The Benefits of Satisfied Customers

What benefits does a home builder receive from having satisfied customers? Knowing the effect on profitability is essential for putting customer satisfaction in the proper business perspective. Here’s a challenge for you - find facts at your own company that substantiate the importance of customer satisfaction and the benefits you receive. Use the topics below as a starting point. Since customer satisfaction effects everyone in the company, involve everyone in the process.

Lower Marketing Costs

Prospects that contact you on the basis of referrals require no associated marketing costs. The more satisfied your customers are, the more people they tell about you and the more enthusiastic the message. Buyers are naturally attracted to builders with a good reputation. After opening a retirement community in the late 90s, referral sales for US Home, Freehold, NJ, increased to over 30 percent. During that same period, their marketing costs were reduced by a similar amount.

Satisfied customers are also important because the alternative, dissatisfied customers, can cause severe damage to a builder’s reputation. Dissatisfied customers can spread the word to more than twice as many people as your most satisfied customers, and they do it with more passion. One dissatisfied customer can wipe out the good will of 10 satisfied customers that no amount of marketing can recover.

Lower Selling Costs

There is no more qualified prospect than one referred by a satisfied customer. What makes them so qualified as a potential customer is that they pre-qualify their builder even before they visit a model home. Based on referrals and reputation alone, Shea Homes, San Diego, once sold out a first release in a new community a month before the models were finished!

Higher Sales Conversion Ratios

With referrals, sales conversion ratios are much higher and sales cycles are shorter. For Triple Crown, Harrisburg, PA, conversion ratios on referral sales are over 90%, much higher than their average prospect. To help encourage referrals, Triple Crown offers homeowners a $500 incentive when a referral buys a home.

Lower Warranty Costs

On identical homes, satisfied customers have fewer callbacks than those who are less satisfied. As an example, one East Coast builder conducted a little experiment and tracked callback and customer satisfaction data on a community of similar homes built with comparable quality. Customers with homes that were not delivered on time had lower levels of overall satisfaction. Although their lower satisfaction levels were not originally caused by poor product quality, these homeowners averaged five times the warranty callbacks as other more satisfied homeowners in the community.
When the benefits of satisfied customers are well understood, the next step is to examine the effect of a satisfied customer on the bottom line. Put a dollar value on a satisfied customer by using the “What’s a Satisfied Customer Worth?” calculation form, available through the NAHB Research Center. To receive a free copy, call the Research Center’s ToolBase Hotline at (800) 898-2842, or email toolbase@nahbrc.org.

The NAHB Research Center is an independent affiliate of the National Association of Home Builders (NAHB), and its mission is to promote innovation in housing technology to improve the durability, affordability, and environmental performance of homes and home building products. The Research Center’s National Housing Quality Program was established in 1993 to disseminate information on quality management principles and practices in the home building and remodeling industries and to foster the adoption of these principles and practices. Fore more information, visit www.nahbrc.org/quality or email quality@nahbrc.org.