3/13/2014 New Home Sales: The Hawthorne Effect And Your Sales Management Possibilities

New Home Sales: The Hawthorne Effect And Your Sales Management Possibilities

NEW HOME SALES

Continually resetting expectations can turn a short-term gain into long-term performance.

Bob Schultz, Contributing Editor

March 13, 2014

Here is an easy-to-implement tactic with short-term benefits that also paves the way to introducing serious training or systems changes into your organization for long-term gain. It’s something that I stumbled upon many years ago when I discovered this interesting phenomenon: Sales would marginally increase after salespeople had been told that they would be mystery shopped. It never failed. This rise occurred whether or not any training had been conducted. Likewise, I noticed something else whenever I worked with a builder who had the last few inventory homes to sell. When we had a meeting with the salespeople to go over some ideas—even for only an hour or so—voila. Those homes that had been sitting for quite some time began to sell. 

When we engaged salespeople in role-playing exercises, it was not uncommon to see a little spike in sales shortly thereafter. As I continued to experience these out-of-the-ordinary occurrences, I mentioned them to a friend of mine who was very knowledgeable about industrial psychology. He said, “I think what you are describing is the Hawthorne effect.” 

 

I had heard of it but never quite knew what it was until I did some research. You may know that the Hawthorne effect is a term referring to the tendency of some people to work harder and perform better when they are participating in an experiment or series of activities in a group environment. Its origin is based on a Harvard study during the 1920s of workers at a Western Electric assembly line plant in the Chicago area called the Hawthorne Works. Once I understood the effect, I proactively used it when and where appropriate to produce a quick spike in sales, to create a smoother transition into a serious training program, or to introduce new processes and systems.

 

Let’s look at how you can harness the power of the Hawthorne effect. But first, a warning: The results of the Hawthorne effect have a very short shelf life. It will not have any lasting impact. Why? Because it’s not providing the necessary tools for someone to change behavior for the long term. However, the impact of the short uptick in performance can be used to establish a benchmark by marking improvement before and after the effect took place. Benchmarking the Hawthorne effect can then open doors by showing that with a more long-term program in place, more permanent and greater sales results will occur.

 

Back to the mystery shop reference. I suggested as a hypothetical that you could increase sales without spending any additional money or time. Simply announce that during a specific time period, all salespeople are scheduled to be mystery shopped. The first thing that happens is paranoia begins to set in. All of a sudden salespeople are thinking, “I better do my best.” In the higher learning matrix—first taught by Confucius—this reaction is called the level of conscious competence. Simply stated, this level means that when I have to do something, I probably can do it. However, the measure of excellence that results depends on whatever level of expertise is present at that time.

 

So what causes those additional sales? Whatever it is the person is now consciously trying to do, when they know they are being noticed or evaluated, they will more likely start doing what they should be doing all the time but are not. Consequently, some sales might be generated as a result of that “something they should be doing all the time,” but are not, solely because they are part of a group experience—aka the Hawthorne effect.

 

In a similar manner, opening minds to be accepting of training or other changes to the norm of operational procedures or policy can be jump-started by another version of this effect—a short duration of some structured training, in which fundamentals are reviewed and expectations going forward are previewed. As a result of this exercise alone, sales almost always increases measurably. When the people involved are asked why the additional sales occurred, they typically will respond with something that was covered or presented in the short program in which they were involved as part of a group, again, being aware they were to be evaluated, i.e., the Hawthorne effect.

 

Here’s a firsthand observation and report on this phenomenon from a very successful real estate broker, Walter Borgen of ReMax Agency in Daytona Beach, Florida, whose company represents builders and condominium developers. Walter notes the following:

 

“A classic example of the Hawthorne effect was a recent training session I hosted for my on-site sales teams in August of last year. Within the next 30 days of this intensive new-home sales training session, our sales team had its best sales month ever. With renewed expectations and goals, the sales agents were excited. They critiqued and revamped their presentations. They felt confident, made commitments of their coming successes, and knew that we expected results. However, as Bob cautions, this was only a temporary gain, as within in a few short months that record sales performance went back to what was the previous normal.”

