From the industrial revolution to today's brick and mortar and online communities, where the focus is on efficiency, productivity, and results, effective communications are a challenge but also a necessity if a builder's brand is to remain relevant in the marketplace. One can learn first-hand from the recent tragedy in California to see how important honest, effective communications and reputation building are for success in any emergency.
"In a crisis situation, good relationships and excellent communications make a difference. One of our City's biggest strengths is the partnerships we have established with local agencies and emergency personnel for the benefit of the entire Santa Clarita Valley," commented Mayor Marsha McLean. "Despite the immense pressure of the emergency situation, the City of Santa Clarita took a proactive approach to the fires and responded to the emergency quickly and effectively with speed in communication. During a time of crisis people are scared and looking for help and information. The City of Santa Clarita worked closely with multi-agency partners to facilitate the flow of information with the community."
Builders, who must communicate with real estate consumers frightened by media attacks and reports against real estate, can learn from the elected officials and emergency personnel from Santa Clarita. John Burns, President of John Burns Real Estate Consulting, Inc. also believes strongly that communication is the key to managing a brand in a national market with regional fluctuations.
"Protecting your brand in a downturn is not an easy thing to do. Tough decisions have to be made, and those decisions adversely impact your relationships with employees, homebuyers, cities, trade contractors, and financial partners," adds Burns, whose firm is dedicated to helping executives; make informed home building industry decisions. "In a market like this, the CFO has to have the power to overrule marketing, or you may go out of business, which isn't very good for your brand either."
Burns believes that the best way to protect a brand name when a company is losing money for reasons that are beyond their control is communication. Here are his thoughts on how builders can communicate with four key groups: consumers, cities, trades, and financial partners:
Consumers: Consumers don't buy a home from you because of your brand. They buy a home from you because it is in the right location, it has the right value, and the house and community suit their needs. However, you can lose sales if you have a bad brand, which consumers will determine by researching your company on the Internet, so you have to avoid having a bad brand. If you have to drop prices in a currently selling community, be honest with your backlog and past buyers. If you have construction defects, fix them within reason if you can. Communication and fair practices are what matters. You will have some consumers who expect more, but they will have to deal with reality.
Cities: City officials exert significant control over your ability to make money by processing entitlements, dictating architecture and required improvements, and determining fees. They usually expect you to improve their community in some way in return for them allowing you to make money. Some city officials -- especially council members -- have little sympathy for you in a downturn. You have to communicate with them. They need to understand the economics of your business. If you aren't able to live up to your commitments, they need to know you did everything you could to try. Otherwise, don't expect to be doing business in their community for the foreseeable future.
Trades: Trades appreciate volume, predictability and honesty. It is reasonable to negotiate very hard with trades, and having a large market share is definitely a competitive advantage. However, if you aren't honest with the trades, you will not get their best teams and you won't get their best bids. Would you give your best bid to someone who didn't pay you on time or who was dishonest with you? Also, most experienced construction superintendents will tell you that the best companies and the best teams contribute far more to the bottom line than the lowest-cost producers. If you can't pay a trade on time or what you owe them, explain why. If you can pay them and you just choose not to, you are assuring poor service and high costs in the future if you remain in business at all.
Financial Partners: Honest and open communication with your financial partners is the key to preserving your reputation in the financial community. You raise equity and borrow money to finance your growth. If you are open and honest with them, most of them will lose money while working with you as long as you are losing money too. If you hide reality from them, they won't do business with you again. The irony of this, however, is that new capital sources will likely emerge to replace them in the future. Therefore, damaging your brand in the financial community is likely to be costly, but not disastrous in the long-term.
With the proliferation of media attacks and industry statistics frightening real estate consumers across the nation, builders are contemplating a variety of maneuvers to enhance their bottom lines to stay competitive. Builders, unfortunately, may be overlooking the most important and effective aspect in changing consumer perceptions: communications and branding. Builders are an excellent source of knowledge for what is happening in markets across the country and they should consider facilitating an honest, two-way dialogue with consumers, cities, trades and financial partners.