By Nathan Amidon, Regional Vice President - New Home Star
You have your land entitled, product approved, costs dialed in and now, after all the time and energy and invested capital, you are finally ready to start realizing revenue. Your first thought might be to put a sales person on site and open up immediately. Not yet! Too often, we have a tendency to make hasty decisions after spending so much time getting everything else right, and the consequences are a loss in pace and loss in margin improvement due to the lack of a grand opening community sales strategy. We get it, that you want to start selling as soon as possible. But opening your doors before you are truly ready and without a strategic approach will cost you more than you think. In this article, we will explore the best practices in maximizing pace and margins and the strategy to set up the community for success beyond the grand opening.
Step 1: Ensure you have all of the information available and in presentable formats. Start with a comprehensive grand opening checklist that is comprehensive and covers all facets of a community operation. This is not just sales and marketing collateral. But also everything from the land planning, amenities and development all the way down to the sign in front of the model or sales office. Once you have your list, assign the appropriate person the task and set a due date. Your sales team should quarterback this effort and be tasked with organizing all the information so they can present it to the operations and management team before going on site. They are the ones who need to know it all so they can accurately represent the community and build sales strategies around the content. You only have one chance to make a first impression. So have a process that results in a sales team that is equipped with the answers needed to create value and earn credibility with customers right from the start. There is an ongoing debate about when to release pricing for a grand opening, and I will attempt to answer this question using the guiding principles of selling homes. Give a range that you are comfortable with, but also help customers feel they are in the right place. But hold off on giving specific base prices until the week before the grand opening, so that your sales team can use this as an urgency tool to set up appointments leading up to grand opening weekend. This enables the customers to focus on the things that are most important to how they really live in a home and begin the emotional attachment to a home. This enables them to be more agreeable to the pricing, once it is rolled out, as long as your range was accurate up front.
Step 2: Have a strategy to create urgency in maximizing conversion. If you simply open your doors when you think you are ready, you have lost a big opportunity to create urgency. Instead of just lighting up the "open" sign, take the opportunity to premarket at least eight weeks prior to the Grand Opening date, form a VIP list, host Realtor and VIP events and educate all who are interested on why the Grand Opening weekend is the absolute best time to buy. Think about it from the buyer's perspective: if they walk into a sales office that is "open" and see few to no sales, it might cause them to hesitate or think to themselves "there must be something wrong here" or "I should wait until more people have purchased because I don't want to end up as the only one in this community." Those fears are real, as we have seen communities that barely got off the ground or never completed at all. We then have to tap into a psychological principle known as "social proof." By ramping up your marketing BEFORE you grand open, you can create a buzz, have a well attended event with lots of customers interested in buying all together at the same time and then create a reason why they will gain from purchasing on Grand Opening Weekend. It's a much better story to tell people who walk into your office in the early stages of the community that we are grand opening in eight weeks and therefore, they have just come to the right place at the right time as they will have an opportunity to take advantage of whatever special pricing or promotion offered when the community opens. When you finally do grand open, you capture a larger percentages of those first lookers giving you momentum in the process as you now have a successful community perception. Successful communities get to take more strategic price increases, ultimately benefiting all involved, including those who purchase.
Step 3: Having a lot release strategy that creates efficiencies in development and construction creates urgency on the sales front and allows you to have A and B lots remaining during a community's final phase. Releasing lots is a balance between the most efficient way to develop the community and the sales strategy of having select sites that are unique. You should have a release mix of A, B and C lots available so you can create a lot premium strategy that will even out the absorptions of each type of lot. There are a lot of margin dollars left on the table due to poorly planned lot release strategies so think through this one. It can be the difference between a top financial performance and a failure.
You have come this far in creating the next big community. Don't deflate all those efforts by falling short of creating and executing a strategy that allows people to feel the excitement and urgency of taking advantage of all that you have worked so hard to make a reality.