Are Custom Builders Ready for Behavioral Targeting?

As Custom builders hunker down in a dormant economy, many are turning to new approaches to keep employees on the books and improve cash flow. Some are turning to remodeling and others are even looking at government contracts. One builder is even working with a modular builder according to a recent Custom Home Magazine article. But is you ask any of them, they will tell you their number one headache is getting more traffic in the door. With everyone watching their wallets, even the well to do are cautiously approaching the custom home concept. So how do builders gain a larger share of a shrinking market?

Many are taking the time to reinvent their web presence. By adding video and how-to's to their site, they are attempting to capture the casual shopper's attention in a way that begins the process of creating a relationship with the buyer. One builder doing an excellent job with this technology is Wisconsin-based Westbridge Builders. But even with all the flashy video, is the customer being reached on their level.

The problem with marketing on the internet is that whatever product is put out there, the entire world has access to it. Unfortunately, only a finite portion of the public is interested at all in the product. In addition, each one of those interested has a unique set of wants, needs and limitations. The challenge then is to present page content that appeals to a specific buyer. That technology is called "behavioral targeting." There are two approaches to behavioral targeting.

The first method uses information gathered from the client while they are surfing your site. Which pages they have been to combined with which videos they fire or images they click on as well as strategically placed questions can give the site programmer what they need to alter page content when the user goes from one page to the next. Although it is not as appropriate for a custom builder website as it is for, say, ebay, getting users to register opens up a whole gambit of options for gathering profiling data. Although it is done by countless websites, the second method is a little more insidious. This method searches a user's computer to determine where they have been (browsing history) and uses that information to alter page content. To experience the power of this technology, go to www. Amazon.com. If you have registered as an Amazon user, you will immediately see a list of things Amazon thinks you would like. That is behavioral targeting.

Some see this as an invasion of privacy. Others see this as an effective way to use the internet efficiently. Regardless of opinion, the technology has statistical merit. According to one Behavioral targeting project manager, the use of behavioral targeting can result in a 1000% improvement in the number of times a user makes the choice to investigate a product. It only makes sense because the company is giving the user content that they can associate with. And after all, that is the goal of your website, to forge new relationships with clients. What better way than finding things you have in common.

Behavioral Targeting is not without its challenges. Beyond the privacy issue is complexity and cost. Trying to figure out which behaviors lead a builder to believe a particular user is interested in French Country style and which behaviors lead them to Italianate can become quite subjective; whereas, some content is more straightforward. For instance, a user who has just browsed your competitor's sites definitely has some interest. What a great time to tell them you are better. Or a user who has just been to bankrate.com is not only a serious buyer but one that needs to learn about your financing options. Sadly, there is a direct and almost exponential correlation between how powerful this marketing tool can be and how much it will cost.

Nonetheless, in the bitter wake of popup ads, behavioral targeting is a technology that will become more pervasive in our browsing practices as more companies realize the gains to be made. Whether or not it is the right product for custom home builders has yet to be seen. Maybe you will be the first to gain from this method.

Boynton Place

Boynton Place- Shickedanz Brothers. Entry Level- As customer service rep and superintendent, this entry level community maintained a six week production time from start to close. I also worked on the three story apartments in the front of the community.

Working Through Market Doldrums

When ancient trade ships were transporting goods from South to North across the equator, often times they would run into an area where the wind would just stop. For a ship transporting perishable cargo powered by nothing other than sails, the doldrums could mean loss of profit, bankruptcy, loss of cargo and even death. Sometimes it wasn’t the cargo that was causing all the stress, it was just sitting on that ship with nothing to do and watching the food supply dwindle that drove many a sailor to the brink of insanity.

Well the current weakness in the housing market isn’t necessarily driving anyone insane. But it does bear some resemblance. Builders are just sitting there with all this inventory racking up interest cost and no demand to drive them. Builders are throwing some of their cargo overboard with “clearance sales”, deep discounts, rate buy downs and free options. All these incentives do help generate cash flow but at the expense of profits. The result is tremendous pressure on purchasing to reduce cost. Meanwhile, petroleum is at an all time high, lumber and aluminum have been hovering near all time highs for months and subcontractors are facing the same cash flow crunch as builders. So how does purchasing achieve the goal of reducing cost in this environment? Here are a few ideas.

Put less focus on unit price. The quick pain reliever too often reached for by negotiators is to demand price reductions. It seems like the right thing to do. But it is based on the false assumption that subcontractors have inflated net margins. There are three fundamental flaws with this tactic. First, it creates an environment where cost is king. Vendors with dwindling margins and cash flow are tempted to replace current trade labor with cheaper, less experienced labor. As a result, callbacks and closing defects are imminent. A year from now, when market conditions are improving, your survey scores will be on the decline. Also, most trade contractors are not equipped with the analysis tools that large builders are. They may reduce prices out of fear at their own peril. Second, the margin reduction increases the vendor’s AP and pay cycle reducing their ability to reap volume discounts necessary to remain competitive. Finally, if the builder is of a scale to only have two active subcontractors for a given phase, the chances of price fixing are increased when price is the only issue on the table.

Place more focus on estimating. By teaming with subs to both refine and value engineer existing plans, both parties end up more profitable. The builder ends up with fewer variance costs and the vendor ends up with fewer return trips and short orders that eat into their COGS. Seek the vendor’s input for alternative materials.

Reduce repairs. It sounds too simple. But damaged materials before the home closes don’t do anything but reduce both the builder’s and subcontractors bottom line. Even if the subcontractor is getting paid for the repair, the overhead cost necessary to pull a mechanic off of a job to do a repair usually exceed anything the sub would get paid. In addition, in an effort to be a team player, the sub often doesn’t even bill for the repairs. Putting practices into place to minimize damaged goods creates a better presentation to the buyer as well.

Focus on payables. Before going to a subcontractor looking for price concessions, review their payables. In today’s computerized world, failing to pay a sub is usually more a matter of budgets not matching up than a builder’s unwillingness to pay. By cleaning up past dues prior to negotiation, you place your company above the other builders in the pecking order. Any sub is quicker to concede to a builder who pays their bills. In the current market, this is also a great opportunity for margin pickup by requesting terms. Most subs are net 30. But with less cash coming in, they are much more willing to concede 2% for bills paid in less than ten days. 2% is a good days work.

Consider reducing vendors. If last year, your division had three electricians, chances are with the reduction in sales velocity, two or maybe even one may get the job done. Offering a vendor 100% of your work bolsters their cash flow allowing them more wiggle room. Beyond the immediate benefit, the sub is also looking at future benefits as the market recovers. This is not always the best choice, however. Before awarding a contractor more market share, remember to recheck their credit standing. If they are not keeping up with their own payables, the sudden increase in production could backfire. Also, there is always a turnover cost when letting a subcontractor go. Be sure to factor this number in when making the decision.

When all of these issues are combined, a more complete agreement can be reached. By adding value to the vendor/builder relationship, there is more value to be divided in the deal. Sooner or later, the wind did pick up and most ships made it back to land. It was the ones whose captain kept a cool head that made it in one piece with all their cargo and crew.