2023 will go down in the history books as a year when sales momentum shifted … dramatically. As we stare down the barrel of all that 2024 has to offer, it might be wise to look at how we leverage sales success where we already have it and build a buffer against threats to the sales pace.
It’s one thing to look at how to jump-start sales when a community hits the sales wall. What gets overlooked is the focus on sustaining momentum on the communities that are accumulating sales.
Every successful new-home community has one common element in its favor: momentum. The Big Mo. Sustain the momentum, and you’re living large. Lose the momentum, and there is nothing but trouble.
Let me get right to the heart of the problem. The longer you wait to correct a loss of community momentum, the more it will cost you. That cost could be aggravation, management time and effort, or opportunity costs, but mostly it will cost you money. And the longer you wait to respond, the more money you will lose.
How does momentum work in home building? I might suggest that, given normal market conditions, new-home communities follow a similar sales pattern, illustrated as follows:
Grand Opening: Fairly self-explanatory. This is all about the marketing and presale work that goes into a successful launch. On Everett Rogers’ adoption curve, these buyers are your innovators. You can read Kevin Oakley’s excellent book “Pre-Sale Without Fail” for a deeper dive.
Momentum Building: Here we are talking about the effort to continually capitalize on the early activity and essentially flaunt to the world a track record of sales success. This is important because no one wants to buy where no one else wants to buy. These are the early adopters. The initial force should boost you into momentum-building mode.
Plateau: Then we get into a stage of community maturity where the sales are still coming through the door but with an unseen risk. After all, a plateau indicates that there is nowhere to go but down. Plateaus are tricky because we like where we are standing, but so often we can’t see the edges. A plateau can be a sweet place to be (“Nice view!”), but it can also be a dangerous place to stay (“Is that a cliff?”). If we’re not careful, we are only a couple of missteps away from a tremendous fall.
Decline: Without warning, the sales pace comes to a halt. For a week or two, it’s no big deal. But then panic sets in, and panic always costs money. We pull out all kinds of stops, and all of those stops are expensive. Discounts, incentives, buydowns, broker bonuses—you know the drill.
But let me go back to something I said at the beginning. The longer you wait to respond to a loss of momentum, the more it will cost you.
Now the twist. This whole time I’ve been talking about momentum, and you might think I’ve been talking about the results on the sales report. But what if we changed things up here and threw in a curveball. Because I’m not talking about sales momentum at all. I’m talking about behavioral momentum.
Sales are not behaviors. Sales are the results of behaviors—behaviors of the marketing, of the market, of the sales approach, and of the buyers.
The sales report itself, for as much attention as it receives, is a lagging indicator. It shows you the results of behaviors that occurred weeks, if not months, in the past.
The plateau stage is where the behaviors take their effect. There are two things we need to be looking at here, two forces if you will—external and internal. External forces we react to. Internal forces we initiate.
External forces include:
- Decreased quality of B leads: This is easily trackable but also easily ignored;
- Changes in CMAs: Especially tracking incentive boosts and other value adjustments;
- Decline in referrals: This can indicate a waning buyer/owner passion about the market; and
- Longer buying cycles: Long cycles are caused by a lack of confidence.
Internal forces include:
- Tired and stale community presentation;
- Lack of management focus on sales behaviors;
- A salesperson’s energy; and
- A salesperson’s activities.
Preventing decline happens by sustaining momentum. That means we need a consistent assessment of the behaviors at any given community.
A piece of advice I received from a mentor a long time ago: When you are not getting the results you want … do something. The worst strategy is waiting and hoping it will all get better on its own. Do something. Like now. Action always tops inaction. Tracking behaviors will always be more important than tracking results.
