The customer service mantra: Why?

Marc Thibault, real estate practice leader at the Canadian office of J.D. Power and Associates, presents a plaque to a Monarch Homes representative at the Greater Ottawa Home Builders' Association customer service awards dinner in September. In the J.D. Power survey, Monarch ranked highest in satisfying new homeowners in the Ottawa market, with an overall satisfaction score of 665, with particular strengths in home readiness, service/warranty staff and construction/site team.

Yesterday, I reported on the (to me) surprising fact that word of mouth and referrals are not the first source of information/impression about new home projects, at least in Ottawa. Most people initially discover projects and learn about developments from nothing more elegant nor important than the directional signs to the builders' sales offices.

But word-of-mouth is important in a direct sense (about a quarter find the builder in the first place through word of mouth) and much more important, in an indirect sense.

Sure, potential clients may learn about your business through signs, advertisements, your website, or newspaper and magazine ads. But once they start engaging with your organization, are they more or less likely to sign on the dotted line if your reputation is good?

To answer the question, lets look at some other numbers from the J.D. Power survey for Ottawa
Research

Some 78 per cent of homeowners researched their builder before buying (82 per cent first time home buyers, 70 per cent repeat buyers).

Not surprisingly, most homeowners researched the builder website, but here is where reputation is important.

• 54 per cent spoke to previous purchasers
• 37 per cent checked the Tarion website. (Tarion is a legislated home warranty program in Ontario that provides protection to new home purchasers.
• 34 per cent checked independent websites
• 25 per cent visited magazines
• 21 per cent checked blogs (an increase from 12 per cent in 2008)
• 19 per cent visited newspaper websites

Notably, the truly independent sources of information where word-of-mouth and direct reporting (rather than managed "corporate messages" reach the consumer, represent a significant portion of the evaluation process.

Now for the bottom line. If you screw up (in the new home market, this would include failing to deliver the home on schedule, misrepresenting the product, and requiring the homeowner to return to the house for several after-sales repair and service visits), you pay.

According to the J.D. Power survey, 60 per cent of homeowner say they "definitely will recommend) a builder if there are nine or fewer problems with the home's quality and service. Assuming 200 referrals, and a referral to close ratio, this would generate six referrals that translate to sales (average sale price $345,000) of $2.7 million.

Compare this to a builder whose clients report 20 or more problems with their property. Only 12 per cent would recommend; resulting in a referral close ratio of 1.2 or revenue of $414,000 from referrals.

In other words, referrals count, and your quality/service and the clients' experience -- including whether their reality matched their expectations, are vital in generating the client satisfaction which, in turn, generates the referrals.

The point here is not to rely on referrals, but to be thankful if in good times you achieve these referrals with such volume that you have all the work you can handle. You have in fact achieved one of the essentials of successful marketing -- you are providing such a great client experience that your current and potential clients are encouraging and advocating your service.

Maintaining and enhancing genuine client satisfaction continues to be one of the best ways to drive your business and build it for the future. This information is especially important if you are a larger or more well-established business with a significant marketing budget. Allocating some of your budget resources for client satisfaction initiatives will probably repay many times forward.

But if you are smaller, or have exclusively relied on word of mouth or referral business for your organization, remember yesterday's posting: That signs count more than word-of-mouth in generating initial inquires.

Marketing, whether it be through your website, search engine optimization, newsletters, advertising in print and magazines, flyers, and the like, all have their place in the picture. (I leave out canvassing and telemarketing because I would argue these create a negative experience for most people and while you can win some business these ways, you are likely to alienate many more potential clients than you win.)

Once you find your clients through marketing, then your experience and reputation will carry you through to the "close" far more effectively than any high pressure sales techniques.