Wed 14 May 2008
After the gold rush
After planning, customer service is the single biggest issue facing housebuilders. George Sell looks at how after-sales care in the industry is evolving.First it was the BBC's Watchdog and the national papers, then the Barker report, and now the Office of Fair Trading (OFT). The housebuilding industry is constantly being told its after-sales service is not up to scratch and that things must change. But are they changing? And what steps are needed to improve the industry's reputation?
The Barker Review set the ball rolling when it said in March 2004: "The housebuilding industry must demonstrate increased levels of customer satisfaction."
It then went on to suggest specific steps. "The House Builders Federation should develop a strategy to increase the proportion of house buyers who would recommend their housebuilder from 46 per cent to at least 75 per cent by 2007. Over the same period, levels of customer satisfaction with service quality should rise from 65 per cent to at least 85 per cent.
This was followed by: "The House Builders Federation should develop a code of conduct by the end of 2004 for new house sales in full compliance with the framework provided by the Office of Fair Trading's Consumer Codes Approval Scheme. This code of conduct should require fair contracts complying with the Unfair Terms in Consumer Contracts Regulations 1999.
Barker then warned: "If progress is unsatisfactory, or if consumer satisfaction levels do not rise substantially in the next three years, the Office of Fair Trading should conduct a wide-ranging review of whether the market for new housing is working well for consumers."
Well, as we all know, the OFT enquiry has been launched and is due to report in the summer of this year. When chief executive John Fingleton launched the OFT's enquiry into housebuilding, customer service was cited as one of its main elements.
"This is the first in-depth examination of competition and consumer issues in new housebuilding. This is a hugely important market for the economy because of its substantial economic impact and because unresponsive housing supply hinders labour mobility, constrains economic growth, and harms consumers. Furthermore, for individual house buyers, even low levels of dissatisfaction can translate into very high detriment," said Fingleton.
So how did the situation get so bad, and what is being done about it?
Philip Cooke of D'Arcy Marketing, who offers specialist training for housebuilders to improve their customer service, says: "For many years, the prevalent attitude within the industry was that because housebuilders could sell anything they built, why the hell should they bother with customer service? I think that over the last five or six years there has been a genuine change in attitude, and there is now an appreciation that this is something they have to do better. The Barker Report has reinforced this."One of the traditional problems has been a huge disconnect between senior management such as regional managing directors, and main board directors. The board might talk a good game, but it has been purely lip service. There have been obvious exceptions to this such as Crest Nicholson, CALA Homes and Miller Homes," adds Cooke.
While this is a damning assessment, Cooke points out that there have been mitigating factors: "One thing you must bear in mind is that for years, housebuilders have been screwed over by the planning system. Applications have dragged on so long that housebuilders get on site late. They need to get a rapid return on capital, and consequently homes are hurriedly built and sold, and the resulting product can be shoddy.
"On a positive note, there is a new generation of brighter, more educated site managers who are looking at the financial cost to the company of not offering a good level of after sales service. Housebuilders are belatedly realising that today's customers have real muscle, they know how to complain, and they judge the service a housebuilder offers them against every other customer experience they have ever had," says Cooke.
Steps are now being taken across the industry to improve the situation. While some major housebuilders still have bad reputations for customer service and are regularly pilloried in the media, others having noticeably raised standards.
Miller Homes, for example, has introduced a customer charter to "further affirm its commitment to making the house buying process as stress free and as straightforward as possible for its customers". The charter focuses on keeping buyers informed of developments with their property during the buying process and beyond.
Under the terms of the charter, Miller Homes has promised to make all of its literature and advertising "clear and fair", to ensure that customers are fully informed at every stage with total clarification agreed before contracts are signed.
The company says research has shown that "wanting more information" tops most house buyer's request lists when buying a home, with many claiming they don't fully understand the process. Marketing director Philip Hogg, says: "The customer has always been our number one priority. Our customer charter has been designed as an easy to digest guide for buyers to outline all the customer focused initiatives we have in place, helping to put their minds at rest and ensure they are fully aware of all the support mechanisms available."
But not all builders are as committed as Miller, and it is repeatedly poor performance which has seen the rise of the professional snagging company. Perhaps the best known is Inspector Home. Its managing director Stephen Nancarrow says: "The gap between the best and worst new homes is widening."
His company website asks: "Why is it acceptable to sell homes with hundreds of defects and to then take months to put them right?"
