Single Family Housing 2010 Megatrends — Branding Finally Gets Traction
Quarterly, the Federal Reserve releases a Flow of Funds report that rolls up household, business, financial institution, and government money movement. This is a glimpse at whether our debt levels increased or decreased in the previous quarter. It has been a harrowing year for the Flow of Funds.
Here’s a sum-up from Calculated Risk when the last report came out on Dec. 10.
According to the Fed, household net worth is now off $11.9 Trillion from the peak in 2007, but up $4.9 trillion from the trough earlier this year.
“Off $11.9 Trillion” means wealth destruction beyond imagining, but as we see the velocity of recovery–$4.9 Trillion to the better–can be almost equally mind-boggling.
How does the Flow of Funds’ tale of wealth destruction tie to one of 2009’s noteworthy achievements in the business of single family home building which, in turn, points to a megatrend for 2010?
What else has the vortex of the Great Recession subsumed as it expanded its havoc? Companies, trust marks, trade names, credibility. The New York Times today notes that the Bureau of Labor Statistics reported that 400,000 small to medium sized companies (100 employees or less) went out of business in the first quarter of 2009 alone.
As hard hit as home building and its pantheon of companies who’d built a name for themselves in the prior two decades or more have been, the casualties in every sector of the economy remind us this thing has been indiscriminate in claiming its victims, and not just from small to medium sized companies.
The Flow of Funds report may measure lost wealth, but what’s the measure of lost trust? More importantly, while a hyperbolic equities market since March of 2009 may have gone fast and far to restore a chunk of the dollars that had vaporized from households’ financial holdings, Joe American has scarcely seen an equivalent restoration of trust, credibility, or dependability… not among policy makers, Wall Street moguls, local government officials. Who to believe?
This is why we’re going to revisit the Pulte-Centex combination strategy as high achievement in 2009–perhaps in the sense that President Obama was considered a worthy selection by the Nobel committee–in home building, if only for the strength of its conviction that branding’s moment has come to home building once and for all.
Branding derives from the trademarking of pottery, wine, and livestock back in the 16th century, and it normally involved burning an identifier into the surface of the item so that all would know its origin.
For home builders branding is a way to forge trust, not just among potential home buyers, but where you need it most, among your overworked associates, among your underpaid subs, among your overly anxious investors, and among your most faithful supporters.
Just as household wealth evaporated amid a flock of Black Swan moments starting in the Spring of 2008, trust in anyone or anything vaporized in a flash as well.
Home building companies’ relationship to branding has been ambivalent. A reputation for quality, for value, for delight has long been part of their DNA, while the trappings of branding in the Madison Avenue sense seemed to run counter to the skill set required to be a successful home building company–especially since a home was different in magnitude, frequency, and nature from any other consumer good or service for sale.
What the Pulte-Centex strategy suggests is that the company will begin to discipline itself around being the best at less and align its value offerings with greater proficiency and belief. The way the Pulte will burn its names into the hide of its communities, its lot positions, its homes, will work to streamline the organization around doing fewer things better, with the result that buyers will gain greater value.
Interestingly, what home buyers want, especially in the wake of all the wealth and trust destruction of the past few years, is not to feel ripped off. (To hear this directly, tune into “What’s Selling & Who’s Buying?” in the Big Builder Virtual program).
If home prices continue to decline in 2010, as is indicated in the latest Case-Shiller Home Price index and other analyses (such as this one from Calculated Risk’s blog), how will your company recover some of the trust that has fallen by the wayside amid the financial crisis?
First, figure out who and what you are, minimally. Introduce scarcity into your own system. Pack belief and commitment into fewer plans. Match them in a disciplined way to lot positions. Allow the notion of your brand to get under your skin and that of everyone wh0’s hands are on your product offerings. Make a story 0f what you’re offering–stories give value to everything. Look at this experiment in Significant Objects for proof.
The BLS is not going to stop reporting hundreds of thousands of small to medium sized business failures by the quarter any time soon. Credit’s not going to work normally for months, so rekindling trust–at every turn–may be the only way to get across the barron stretch still ahead.
So props to Pulte for its affirmation of branding as a home building strategy. We’ll see more of less brand names in 2010.
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Not all home builders are out to forge the trust of potential buyers. I think the housing market has caused Americans to lumped all home builders into one category: “Companies willing to do anything to make money and recover.”
We all know that November wasn’t a great month for the market. It was actually terrible for America- but a few cities managed to hang on and not lose money. St. Louis, in particular, saw an increase in home sales of 44% from last year.
http://www.fischerandfrichtel.com/blog/index.php/2009/12/st-louis-home-sales-jump-44-in-november/
I think it’s very important to research ALL aspects of a builder before you choose to develop a relationship with them, since the relationship will extend well beyond closing.