 

One of the biggest challenges in managing an experienced sales team is that they possess the knowledge and the skills needed to produce the desired results. But they fall into routines and mindsets that often limit their performance. As sales managers and mentors, I believe it is imperative that we strategically follow a program to continually reset expectations to maintain peak performance. PB

 

Bob Schultz is president and CEO of Bob Schultz & The New Home Sales Specialists, a management consulting and sales firm based in Boca Raton, Fla. Schultz is the author of two best-selling books, “The Official Handbook for New Home Salespeople” and “Smart Selling Techniques,” and was named a Legend of Residential Marketing by the NAHB. He can be reached at bob@newhomespecialist.com.

2/26/2014 Moneyball For Home Builders

Moneyball For Home Builders

NEW HOME SALES

Sales representatives need to have a passion for knowing the numbers that are critical for scoring closings.

Bob Schultz, Contributing Editor

February 26, 2014

In our next effort to present strategies that help builders increase revenue while reducing unnecessary costs in our 2014 series, ”Forge a Breakout Year For Sales,” we’ll look at a principle familiar to carpenters. The axiom is measure twice and cut once or, as the late business guru W. Edwards Deming stated, “You cannot manage or improve that which you do not measure.”

Just as owners of baseball teams need wins, builders need profitable sales. If you saw the movie or read the book “Moneyball,” maybe you recognize that although this story is set in baseball, it’s really about developing a passion for knowing and understanding how to use critical numbers and statistical probabilities that create wins, which then create championships and higher profits. In “Moneyball” it was number-cruncher Peter Brand, played by Jonah Hill, and not a baseball expert, who understood that a win is not a thing that just happens. It is the end result of consistently getting on base, and then scoring. 

 

In the business of new-home sales, a sale doesn’t just happen. True, a contract to buy and sell has been achieved, but a sale is really the end result of a series of well-defined and executed steps and tactics that can be measured and improved. As each step is improved, an increase in profitable sales is the result. For example, marketing and promotional spending must be measured for ROI (see “The Opportunity For a Breakout Year in Sales,” Professional Builder, January 2014, p. 29).

POP Benchmarks 

Now when we look at POP, or point of purchase activities, we want to see what happens when a prospective buyer comes in contact with a new-home sales representative. We also need to measure, benchmark, and improve critical steps of that process. Some of the essential and fundamental stats to examine for each salesperson, each community, and the company as a whole include the following:

 

• Conversion of traffic to sales by sources of traffic

• Percentage of traffic and sales generated by Realtors

• If sales are negotiated, what is the percentage of total sales where concessions were involved, and what was the dollar amount given away by each salesperson.

• Sales accomplished by visit, i.e., first, second, third, or beyond

• Cancellations

• Follow-through activities with prospects who have been in contact but have not purchased. We use a system called Customer In Process (CIP) Analysis and Action Plan.

Passion To Know 

I am always mystified when I ask a salesperson or sales manager, “How many sales do you have for the month?” and the response is something like “I’m not sure” or “I don’t know.” The fact that they don’t know is not as troublesome to me as is the issue that they don’t have a passion to know. Peter Brand demonstrated an unbridled passion to know who gets on base and who scores as his fundamental benchmarks. Then he motivated and involved Oakland A’s general manager Billy Beane, played by Brad Pitt, to the same level of passion. I encourage all sales managers and builders to develop a passion for knowing the important numbers critical to your sales operation. Understand what they mean and know how they will benefit you to increase sales revenue and profit.

 

In keeping with our format of presenting real-world experts, active salespeople, managers, and builders who each day are challenged and charged with the responsibility of generating a consistent level of profitable sales, I introduce Jay Webster, vice president of sales and marketing with Marrick Homes in Prince Frederick, Md.

The Marrick Method 

“We have made a practice that has become part of our culture to measure all of the benchmarks that are referenced,” Webster says. “The benefits to us are measurable. Both management and the sales team, collectively and individually, are tuned into the process that produces sales.

 

“Building on Professional Builder’s January article, ‘Debunking The Myths of Social Media and Internet Marketing,’ we focus on tracking each appointment that we have from our online and other marketing efforts. Our Prospect Process Tracking  (PPT) form is the primary tool our sales team uses to ensure that each prospect is given the attention needed at each step of the decision-making process of purchasing a home.”

 

Webster adds that the Marrick sales team meets weekly as a group to review and discuss these details:

 

• Contracts written month to date

• Number of closings month to date

• Review of top prospects for each community, which often leads to a Customer In Process (CIP) group discussion. The CIP review process is directly credited for generating approximately 10 percent of all 2013 sales.  

