Why It Pays for Homebuilders to Work With Their Toughest Customers

A lot has been said about customer experience management and how builders can reap the biggest return on their investment. The issue came up following a recent Ontario Homebuilders' Association event, where one prominent consultant argued that home builders should not focus on satisfying their toughest customers. Instead, she argued, builders should devote their resources to making happy customers happier. Her rationale was that it's too difficult to turn disgruntled home buyers into loyal advocates and more fruitful to turn moderately happy customers into ecstatic ones.

While this simplistic view is rational, it ignores the positive impact strategic service recovery can have on the bottom line. The truth is, home building is a local business, and it doesn't take much to tarnish one's reputation in a way that kills future sales. A customer management strategy that addresses only moderately happy customers is not just ill-advised, it's dangerous to a builder's long-term success. Clearly, builders should focus their service efforts on the areas of greatest opportunity, but they also must have a process for dealing with those severely dissatisfied customers who can create a public relations nightmare.

How about Sprint Nextel, which last summer began dropping thousands of its cell phone subscribers who apparently complained too much? According to Sprint Nextel's own press release, 2008 first quarter revenues declined 9 percent compared with the same period a year ago, and declined 6 percent from the fourth quarter of 2007. "The declines are mainly due to lower average service revenue per customer and fewer post-paid subscribers," the company states.

On average, builders can expect 7.5 percent of its customers to make a negative referral. That's why I have always been a staunch advocate of stabilizing your toughest customers. At the same time, I recognize the value in appealing to your happier customers, too. The truth is, you need to strategically do both!

The best way to deal with tough customers is to establish a SWAT team, a group of employees that works with buyers to peacefully resolve problems. (Visit HousingZone.com and search for "Builder SWAT Team" for more on this concept).

No builder can turn around every disgruntled customer. But at the very least you should stabilize the situation. It still pays to care for your least satisfied customers. Leading builders who take a holistic customer approach have been able to reduce their percentage of hostile customers to less than 1 percent, while the rest of the industry hovers at 7.5 percent. The fact is, working with your toughest customers can yield tremendous return on investment.

To ignore hostile customers, however, is disastrous advice and anyone recommending this strategy is misguided. Don't let them put your company in harms way.