Warranty Service & Referrals: Are You Leaving Money on the Satisfaction Table?

Every third party homeowner survey company has concluded that warranty service is
the greatest influence on getting referrals. Regrettably, most builders are unaware of this
tidal wave of support for warranty service because they use only ONE survey company.
As a result, it’s easy to miss the powerful pattern of statistics that has surfaced. Consider
just a few of the conclusions that have been discovered by these well-respected survey
companies—

• A major study performed by Professor Ken Merchant of the University of
  Southern California found that an increase in profits between 13 and 23 percent
  is available to builders who increase customer satisfaction by just 8 percent.
• Eliant Surveys (www.eliant.com, contact Bob Mirman) reports that 51% of a
  homeowner’s decision to refer is based on satisfaction with warranty service.
  Further, only 5% of referrals occur before closing, leaving 95% for after closing
  (that is to say, during and after the warranty period). What memories do you want
  fresh in homeowners’ minds?
• Customer Follow Up, Inc.(www.customerfollowupinc.com, contact Marc
  Warren) provides further support: 53% of homeowners who would NOT refer
  their builder cite inadequate follow up and slow resolution of warranty issues as
  the reason. Eighty-two percent of that group rate their builder at a 7 or less (on a
  10 point scale) for resolution of warranty issues. You must perform at top levels
  to earn referrals—slow, slipshod service will not qualify.
• Woodland-O’Brien (www.woodlandobrien.com, contact Charlie Scott) has
  concluded that the average builder loses nearly 25% of homeowners’ willingness
  to refer during the warranty period. What a waste after all your hard work keeping
  buyers content up to this point—don’t walk away from rewards that are available
  for just a bit more effort and attention. This effort is less expensive and more
  certain to work than costly marketing campaigns.

Yet most builders still think of warranty service as an annoying, tedious, necessary evil.
This attitude is reflected in the fact that homeowner’s satisfaction drops between 8 and
11 percent between move in and year end—typically caused by the builder seeming
to “turn its back” on the homeowner. Regrettably, referrals drop along with satisfaction.
The steps that follow can help to change that and lead to more sales and increased
profitability.

Change Your Thinking
Think of the closing not as an end but rather as a beginning. Work for a healthy long-
term relationship with homeowners. Treat it accordingly with planning, good systems and
procedures, and genuine appreciation for your homeowners. This will align your thinking
with your homeowners’ hopes and expectations.

Proactive Structure
Establish a proactive structure for service. I recommend two builder-initiated visits–
a primary visit (typically between 30 and 90 days) and an anniversary visit (at 10-11
months). Avoid the mid-point (5 or 6 month) contact which sends a message that you
expect a lot to go wrong with the home and is highly inefficient for all concerned.

Before Closing
Set the first of these two appointments before the home buyer closes on the home.
This sends a clear message that you intend to stand behind your product and that you
still care about customer satisfaction. “We would like to review your home and confirm it
is living up to the standards we promised you.”

Checklist
Show up with a warranty visit checklist and look for things that might need attention.

These can include safety and security items (such as locks, smoke detectors, GFCIs, and
so on), known trouble makers (down spout extensions in place? how is concrete flatwork
doing?), and general functionality of doors, windows, fixtures, and so on. Review key
maintenance points–and bring a clean furnace filter as long as you’re going!

Interim Items
Between these two appointments, graciously accept interim reports of items. While you
can offer to hold non-emergency items until the next routine visit, ultimately it serves your
purpose best to leave that choice to the homeowner. This combination of two planned
visits and a gracious interim request item policy gives all parties the best of both worlds in
terms of procedures.

Repair Appointments
Ensure that work appointments are effective and efficient so that repairs occur in one visit
as often as possible. This requires an informed inspection to accurately identify whom
you need to send, anticipate the details those technicians will need to know, and consider
whether follow up attention might be appropriate (such as the cleaning crew after a major
multi-trade repair).

Trade Agreement Details
Document your warranty service practices in your trade agreement. Start with the date
the warranty coverage begins–the date of closing. Add response time expectations and
consequences of slow or no response. Detail the service behaviors you expect as well,
right down to “park in the street rather than on the homeowner’s driveway.” Host a trade
contractor service orientation and discuss all of these points.

