Marketing & Sales

As Uncertainty Kicks Up, CX's Value Grows As A Builder's Tool

Here's how the role of machine learning-enabled consumer experience focus expands as tidal new-home demand morphs in the direction of value-driven discretionary buyers.

Together with

Cecilian Partners

Together with

Marketing & Sales

As Uncertainty Kicks Up, CX's Value Grows As A Builder's Tool

Here's how the role of machine learning-enabled consumer experience focus expands as tidal new-home demand morphs in the direction of value-driven discretionary buyers.

Together with
February 22nd, 2022
As Uncertainty Kicks Up, CX's Value Grows As A Builder's Tool
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Left: John Cecilian, Jr., Co-Founder & CEO of Cecilian Partners
Right: Philip Worland, Co-Founder & CSO/EVP of Cecilian Partners

Uncertainty can change residential development and homebuilding's outlook, and the challenge companies in the sector each face.

What uncertainty does, when it activates, is to alter the nature of new home demand, from traits generalized as a tide, to characteristics far more individualized and specific.  

For instance, we hear this from Jay McKenzie, senior director at Builder's Digital Experience:

With 3-4 interest rate hikes looming – compounded by new home prices up sharply given the spiraling cost of lots, labor and building materials – those shoppers who remain on a builder’s interest list for a $375,000 home are finding that same home now costs $475,000. At minimum, a bit of a shock. Not all buyers will qualify. Some will stretch. Others will set their sights and price range lower.
The result? Builders need to attract a whole new class of buyer as home prices and mortgage rates rise. That requires marketing. And home shoppers have memories. They won’t immediately adjust to paying $475,000 for a home they toured not that long ago with a $375,000 price tag. Builders should ask themselves, “How do I help my buyers adjust to the new price of my home? Are my product and brand ready to meet the expectations of buyers in my suddenly new price range?”
These questions take on added urgency in the light of more housing supply in the pipeline.

McKenzie punctuates the sudden impact new uncertainties have had on homebuilders' forecast challenges with topline bullet points on the latest national new home search behavior trends from BDX:

Image Courtesy of BDX
  • Consumer search online for new homes is down 7% week over week
  • Down 29% for the week ending 2-12-22 vs. the same week last year

So, there's this Dartmouth University economics teacher and author and commentator, Charles Wheelan. True to economists' stock in trade, Wheelan is fluent in doublespeak.

On the one hand, he says, he attests that he endures an "uncomfortable relationship with math." On the other, he's a gifted whiz at breaking down complex quantitative riddles into vividly understandable chunks for people who, um, are numerically challenged.

Why is this important today?

Wheelan's work, "Naked Statistics," and other guides that translate complicated math, economics, and data concepts and formulas into plain practical terms, do something brilliantly that everybody in the world of homebuilding, residential development and investment, and building products and materials channels – whether they know it or not – needs right now.

Unlocking probability.

Probability that impacts the broad number of people with financial means and lifestage motivation and circumstantial urgency and activated behavior to be a new home customer today, to have narrowed their field of geographical location choices, to have recognized a consideration set among new home price, model spec, neighborhood, etc. options, and

Predictive quantitative analysis – a high-fidelity signal amidst a chaotic cacophony of noise – will go hand in hand with a capable navigation of heaving and shifting ahead in homebuilding's never static homebuyer universe, Jay McKenzie speaks of above. The calculus around impacts and implications of consumer inflation, of higher interest rates on mortgage borrowing, and now, of geopolitical disturbances that can create further flux in supply chains, sentiment and confidence baselines, labor markets, consumer behavior, financial wherewithal, etc. have injected a slew of potent "known unknowns" into every residential real estate business leader's probability mix in the past several months.

Those known unknowns, together with unknown unknowns – for example, a currently undetectable tie between an unregulated financial market and broader financial and economic markets, or some other unforeseen, unmodeled scenario – make Wheelan's plainspoken explanation on what probability is good for and what it's not good for timely.

Here's an example he uses to delve into machine thinking-level predictive quantitative analysis. You can algorithmically see a strong connection between those who buy "felties" – little pads that stop chair legs from scratching the floor – and strong credit ratings that reflect they've almost never missed a debt payment.