• Appointments scheduled or that need to be scheduled for the week with top prospects. This review also often leads to a group discussion on individual prospects that have visited more than one of our communities to create a specific strategy to get them back and buy. “As Bob says, ‘Selling is a contact sport,’” Webster notes.

• Contingent contracts are discussed with group input, which often leads to strategies that can be helpful in selling the contingent property.

• Community events that current homeowners and prospective homeowners are invited to attend. This interaction has proven to be an excellent tool to promote our company and community.

• Realtor outreach, including presentations at Realtor sales meetings and events for Realtors at our communities

•  Available inventory homes

• Current month sales goal per community and year-to-date sales per community

 

 “The PPT is updated during the week to reflect appointments that have been confirmed for the week,” Webster says. “Appointments are the key to turning prospects into sales. I manage and lead by objective, and our team constantly strives to improve that which we measure.”

Bonus Tips 

Remember that the goal is to measurably increase profitable sales and always ask this question: Doing what we are doing the way we are presently doing it, how many sales, how much revenue and profit are we missing, and how much time, money, and human resources are we wasting in the process? If you aren’t tracking activities critical to improving your sales process through each step of the system, you won’t really know if your efforts are resulting in increased sales. Having and properly utilizing CRM (Customer Relationship Management) software that is specific and custom to home builder operations is critical. To receive a complimentary outline of the CIP system, email: info@newhomespecialist.com and mention “ProBuilder and CIP.”

 

Jay Webster is vice president of sales and marketing for Marrick Homes in Prince Frederick, Md. Contact Jay at jwebster@marrickinc.com. Bob Schultz is president and CEO of Bob Schultz & The New Home Sales Specialists, a management consulting and sales firm based in Boca Raton, Fla. Schultz is the author of two best-selling books, “The Official Handbook for New Home Salespeople” and “Smart Selling Techniques,” and was named a Legend of Residential Marketing by the NAHB. He can be reached atbob@newhomespecialist.com.

1/10/2014 The Opportunity For A Breakout Year In Sales

The Opportunity For A Breakout Year In Sales

NEW HOME SALES

Debunking the myths of social media and Internet marketing

Bob Schultz, Contributing Editor

January 10, 2014

Warren Buffet often says the time to buy stocks is when everyone else is selling, thereby taking advantage of the vacuum left by those who fail to see the hidden opportunities to make a killing. That axiom is true for home builders as well. In the constant quest to increase sales revenue while reducing costs, it is easy to be seduced into complacency by good market conditions. I have seen it happen over and over again during the past four decades and through four significant economic downturns.

The ability to find opportunities others ignore comes from developing a mindset and a culture that foster a constant and intense focus on improving the fundamentals of your business. This competency comes from not allowing yourself to be seduced and distracted by anything offered as an easy panacea. These pitches include but are not limited to presentations that tout “the new rules,” “secrets for success,” or “the one thing you need to do.”

 

To help you stay on track for a breakout year, my 2014 articles will be serious about staying focused on the fundamentals by presenting strategies, processes, and systems that have proven to be timeless and effective in all market conditions. Select home builders, salespeople, sales and marketing managers, and Realtors—all currently and actively involved on a daily basis in producing profitable new-home sales—will co-author and explain the what and how, and the results that they achieve by implementing these break-ahead strategies.

 

Through analysis and examples, we will help insulate you against being distracted by “experts” whose biographies and track records demonstrate very little or no real-world, hands-on, practical industry experience in actually creating provable and profitable sales revenue.

 

We kick off 2014 by debunking the myths of social media and Internet marketing. Kristi McArthur Allen, sales director for Salt Lake City builder McArthur Homes, is our expert. Why? For openers, she is a highly experienced and successful new-home sales professional who developed, implemented, and measured a process to use the Internet and social media to make sales, not just friends. In addition to her responsibilities to lead, coach, motivate, and manage the entire sales operation, Kristi is in charge of all of McArthur Homes’ online marketing efforts, which currently account for more than half of its sales revenue. Proof positive that when something becomes personal, it becomes important.

 

Kristi says that it is very easy to get distracted by the glamour and fun of social media and the confusing messages from “experts” who declare that social media’s purpose is increasing brand awareness, keeping customers satisfied, and improving search-engine optimization. Their promised results are fantastic and extremely vague. Kristi offers the following:

Social Sales Media 

 

To be successful, we must be more specific about our goals. Stephen Covey, the author of “The Seven Habits of Highly Effective People,” said, “Begin with the end in mind.” What is our end goal as home builders? Is it to increase brand awareness? Is it making people feel warm and fuzzy about our company? Is it to be popular and have lots of friends and followers? Not in my world. Banks will not accept a list of followers and friends in lieu of money. It’s clear that banks are not social, warm, or fuzzy. Our goal must be to sell homes.

