In Case you missed it, Real Estate Economics hosted Eric Snider as a webinar guest last week as he discussed LifeStory and the Business of Trust in the Residential Housing Market Industry. Below is Part 1 of his presentation, we hope you find it interesting and insightful. Part 2 will be posted tomorrow morning.
The Business of Trust –
The Most Trusted Builders in America
“It takes 20 years to
build a reputation.
It takes 5 minutes to ruin
it.” – Warren Buffett
Introduction
In today’s
economic marketplace, trust is everything.
More than any other factor, it can reduce costs, improve productivity,
enhance innovation, improve collaboration, and increase value. Without trust, barriers go up, value goes
down, and relationships do not advance.
Consumers desire and seek out companies that they have confidence and
trust in.
We want to frame trust in a different light, in a way you
may have not considered before. We want
to make a business case for trust. To
this end, we undertook an extensive study on the nature of trust within the
home building marketplace in order to identify how business is influenced by
the trust that prevails between a builder and home shopper. Our goal in this presentation is to share
some of the insights we captured in this work. As this work demonstrates, trust
is a valued currency that can significantly alter how consumers evaluate the
merits of a new home builder.
Specifically, our objective today is to outline the
framework and justification as to why “trust” matters in conducting business in
the marketplace today. Moreover, our
objective is to demonstrate how consumers think of trust in the context of
searching for a new home. To this end,
as part of this presentation we will be sharing the rank of the Most Trusted
Builders in America at a national level.
Background
Before
sharing the results, I wanted to give you a brief overview of Lifestory
Research and myself. Lifestory Research
is a firm that was begun in 2009 with a focus of providing high quality
consumer research services. My name is
Eric Snider, and I am the President and Chief Research Officer at Lifestory
Research. Prior to forming Lifestory
Research, I worked within home building for more than 14 years, both at Shea
Homes and Pulte Homes, where I held the role of the national vice president of
sales and where I oversaw all consumer research efforts. Prior to my home building experience, I spent
6 years of my career as an academic as part of the faculty at Arizona State
University where I taught classes on research methods and performed research on
the subject of persuasion and influence.
Lifestory
Research is a multi industry research provider.
We serve clients from a variety different industries including energy,
product manufactures, health care, education and non profits. However, more than half of the work we
perform today is concentrated within the home building industry.
Data Comes From
Today I am going to share with you the results
of an ongoing study we conduct at Lifestory Research. This is a research product that clients can
access through a subscription to the research program. I want to give you a brief overview of the
study design and approach before sharing the results.
Surveyed
The data from this research program comes from
27 markets in which we survey on a monthly basis and report out the results on
a quarterly basis.
Surveyed
Each month
we survey around 3,600 new home shoppers across the 27 markets. As a result, each quarter we survey 400
people in each of the 27 markets in the study.
This gives us a margin of error of less than 4% and allows us to have
confidence in the results. People who
take the survey are qualified as well. A
person must be currently shopping for a new home, have an income over $50,000,
and be between the age of 25 and 69 years of age.
Tracks
In each of the 27 markets, we track consumer’s
perceptions of the top 15 to 20 builders in that market. In all, we have over 130 builders being
evaluated in the study each month. We ask 11 core questions about each of these
builders in order to understand things such as brand awareness. We also include questions about product manufacture
brands in specific categories such as kitchen appliances, HVAC systems,
cabinets, and paint. In all, we track
another 100 product manufacturing brands each quarter as part of the survey
program.
Why Measure Brand
We often get
asked, what are the benefits of measuring brand? So, let me share a few of the reasons we
undertake such a large scale research program.
First, we know from our research that for most consumers
knowing the name of a builder when they are shopping for a home impacts their behavior. Consumers are more likely to visit
communities of builders they have some degree of familiarity with.
Second, it is a standard operating procedure in most industries
to track how ones brand ranks within the category in which they operated. We actually perform this brand tracking for
several companies in industries such as health care. Another client we have tracked in regards to
brand trust is the Olympics. In their
case they benchmark how they rank in trust against other sports based organizations.
Third, consumers tell us in our research that in
addition to knowing the name of a builder before shopping one of their
communities, consumers tell us that the reputation of a builder is critical for
them to know prior to purchasing. The also tell us that they would pay more for
a builders homes if they have a good reputation.
Fourth, and perhaps most important, we have found that brand
matters when it comes to sales. We know
specifically in the home building industry, that 24% of THE ENTIRE DECISION a
customer makes when shopping is based solely on their awareness of the builder.
The Context
Place
yourself in the shoes of a customer shopping for a new home and imagine if they
have trust in the company. Consider a situation in which someone is shopping
for a new home and in one case the consumer has low trust in the builder and in
another case they have high trust in the builder. Is it not obvious which builder has the
greatest potential to create a relationship and form a transaction sale?
The
reality is we're operating in an increasingly low trust, low confidence world.
There's a crisis of trust all around us, with low levels of trust in other
people, organized religion, Wall Street, and in government. In recent national polls on the subject of
trust, it has been found that on average 61% of Americans say that you cannot
trust other people.
This level of distrust in others is the
lowest on record since 1972 when polling began on this question by the National
Opinion Research Center. Similarly, confidence
in organized religion has fallen from a high of 45% in 1973 to a low of 20.5%
. Perceptions
of Wall Street show that 72% of Americans think that Wall Street only cares
about making money for itself.
Just 20% of Americans say they can trust the
government in Washington to do what is right always or most of the time. At the core of the
current market is a crisis of confidence and trust in companies. After experiencing the worst financial
collapse since the Great Depression, consumers have lost trust in companies.
In a longitudinal study by the National Opinion Research
Center finds that confidence in companies has dropped significantly with now
only 13% of Americans indicating that they have a great deal of confidence in
companies.
We have found these patterns of distrust in our own
research. We found that trust varied
significantly based upon the industry in question. The least trusted industries were health
insurance (50% distrust), and banks and financial institutions (46%). The industries garnering the lowest amount of
distrust included Manufacturing (11% distrust), Technology (11%) and Retail
companies (12%). Home building and real
estate companies trended toward the middle of the industries tested with 31% of
consumers indicating that they do not trust companies in this industry.
So, if there is a crisis of trust in how Americans view
companies, what are the things a company needs to do to create trust? We now turn to defining more clearly the
construct of trust. For we know that the
creation of trust is based on knowing and understanding what is trust.
Pew Research Center, Trends in American Values: 1987-2012, 2012.
Pew Research Center, The Generation
Gap and the 2012 Election, 2011.
Please contact Real Estate Economics for more information at ContactUs@RealEstateEconomics.com or visit www.RealEstateEconomics.com.
