Tuesday, July 3, 2012

How to Compete with "Low-Ball" Modular Home Builders

If you’ve been a modular home contractor for any amount of time, you’ve probably had to compete with “low-ball” competitors.  And if you’re a new builder, you just might be the “low-baller” and don’t even know it.

We all compete in a new economy dictated by free-market forces where a fair price being one the new home buyer and the new home builder agree to without coercion.  Like it or not, a great many buyers will continue to choose strictly based on the basis of low price.

Unless the new home buyer is knowledgeable, open-minded and discerning, it is next to impossible for them to compare builders until the house is actually built. 

There are only two things new home builders offer buyers; either a commodity or a service.  Commodity selling would be similar to being a new car dealer.  A Ford is a Ford and car buyers will travel great distances to beat your price.  A service becomes a commodity ONLY after it is built.  Unfortunatley, a lot of modular home factories view their homes as commodities and see the builder as “low-ballers.”

Position your company as a unique service provider with exclusive characteristics and value-added services.  If you don’t, be prepared to run with the “low-ball” pack.

How can you accomplish this? 

First, understand that for low-price buyers to exist, there also must be low-price sellers. Some are legitimate, some are not. Know the "who," the "how" and the "why" of the low-price builders, and plan your marketing accordingly. Through proper planning, you not only can provide your clients and prospects with tools to be discerning buyers, but you also will be prepared to "push the right buttons" when offering your services.

Who are the low-price sellers?  

  • Newcomers. Newcomers are the most common of the low-price sellers. Most don't have a clue as to what the business of home building management is all about, and their chances for survival are not good. Unfortunately, low barriers to entry in the building industry ensure that, just like dandelions, another crop of modular home builders will sprout every year.

  • One-size-fits-all builders. This class of low-price competition is the "cookie-cutter" or "one-size-fits-all" tract home builder. These contractors provide only certain basic services with minimal quality at minimal prices.  Many new home contractors choose this niche and, if they're efficient, they can be quite successful and profitable.

  • Cheaters. A third class of low-price competitors are builders who cheat. Let's be candid: There are some who do. These contractors know how to prey on unsuspecting customers. They promise a lot and deliver very little, all by design. Even though they don't deliver what the buyer wanted, they will continue sell to new ones every year because of low pricing and human nature.

Now that you know who the “low-ballers” are, let’s look at how to compete with them. 

Selling a quality home is important but quality has different meanings to different people. It can be defined as what is right and appropriate for each customer and not necessarily by what is the best, most expensive or highest level of service. Therefore, you need to listen and let the customer define what they mean by quality. Often, their definition is tempered by what they are willing to pay. Perhaps you see an opportunity in selling price. If you do, talk about it, but be honest enough not to promise a quality or level of service that is not commensurate with the price you charge. Some new home buyers may accept it, most won't.

It will be tough looking at yourself as a service provider rather than a commodity provider but the rewards will be awesome.  You will find that you can build fewer homes, have better management controls, make more profit per house, have better employees and a happier family when you stop trying to compete with “low-ballers” that are selling  commodities and start working with buyers that understand that you are offering something unique in this WalMart world.

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