Inspector Home says it works with homeowners, providing detailed defect reports and liaising with purchasers, developers and warranty providers; with developers, inspecting and re-checking new homes prior to completion, hopefully ensuring that homes are finished to standard before the buyer moves in; and by campaigning, making regular contact with parliament, the media and consumer organisations we ensure that the subject of quality in the new homes industry is at the forefront of topical discussion.
The HBF says: "Home builders are committed to achieving high levels of customer satisfaction. Companies employ a range of measures to monitor satisfaction among their customers, to build on areas of strength and to bring about improvements where weaknesses are identified. For example, almost all larger companies regularly survey their own customers and many staff incentive schemes include customer satisfaction results."
It is responding to Barker's demands with a number of initiatives. These include a national annual survey of new home customers, developed in association with NHBC, which monitors levels of customer satisfaction across the larger HBF member companies, a voluntary a Customer Service Code of Conduct for housebuilders, and developing model terms for consumer contracts, in consultation with the OFT, to assist member companies bring their constracts into compliance with the Unfair Terms in Consumer Contract Regulations 1999.
The first HBF survey, published in February 2006 and including 22 larger companies, covered new home buyers completing between April and September 2005. The second survey, launched in April 2007 and including 20 larger companies, covered completions from October 2005 up to September 2006.
The second annual survey of new home buyers showed that 76 per cent of purchasers were satisfied with the overall quality of their home and 77 per cent would recommend their builder to a friend, a two per cent improvement on the first survey.
But the second survey certainly showed that there is still much to be done. Asked about the condition of their home on move-in day, 72 per cent were satisfied, with a similar proportion, (70 per cent) regarding the standard of finish as good. By contrast, 18 per cent were dissatisfied with the condition on move-in day and 18 per cent regarded the standard of finish as poor.
As in the first survey, the weakest area was home builders' service after purchasers had moved in, with 65 per cent very or fairly satisfied, against 23 per cent dissatisfied.
Although most home purchasers had reported a problem to their builder after moving in, such as a defect or snag, a majority regarded the number of problems as either in line with expectations (39 per cent) or fewer than expected (22 per cent).
However 39 per cent said the number reported was more than expected. These results were almost identical to the previous survey. As we went to press, the New Homes Marketing Board was due to announce the reports of its latest customer satisfaction survey within the next few weeks.
Philip Cooke believes a total shift in a company's perception of its customer is necessary from the boardroom down to the site workers. "One of the most enlightening things I have seen was at a medium-sized housebuilder with five divisions. They were determined to effect a culture change when it came to customer service, and in this instance it came from the chairman down. The most significant thing we recommended, and you could have heard a pin drop in the board room when we suggested this, was that every person who moved in to one of their homes should get a personal call from a board director within 48 hours.
This had a profound effect on the company's perception of their customers. Previously the management backed away and was scared of having contact with customers, but this way all the directors, including the financial director were actually talking to customers," says Cooke.
"The result of this was that management got a much clearer idea of what it was actually like to live in one of the company's homes. Another successful initiative was to teach staff to run feedback questionnaires for customers five months after they had moved in. The result of this was that the technical and commercial departments, which had previously felt isolated from customers, got useful information back from the end user. They could see whether their design features worked or not. Consequently they were re-energized and motivated, and also understood what an integral part they played in the customer equation," he adds.
Cooke thinks that the current tight market will challenge housebuilders to improve their customer service. "Housebuilding is unlike any other market, in that builders are not competing against each other but against the planning system. You can sell everything you build, even in a tight market. But it will be interesting to see what happens over the next few years. If you compare the situation in the States, where there is a net excess of supply, with the UK where there is a net excess of demand, the level of customer service in the US is much higher. Customer management is going to become an increasingly important skill for housebuilders, as their buyers become more and more demanding. The slowing market is a good opportunity for them to put things in order."
Contacts
D'Arcy Marketing www.darcymc.com
Home Builders Federation www.hbf.co.uk
Insector Home www.inspectorhome.co.uk
Miller Homes www.millerhomes.co.uk
New Homes Marketing Board www.new-homes.co.uk
Posted by George Sell
in Cala Homes, Crest Nicholson, D'Arcy Marketing, Features, Home Builders Federation (HBF), Inspector Home, John Fingleton, Miller Homes, Office of Fair Trading, Philip Cooke, Philip Hogg, Stephen Nancarrow on Wed 14 May 2008
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