Probability gives us tools for dealing with life's uncertainties."

That's true for a business – a complexly layered homebuilding business, which often nests many businesses that price goods and services and value generated, and convert property value from just 20% of a home's valuation to 60% once it moves from new to resale in real estate's transaction chain – as it is for a person or a household.

This is where Wheelan's knack for simplifying the complex math riddles of consumer purchase and behavioral insight flows together with the new builder's outlook challenge that BDX's Jay McKenzie speaks of as uncertainty rattles the outlook.

So, what's the giveaway clue that will allow a homebuilder or masterplan developer zero in on that value-driven buyer in a market so shrill with noise around price inflation and monthly payment impact and mortgage rate increases?

There's a tool for that that builders are starting to put to use, and it's particularly well-designed for a market and mix shift pivot from price-driven new home purchase and consumption behavior to value-driven. Do you want to know which purchase behaviors become a telltale for imminent or early-phase entry into a new homebuying journey? What are the "felt pad" purchases that suggest it's the time to engage and enable that journey?

CX – the meld of timeless focus on consumer experience and the ever-changing, exponentially powerful use of digital data surfaces now, when a tide of demand morphs into finite, divisible, individual would be buyers – is a tool whose moment in a homebuilding market roiled by uncertainty whose time has come.

From a macro viewpoint, here's where the capability Wheelan speaks of and the necessity McKenzie address merge in this notion of machine learning enabled customer experience focus. A report from consultancy McKinsey [not McKenzie] notes:

A few leading companies are pioneering a better approach that takes full advantage of the wealth of data now available. Today, companies can regularly, lawfully, and seamlessly collect smartphone and interaction data from across their customer, financial, and operations systems, yielding deep insights about their customers. Those with an eye toward the future are boosting their data and analytics capabilities and harnessing predictive insights to connect more closely with their customers, anticipate behaviors, and identify CX issues and opportunities in real time. These companies can better understand their interactions with customers and even preempt problems in customer journeys. Their customers are reaping benefits: think quick compensation for a flight delay, or outreach from an insurance company when a patient is having trouble resolving a problem. These benefits extend far beyond the people typically thought of as “customers”—to members, clients, patients, guests, and intermediaries. Early movers in the world of customer-experience analytics herald a fundamental shift in how companies evaluate and shape customer experiences.

Now, let's narrow the focus from the wide world of everything to a trail a homebuilder or masterplan developer would want to pick up on early – like knowing who's buying those felties for their furniture as a proxy for being a strong candidate for a loan. Opportunities to bring CX's new data sets to bear on how and when to engage, and how to ignite the value creation relationship, and how to own a lane into that person or household's consumer behavior become critical sales and marketing tools.

John Cecilian, Jr. co-founder and ceo of Cecilian Partners writes:

Meta (formerly Facebook) illuminated the reality that the collection and use of digital data carries value equal to assets typically held near and dear—such as the land upon which homes or communities are built, or the raw materials used to build them. Data is a differentiator that offers competitive advantage, not only in what is collected, but how it is used.
Tracked information derived from online visitor interactions sheds light on how much time is being spent in specific parts of the home, where visitors click for more information, as well as where along a digital homebuyer’s journey additional touchpoints or information could be useful. Builders and developers can no longer lean on the historic practice of believing they know best. Instead, through the integration of intelligent property technology solutions, they can flip the script to create digital “listening” tools, from which collected data will output trending preferences—a literal map of the types of floorplans, layouts or designs will be in greatest demand (i.e. sell more quickly).

The script Cecilian talks about flipping has a set of new stressors that BDX's Jay McKenzie notes with his caveat to builders:

“How do I help my buyers adjust to the new price of my home? Are my product and brand ready to meet the expectations of buyers in my suddenly new price range?”

The test will be in how well sellers of new homes and communities deal with unknowns' impact on probabilities, and their skill at recognizing behaviors that morph into predictability. CX isn't, then, a buzzword. It's a business survival and future-proofing tool.

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ABOUT THE AUTHOR

John McManus

John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

ABOUT

Community development simplified. We transform the home buying experience with game-changing proptech for builders and developers.

Website

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President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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Community development simplified. We transform the home buying experience with game-changing proptech for builders and developers.

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