5 Steps to Making Your Design Studio Hum
by Kevan Irsch
Builders are constantly wondering what they can do to increase profit margins, move homes, and make their customers happy. Thanks to design studios, all these goals can be accomplished with one solution - but only if done in the right way.
I spoke with Jane Meagher, President of Success Strategies, a leading design studio consulting company, and asked her discuss the secrets of gaining exceptional results from your design center operations. She discusses with us 5 steps to making the most of your design center.
1) Step Up the Presentation
“Despite the more challenging market, smart builders are making positive changes by leveraging state-of-the-art studios and superb customer experiences as sales tools,” says Meagher. “We need to build on the sophisticated ambience of retail; design studios are an integral part of the home buying experience.” According to Meagher, the design studio is one of the best opportunities for builders to demonstrate they care about their customers. “We’re stepping up the physical presentation of studios and products because we realize we owe it to the buyers and to ourselves.”
2) Create Incentives
Since new home customers are getting less money for their old homes than before the
housing market slowdown, they may not have as much money to invest in options as they previously thought. However, a good design studio professional just needs to work harder to help the buyer come up with their dream home, which can be achieved on any budget. Meagher says many builders are now offering thousands of dollars in studio options as incentives. “These incentives, in a soft market, have changed a lot of things. Buyers now come in and have a certain amount of free spending money. These incentives often get the buyers into the mood of personalizing their home and create a comfortable feeling around investing money at the studio. A smart design consultant will capitalize on this and encourage the buyer to continue investing so that the buyer truly creates their dream home. It should be a win-win for all.”
3) Improve Efficiency
According to Meagher, the average design center appointment should take about three hours. “Out of town buyers or buyers with unique situations may need a longer appointment, but generally we find that after three hours, the buyers’ attention span and productivity begin to decline,” she says. Most appointments could be shorter and more efficient. “Historically, the homebuilding industry has not provided a lot of skills training to design consultants,” says Meagher. “If builders invested the resources to train their design consultants thoroughly, the rewards would far outweigh the costs.”
There are two things builders can do to streamline appointments and operations, provide a better customer experience, and maximize revenue:
Provide a 100% predefined and prepriced universe of choice with accurate real-time pricing to eliminate confusion and capture the buyer’s interest.
Allow the buyer ample time to prepare for the appointment prior to visiting the design studio (to become familiar with the scope and details of all of the choices). This may include using a powerful software tool to research available options.
4) Utilize Technology
In terms of the sales process, automation is one of the many tools that buyers should be using to become familiar with the array of options choices and specific product attributes/benefits. “Software really does help the buyer prepare for the appointment,” says Meagher. “While it doesn’t replace the need for touching, feeling, and seeing the products in the design studio, automation and visualization software are great additions to the experience.” The warehousing of data has become more sophisticated as additional software products enter the market. Envision, the complete options management and selection tool, has helped streamline the design process. Every year, more builders use Envision to catalog available product choices and investment amounts, making it easier for design centers and buyers to access information. Click here to learn more about the benefits of implementing Envision.
5) Measure the Right Things
As I spoke with Meagher, one of the overriding points she made is that it’s not just what you measure, it’s the analysis of what you measure that counts. Builders often collect tons of data but don’t know how to act on or sort through it.
Builders should measure, as they often do, options sales as a percentage of the base home price. “This works when you are comparing within a builder, but it loses meaning when you start comparing builder-to-builder, because many other factors go into influencing the options sales percentage,” says Meagher. This number can be affected by the level of included features, the buyer demographic, the price of the home, the array of choices the builder actually offers, the builders’ attitude toward option sales, the time the buyer has to make decisions, and many other factors. A common error builders make is to average the options sales percentage of inventory and spec homes, arriving at a middle number that essentially means nothing. “If the stage of construction influences the quantity of options the buyer has to choose from, then the options sales percentage should be looked at in that context,” states Meagher.
Return on investment (ROI) at the design studio is another important metric builders should use to assess performance. Look at the profit markups and margins for every product in the design studio and continually try to maximize revenue. According to Meagher, “The studio should be treated as a separate business entity, but there are potential, unquantifiable, but vital returns on investment that add to the value of the design studio,” such as bringing potential buyers into the studio as part of a highly systemized sales process program or VIP night. In some cases, home sales can be directly attributed to a design center experience, so the value of design studios is undeniable.
In addition, Meagher advises doing an options sales analysis per product category. Builders should sort and analyze their product categories by what is appropriate for that builder. For some builders it is appropriate to sort by product line, for others by floor plan, and for others by community. Builders need to apply the appropriate filter so that the analysis of the numbers means something. “Just because a product isn’t selling, doesn’t necessarily mean it’s not sellable,” she says. The product could not be selling because of low demand, but it may also be because the buyer doesn’t understand the product, it isn’t showcased in the right way at the design studio, it isn’t sold correctly by the design consultant, or one of many other possible explanations.
Other metrics to consider are customer satisfaction, design consultant productivity, and time spent in the design studio during appointments/preview visits. The most important thing to realize is that all of the relevant factors need to be considered together when assessing design center performance, since they all impact each other.
Jane Meagher is President of Success Strategies, a full-service design studio strategy company working with leading builders in over 30 states and Canada. Her website is www.opt4success.net. She can be reached at (732) 761-8134 or via email at Jane@opt4success.net.