Construction Marketing Ideas

Sam Morgan of SW Morgan Fine Homes in Nephi, UT, started the JLC Online thread, Share some marketing/advertising ideas??? described here. He has an impressive website with great testimonials, indicating he cares about quality and reputation. His idea, however, of mailing a financing offer to renters doesn't seem to be working.

These three postings on a Journal of Light Construction thread tell a disturbing story. (Of course you should visit JLC Online to read the entire thread.)

The thread starts with this post:

Anyone want to share some marketing and advertising ideas that they are using right now with the market so dang slow??? I'm in the middle of one that I hope will get the phone ringing....so I can't say whether it is going to do any good or not. I am specifically a new home builder....so I am out looking for new home prospects.

If anyone is interested in this thread idea....I'll post more of what I am doing now....and over the next few weeks I can post results of whether or not it is working.

Then the original poster explains his plan:

Yes...looking for clients to build presold homes for. I've done way to many specs and not interested in doing any more....live in several of them!!!! You may remember that a few years ago I moved to this new area....only 20,000 people in the whole county so I am pretty much marketing to anyone and everyone!!!!

I do not currently have any lots of my own...although this coming year I may be working with at least one "partner" to develop one or more locations.

Things are deathly slow here now after really being quite busy all last year and earlier this year. I'm ready to move past the downturn I'm in with my current development project with all of these condos/townhomes that are going back to the banks and go back to building homes like I used to when you and I first met.

So...here's what I am working on right now. I obtained a mailing list from the city office of the city I live in, which is the largest city....of all of the rental units in town. I figure this target market has two things going for it with things being so slow right now. First, no current home to sell and second, most likely can qualify for the first time homebuyer tax credit. Those of you that are following along here may want to look into that for your own marketing at www.federalhousingtaxcredit.com which is a website the NAHB set up with all of the rules for getting the $7,500 tax credit for first time home buyers. The nice thing is, you can have previously owned a home to be considered a "first time" home buyer.

Anyway...I have a pretty awesome brochure that I had 10,000 copies made up of several years back. You may even remember that we did an article in JLC about that as we had our subs and suppliers participate in the advertising and cost of the brochure which is really almost more like a magazine than a brochure. I sent the brochure, one of the NAHB premade flyers regarding the tax credit, a letter explaining how the tax credit works, and a cover letter explaining who we are and how we can help them get into a new home even though the credit market sucks right now.

NOW....this is where it gets really interesting and where I think my marketing idea is getting good. I wouldn't normally do something this bold....but I've been sitting at home doing nothing lately.....so I figure anything to get work is better than nothing.

I'm offering....as an assistance to help people qualify for their construction financing, to subordinate half of my builders fee during construction. I do all of my jobs on a cost plus contract....always have. I typically do cost plus 10, plus I have a percentage for overhead and supervision. So, I am offering to collect my normal overhead and supervision and only 5% during construction and leave 5% on the table to help them qualify......so they don't have to bring as much in as a down payment....possibly having to bring in NO DOWN PAYMENT!!!

Of course I will have liens on the property throughout the job so I am protected and then will get a lump sum at the end when the home closes. I normally wouldn't even think or consider something like this......but I'm SLOWWWWWWW right now....been doing nothing but sitting a home drawing plans for myself and working on getting a book full of plans together. With any luck I may get 3 or 4 projects out of it???

So far, I've just sent out info to renters in this one town only as that's the only list I had access to. If I start getting some calls next week, I looked into a list from an online company and I can access the rest of my county for $75.00.

And here (and alas not surprising) are his results:

Well.....so far....not one single phone call. I'm trying to not get discouraged thinking that many of these people are worried about what they are seeing on the news so they are being careful and taking time to think about things before they act at all. I'm going to put an ad in the local real estate magazine over the next few months that will have the same message so hopefully that will get some things going.

Fortunately, the contractor who tried this marketing approach didn't spend thousands of dollars on the ill-fated experiment, and he deserves respect for telling his story openly. And other thread posters suggest that is best hope is not so much in trying to get renters to start building homes using financing programs (probably a rather dubious concept in the current environment) but to diversify and find opportunities within his area.

I think one challenge with the general direction of this builder is that he can't pass the "word of mouth" test. Is (in the current environment) a renter going to brag to his friends that he can get a new home with a builder willing to help carry the load on financing, when so many have lost their homes because of supposedly easy credit. No relationship is established, no connection from the heart is made, in selling a supposedly rational offer.

What should the builder do here?

• Who are the most successful people in town? The top-producing Realtor, the best recognized banker, the community newspaper publisher? Can he outline his advantages, and unique selling proposition to them -- in a thoughtful way? In a community with a 20,00 population, these leaders won't be inaccessible.
• Who is currently building, and who is currently buying what is built? The local building permit department may help. The sample won't be large, but it will provide insights and clues about where potential clients can be found.
• Could the builder claim expert status with straightforward insights and knowledge on how to successfully navigate the real estate/construction markets in his community? Then he can write articles, give speeches and presentations, and generally achieve visibility as an expert within his community. And the phone will, then, ring.

All of these initiatives require outbound effort and communication on a one-on one rather than mass basis. Marketing strategies which involve placing ads and hoping people respond, or sending out standardized direct mail fliers and dreaming of response, generally are disappointing. Look at the poll results on this blog's sidebar and remember that most business arises from word of mouth and repeat clients. Your alternative marketing strategies should supplement and encourage, not replace, these key methods.