Rigorous Follow Up
Make follow up contact with homeowners requesting any feedback on the repair process.
Start with emergency items, then address work orders that have not been scheduled yet
and those nearing their expiration dates. Next, contact homeowners whose work orders
came back without the customer’s signature and finally check with homeowners who
signed their work orders. Use email, phone, mail, or in person visits to make this follow
up happen.

Document
Once the documentation habit is in place, it blends into daily operations and generates
impressive benefits: Quality analysis is possible, costs can often be reduced, and
information that may be needed for self-defense accumulates.

An effective warranty management system like our patented HOMsoft system
makes this easy. It tracks every communication and codes each item to generate
useful reports. The dashboard lists the follow up contacts you need to make each day.
As Tracey Gundersen of Homsoft says, “Inevitably the builder who is in trouble with a
homeowner is the builder who lacks an effective system and thorough documentation.”

Reports
Internal reports should track items rather than “lists” to identify recurring issues. Look for
design, product, and workmanship issues. Circulate this data back through all systems
such as architecture, purchasing, trade selection, supervision, and delivery. Watch
for issues stemming from choices available in the home buyer selection process that
consistently cause problems later, or errors in setting expectations.

Stimulate Referrals
Ensure that your warranty personnel understand how and when to ask for referrals.
For example, imagine a homeowner says “Thanks for getting out so promptly. We love
the house and appreciate your help with these few items.” Your warranty rep should
recognize the cue to respond “Thank you, and we’ll give the same care and attention to
anyone you refer to us.”

Then sit back and enjoy the benefits of putting warranty service in its proper place
beside your other marketing campaigns.

Customer Meeting Management

Our customers just take over…

We lose control in the first 10 minutes.

These meetings are taking way too long.

Customer meeting concerns abound. Most of them develop from a common gene pool: the need to master meeting management techniques. Here are six I believe to be critical.

1. Have a written agenda. A set of Sample Meeting Agendas can be downloaded from the Forms section of our Library.
2. Align the customer’s expectations about the upcoming meeting. Do this with a description in your homeowner guide, in conversation when you set the appointment, and again as part of the meeting introduction.
3. Arrive early to set the stage and get focused. Welcome the customer to your territory surrounded by appropriate materials and conditions.
4. Cover the agenda. Your goal is to address each applicable topic (marking others “n/a”) however you can certainly vary from the sequence on the agenda is circumstances make that appropriate.
5. Record agreed upon follow up actions–both yours and the home buyer’s–on the agenda. When the customers leave with their copy of your meeting notes you will both have exactly the same information.
6. Follow up ASAP on each item noted, documenting the end result and when you delivered the response.

These methods, few and simple as they are, demonstrate to home buyers a professionalism that builds trust and confidence. When they see that you know what you are doing they are more likely to relax and let you lead the process.

What If the Goal Was to Make Things Better?

In free moments I like to speculate on what the world would be like if everyone got up in the morning with the goal of making life easier for other people. This would require a significant shift in attitudes and practices in many offices and agencies.

Imagine for instance that the building department wanted to help you build better homes, not just catch you doing things incorrectly, that they worked hard to make codes comprehensible and applied them consistently rather than whimsically.

Likewise governmental regulations and environmental rules would make sense because people sat down together with the mutual goals of both preserving our planet and still allowing—even welcoming—PEOPLE to reside on it with other forms of life.

This make-life-better approach would not be limited to the construction industry. Supposing designers at every manufacturer made a practice of using the products they produced? My guess would be that shampoo bottles with caps that require a tool to open would get re-designed. “Easy” open/close zip lock plastic bags containing frozen veggies would actually be possible to open and close—I won’t go for easy as that may be expecting too much even from this concept.

Here’s a more serious example. Recently our local paper (Colorado Springs Gazette, March 10) carried an article exposing the blatant arrogance and greed of KV Pharmaceutical. KV won exclusive rights to produce and market a prenatal drug called Makena (a right awarded to them by the government to ensure consistent quality).

For years this medication which helps prevent premature birth was available from compounding pharmacies for $10-15 a dose. With their new exclusive rights, KV hiked the price to an astonishing $1500.

Early this month, KV gave in somewhat to pressure from groups like the March of Dimes and lowered the price to just under a still greedy $700. Even better, behaving with considerable common sense, the FDA announced that it would not take enforcement measures against pharmacies producing a substitute version. As a result, the medication will continue to be available at the former low prices.

