The most important metric in sales and marketing for home builders is the appointment-to-sales ratio. This metric is crucial for understanding how well your sales process is working.
But what exactly counts as an appointment?
An appointment is any meaningful conversation that includes pricing information and lasts at least 15 minutes. For example, walk-in traffic can turn into an appointment if it meets these criteria. Similarly, if a potential buyer visits multiple times, each visit can be considered a separate appointment.
Essentially, anytime we have a meaningful discussion with a prospective homebuyer that includes pricing and lasts 15 minutes or more, it counts as an appointment. It's important to note that the entire conversation doesn't need to be about pricing, just that pricing is a part of it. And of course, online sales appointments are also included. By tracking these appointments, home builders can gain valuable insights into their sales processes and improve their overall success.
It’s often emphasized that this ratio should never drop below 10%, and if it does your sales process isn't functioning as it should. Even with high traffic, if the appointment-to-sale ratio is below 10%, it indicates an underlying issue. If your ratio falls below this threshold, it's a clear sign that something is amiss.
The appointment-to-sales ratio is influenced by three main factors, with a fourth one added if we include online sales. For now, let's focus on the primary three factors.
1. Make It Easy To Buy From You
One of the key factors in making a purchase experience seamless is the ease with which customers can buy from you. You can do this in several ways.
The first key factor is content availability. It's essential to provide customers with ample resources to allow them to self-research, self-qualify, and self-progress through their buying journey. This means offering detailed imagery, descriptions of both included and optional features, and transparent pricing information. Essentially, you need to provide customers with everything they need to make informed decisions on their own.
Let me illustrate this with a personal story. I have two teenage daughters, aged 17 and 14, and I recently took my younger daughter to Five Guys because she loves their hamburgers. When I asked her to place her own order, she hesitated and asked if there was a kiosk she could use instead. Despite knowing exactly what she wanted, she preferred to avoid interacting with a human. This underscores a broader trend: customers increasingly want the ability to handle things independently until they feel comfortable.
Next is self-progressive functionality. This involves enabling customers to add items to their "cart" and "proceed to checkout" effortlessly. I use air quotes here because we're not trying to replicate the entire online shopping experience for something as complex as home buying. However, providing this functionality meets customer expectations.
Some buyers may prefer to finalize their purchase online after gathering all the necessary information and interacting with your team in person. Moving in this direction can enhance the overall buying experience. While this feature won't solve all challenges, especially those builders faced when peak demand faded post-pandemic, it can significantly improve customer satisfaction and streamline the buying process.
Another increasingly important aspect is self-touring. Allowing customers to view properties on their own, without a salesperson immediately present, can be very appealing. Of course, providing the option to have a new home professional join them if they prefer adds an extra layer of service and convenience for those seeking detailed insights during their visit. This approach caters to different customer preferences and enhances the overall experience.
Minimizing hurdles in the home buying process is essential. Consider the number of meetings or steps a customer must go through before making a purchase. Some builders still require a 30-minute FaceTime conversation before an in-person visit or a pre-approval letter just to meet with the sales team.
Think about the typical steps in the buying process–you may start with an initial appointment, then a second appointment to choose the floor plan, followed by another appointment for detailed options. But when do you actually consider the sale closed? Some companies get creative, like hosting ceremonies to welcome you into their community right from the start. Why not start the celebration sooner? Celebrating milestones can keep customers feeling engaged, even if the final sale hinges on a few decisions.
It’s also worth noting that some builders let you reserve a home without a fixed price or move-in date, yet they hardly ever see a cancellation rate above 10%. Customers wait for months, unsure of costs or timing, but they treat the reservation like a done deal because of great communication.
Making it easier for customers to buy from you involves:
Providing detailed content for self-service.
Enabling self-progressive functionalities.
Offering self-touring options.
Minimizing hurdles in the buying process.
These approaches build trust and confidence, leading to a more satisfying and successful buying experience.
2. Communicating Your Value
How easy is it for consumers to really grasp and appreciate what you bring to the table? Now, you might be thinking, "Wait, aren't we supposed to steer clear of the word 'value' because it's so overused and misunderstood?" Spot on! When communicating with your customers, ditch the term 'value.' But here, as industry insiders, let's dive into why communicating value is crucial—and why it’s important to understand that value is a comparison-based idea.
Value isn't just about price. Price is straightforward–a black-and-white number. Value, however, is all about how your offering stacks up against the competition. Can consumers easily see what sets you apart and decide if it's what they need?
Now, I could get into this in many ways, but I'm a fan of analogies. So, let's think about Starbucks and 7-Eleven once more. If you've caught my Presale Without Fail talk at events like the International Builders' Show, PCBC, or the Do Convert Summit, you might recognize this example. When it comes to coffee, there are tangible and intangible aspects. The tangible part is the liquid in the cup and its quantity. Everything else—the ambiance, the music, the cup design, even the secret ordering lingo at Starbucks—those are all intangible values. They enhance the experience but are hard to quantify.
Now, comparing Starbucks to 7-Eleven, Starbucks has a sky-high appointment-to-sale ratio. That means a lot of folks who walk in craving coffee end up shelling out for their slightly overpriced brew. At 7-Eleven, it's more about convenience; you're already there, so why not grab a cup?
In the world of home building, using this analogy, a high-end builder would likely have a higher appointment-to-sale ratio due to the perceived value and quality they offer. A builder with a standout product that clearly communicates its value proposition will see that ratio soar.
If you have an amazing product that clearly articulates its value proposition to the customer, your appointment-to-sale ratio will be off the charts compared to the industry or market average.
3. Sales Team Training and Process
Now, let's talk about the last piece of the puzzle: the effectiveness of your sales team and the process they follow. Obviously, this is a crucial piece of the business, but too many owners and sales managers get laser-focused on this part alone. While having a top-notch sales team and process is key, it won't make up for the other factors—like being hard to buy from or having unclear value compared to your competitors.
However, if your ratio is below 10%, be brutally honest with yourself and search for other items to fix before expecting marketing campaigns to save you.
Many organizations struggle to track their appointment-to-sale ratio effectively, or worse, they give up because they think it's too hard to measure. But, this metric is critical for success. A healthy appointment-to-sale ratio is a sign that it's worth investing more in advertising and branding efforts to attract more potential buyers. However, if your ratio is below 10%, it's time to take a good, hard look at what else might need fixing.
TLDR Summary:
How easy is it to buy from you? Ensure the buying process is smooth and intuitive, with plenty of information available for self-research and minimal hurdles.
How easy is it to see and understand your value? Make sure your value proposition is clear, differentiated, and easily comparable to competitors.
How well-trained is your sales team and process? A well-trained sales team following an effective process is crucial but not necessarily the most important factor.
Focus on these aspects to improve your appointment-to-sale ratio and overall success. Measure and track this metric diligently, as it will provide valuable insights into your business performance, identify areas for improvement, and have the biggest impact on sales results.
