In 2002, Billy Beane and Paul DePodesta of the Oakland A’s figured out how to find baseball players who were undervalued by relying on quantitative research that disproved rules of thumb that scouts had been using for years. In 2011, we saw many of our clients doing the same.
- Value Engineering – By creatively addressing every single cost that goes into house, many builders are back to 1990 direct construction costs per square foot!
- Internet Marketing – The Internet has made advertising so much more efficient, and really helped builders stay in touch with their prospects, customers and existing homeowners. Marketing dollars are being spent far more efficiently than before.
- Consumer Feedback – Those who proactively collect email addresses have been doing surveys to understand all sorts of ways to get buyers off the fence to buy a home. The land developers seem to be the leaders in this type of research, although builders are following suit.
- Energy Efficiency – New homes are now so much more energy efficient than resale homes that creative builders have made strides getting officials to consider a number of incentives for new homes in addition to the energy tax credits that already exist. These consider a suggested premium that appraisers can use over less efficient resale homes, and higher allowable debt to income ratios since new home buyers will have lower utility bills.
- New Design – We have seen some amazing new home design driven by consumer input. While the energy-efficient and multigenerational homes have garnered much of the attention, our consulting team continues to see many unique designs that are being well-received by consumers.
- Land Acquisition Tools – A number of builders have beefed up their land acquisition departments tremendously, putting together data-driven land acquisition packages that take much of the subjectivity out of the process. While some component of land acquisition will always be subjective, the smartest land buyers are making decisions with more confidence than ever before.
In summary, those who are relying on rules of thumb are getting left behind and leaving the industry. The “old guard” is being replaced by management who sees opportunities to run the business more effectively and with less risk. Management is getting a higher return on investment on all dollars spent. This is the wave of the future, as it should be.
