, they buy. Therefore, a professional approach to selling options lays the groundwork for dramatic increases in profits.
This book assists home builders in creating an effective and efficient option sales program by addressing the following:
key elements for developing a valuable option program that appeals to your market
steps to a well-organized and professional design appointment that better serves your customer and reduces the time spent selecting options
effective techniques for better understanding and selling to the needs of your customers
methods and tools for a well-run selections operation
The book also gives you access to a Web page with 19 downloadable forms and other tools that will help you create a well-run design center or reorganize your existing one to be more efficient and profitable.
Developing an option program does not have to be a burdensome process. It just requires prelaunch commitment to research, planning, organization, and teamwork. Customers depend on your company’s expertise to deliver the home of their dreams. They look to you as professionals to guide them through the appropriate choices to satisfy their lifestyle and budget and to introduce them to new products they would not have discovered on their own.
Don’t let profit slip through your fingers. Make the commitment now to create a well-organized option program that
responds to your market’s desires
speaks in customer friendly language
creates a rewarding home design experience for you and your customers
Option Selling for Profit explains in detail the techniques for serving customers better and helps builders and design professionals understand individual purchasing styles, learn what consumers value by actively listening to what they say (both verbally and nonverbally), sell concepts rather than products, and provide superior customer service.
When you successfully apply these strategies to make a customer’s dream home a reality, you create satisfied buyers and referrals that will grow your profits.
What You Will Find on the Web page
The companion Web page includes the following tools:
1.Designer Commission Report
2.Candidate Assessment
3.New Hire Orientation and Training Outline
4.Sample Options Contract
5.Cover Letter for Mailing Options Contract
6.Profit and Loss Statement
7a.Designer Annual Business Plan–Part I
7b.Designer Annual Business Plan–Part 2
8.Design Center Department Report
9.Welcome Letter
10.Design Center Description
11.Option Selection Process
12.Materials Disclaimer
13.Design Center Appointment Preparation
14.Design Appointment Options Checklist
15.Active Customer Report
16.Customer Contact and Community Information Sheet
17.Record of Customer Correspondence
18.Contract Information Cover Sheet
19.Customer Survey
The files can be customized easily to meet your business needs. To access the files go to www.nahb.org/5xZQwery.
1
Housing and Paying for an Option Sales Program
There are three choices for housing an option sales program:
building or leasing your own showroom to display options
using your model homes
outsourcing through an existing design center or other outlet
Building or Leasing Your Own Showroom
Owning or running your own design center is the most expensive alternative for displaying your option products, as it involves building construction or leasing and shell design, as well as display design and installation. If you choose this route, following are three possible alternatives to help you get started:
Hire a design firm that specializes in option showroom design. These firms typically charge $5–$10 per sq. ft. At $10 per sq. ft., the design firm provides complete floor plan design, blueprints, all paint color detail, cabinet designs, and elevations. It also selects coordinating products, including countertops, faucets, tile designs, and lighting. This full-service design approach requires the least hands-on effort from builders. For an additional fee, the design firm will send a representative to oversee construction of the design space. At $5 per sq. ft., the design firm typically provides floor plan layout, blueprints, and color selection detail. The design display and product detail remain the builder’s responsibility.
Work with your trade vendors to help design your showroom space. Although a viable option, this approach requires more effort and attention on the builder’s part. Manufacturers and contractors, especially larger companies, employ in-house designers. Therefore, look to your trade partners for assistance in designing individual areas such as kitchen, bath, home theater, lighting, and electronics displays.
Use a combination of professional design firm and trade partner support. This is probably the most cost-efficient and effective method of designing your showroom, as it relies on experienced input while addressing budget restrictions. Contract with an expert for shell design and product display placement (kitchen area, bath vignette, home theater, etc.), color detail, and overall image. Again, look to trade partners to help design individual areas; they can choose cabinet elevations, create bath vignettes, and suggest coordinating products.
Starting Small
Builder-owned design centers aren’t just for high-production builders. Even if your niche is one-of-a-kind custom homes and remodeling, you probably can do a better job of serving your clients and expand profit potential by bringing product selections together under one roof.
The Artisans Group Inc. of Olympia, Washington, which has been helping clients create one-of-a-kind custom homes and renovations since 1997, recently consolidated and expanded its operations to include a retail design center. The 1,000 sq. ft. center, in its second year of operation, was expected to bring in roughly a third of the company’s overall design sales