 

We began by assessing where we were and setting expectations as to where we had to be. In 2011, our online efforts produced 10 percent of all sales. Not acceptable. In 2013, that number jumped to 52 percent. As an on-site salesperson, I was taught that selling is a contact sport. Pretty simple. The more contacts I make with people who visit our website and provide me with contact information, the more appointments to visit one of our sales centers are confirmed. The more appointments that actually show up, the more sales we make. Extremely fundamental. Of the more than 800 online leads in 2013 that provided contact information, 39 percent kept an appointment to tour one of our model homes.

 

The following are my top-10 tips for debunking the social media myths and measurably increasing sales through your online efforts:

 

1. DO gain good fans and followers by asking prospects to like you when they visit the model home.

 

2. DON’T use marketing sites or gimmicky giveaways to gain thousands of insincere fans. Sure, you might gain a thousand new fans by spending a few hundred dollars, but now you have a thousand people following you just to get free stuff. These new fans may or may not be from or interested in the area where you build. They may or may not fit the profile of your target buyer, so don’t waste your time or money. People who foster these activities probably have never been responsible or accountable for generating a provable ROI. I was taught to always ask myself this question: Would I do this and spend the money if it were my own?

 

3. DO use homeowner involvement and offer well-planned contests for your homeowners, encouraging them to get their friends to like you. Friends and family of current homeowners make great prospects.

 

4. DON’T create contests or incentives that violate rules for the social-media platform you are using. Many builders fail to follow these guidelines and risk having their entire website shut down.

 

5. DO keep in mind that sharing online content from your company is good, but getting others to share that content is much more valuable. Our most successful campaigns include photos of buyers’ homes under construction. Who doesn’t love sharing photos of their beautiful new home?

 

6. DON’T post “Buy a home from XYZ Builders!” or “10 Percent Discount on Homes Today! Buy Now!” No one wants to read your sales pitches on a social media site. 

 

7. DO entice social media prospects to your website with good content. Catch their interest with a beautiful photo or an intriguing headline and then link to an article on your blog, to a neighborhood, or floor plan that you mentioned.

 

8. DON’T be shy about asking prospects for their contact information once they move from social-media sites to your website. We want to motivate, entice, encourage, or tactfully provoke when appropriate as many people as possible from our website to our model homes. Remember, selling is a contact sport. Capturing contact information is a crucial step in this process.

 

9. DO ask for contact information in several different places and on each page of your website. Besides the typical “Request Info” button, use calls-to-action such as “Find Out How Much Home You Can Afford.” Test different types of contact request forms to discover which ones are most effective in capturing lead information.

 

10. DON’T work hard at gaining new leads and then fail to follow up. Have a solid follow-up and sales system in place in order to convert as many prospects as possible to a sale.

Bonus Tips

 

Don’t forget that the goal of using social media and online marketing is to measurably increase sales. If you aren’t tracking your prospects through each step, you won’t know if your efforts are resulting in new sales. Using Google Analytics, an affordable customer-relationship management software, and a simple spreadsheet, you can track the following:

 

How many people visit your website?

Where they are coming from?

How many give you contact information?

What percentage of prospects was contacted in a timely manner?

How many resulted in appointments and which of those led to sales?

 

You’ll know which posts are moving prospects to your site and yielding the highest percentage of contact information. 

 

To read more about Kristi’s implementation process and receive an example of the tracking spreadsheet, contact bob@newhomespecialist.com. You also can see Kristi Allen discuss her online marketing tactics in “Secrets of the Internet Marketing All-Stars” at the 2014 International Builders’ Show, Feb. 4th in Las Vegas. Bob Schultz also will present a variety of ideas and tactics at three IBS programs. For a specific schedule go to www.newhomespecialist.com.

 

Bob Schultz is president and CEO of Bob Schultz & The New Home Sales Specialists, a management consulting and sales firm based in Boca Raton, Fla. Schultz is the author of two best-selling books, “The Official Handbook for New Home Salespeople” and “Smart Selling Techniques,” and was named a Legend of Residential Marketing by the NAHB. He can be reached at bob@newhomespecialist.com.