[http://www.thirdage.com/news/kv-pharmaceutical-cuts-price-prenatal-drug_4-1-2011]

Sad that KV would take advantage of desperate patients for material gain but kudos to those who came to the rescue. What can you do today to make life better for someone—whether a customer, co-worker, or associate? Systems are often impersonal, uncaring, and mechanical but those of us who apply them can still think if we choose to.  Many times, there is a way to make things work if we look with that intention at heart.

[For more thoughts on using good judgment in customer service, download Judgment Calls from our Service Library Articles.]

Community Team Service

Community Team Service
Expand the Team, Expand the Benefits

The community team meeting concept has been around quite a while now. Many companies have had such success with it they are ready to take it to the next level. That involves expanding the role of others who work with home buyers throughout the process to strengthen service and attention.

Depending on the details of a company’s processes, this might include mortgage, selection, closing, and warranty personnel. Traditionally, these folks are welcome at community team meetings but in too many cases schedules have made their attendance irregular at best.

Given the realities of today’s marketplace, the time has come to devote more energy and attention to existing customers and coordinating services to them. The good news is that today’s technology makes doing so possible and convenient. Video and phone conferencing is readily available from most locations–so even if participants are unable to attend in person, they can join via technology.

Imagine the results if this meeting became a standard item on the schedules of these professionals–tangible evidence that looking after existing customers is a priority. What results might come from this entire group reviewing each buyer’s status and discussing issues and solutions together? Rather than having numerous separate conversations, the efficiency and effectiveness of bringing these matters to the community table systematically makes a lot of sense. Out of the box solutions to problems often come from fresh perspectives. Energy and enthusiasm grows from a sense that you are not alone selling, building, and servicing new homes and the customer who buy them.

Action items noted for follow up on the community team meeting agenda have a greater chance of being brought to closure. The responsible individuals will be reluctant to let the group down. With budgets tight and fewer people available to serve customers, working together to come up creative services and solutions to problems may be a great way to serve more customers. This team approach to caring for homeowners would go a long way to bringing more buyers through the sales office door.

The era of sign the contract and throw the buyer into the system hoping for the best is gone along with the exuberant market of years ago. Simple, efficient means of staying close to customer needs are needed and this one could have significant impact for all involved.

Change Order Disorder

When the market is strong and sales are good, many builders refuse to accept customer change orders. In leaner
times change orders become popular as a means to secure sales. Frequently once the change order gate opens,
change order creep occurs and alterations get made later and later in the schedule, sometimes without payment or
complete documentation. What follows is often insanity for the field staff, errors, disagreements, and customer
dissatisfaction.

Swinging from no changes ever to some changes maybe to almost any changes almost any time may be a tempting
marketing strategy. But caution is in order: As this change order pendulum flails back and forth, remember that the
entire company flails right along with it.

Managing customer change requests is as much an operational issue as a sales and marketing issue. Each
company– whether production, semi-custom, or custom–evolves its operational style based on philosophy and
experience. Documentation and communication systems develop to reflect and support that evolution. Altering these
components is possible but requires planning, discussions, and revisions of the plans. From sales through warranty,
every company function must be aligned to manage and respond to changes effectively.

The ideal situation is to have systems and attitudes in place that accommodate reasonable change requests within
reasonable time frames with reasonable profit accruing from the effort. “Reasonable” in this context is defined by
what works successfully for both customer and company. Such changes are then correctly implemented resulting in
ecstatically happy home buyers.

Regrettably, many builders lack effective change order management systems. Jumping back and forth among
operational styles means that change order practices don’t have a chance to be fine-tuned before they mutate to a
different form. Reasonable is replaced by “seat of the pants” and “spur of the moment”.

Builders might do better both short- and long-term by making peace with the whole change order challenge. Is it
really fair to expect customers to make every decision about a product this expensive and this important and never
second guess any of their choices? We’ve all seen builders make changes to model homes two days before their
grand opening–yet buyers are expected to get all details right often before construction even begins.

And desirable as it is to operate without the extra work and annoyance of change orders when times are good, that
approach leaves a company without polished systems for managing change orders when accepting them is essential
to selling homes. Hurrying to develop and implement this complex process under stress is a recipe for frustration,
mistakes, misunderstandings, and expense.

As we all know, it is easier to speed up a moving vehicle than one standing still. Slight adjustments to a competent
change order system are easier than creating a system from the ground up under the pressure of a tough market.

Silver Bullet Syndrome

We all understand the uses and limitations of a hammer: it’s a great tool when you want to hang a picture but it’s of
little use when you need to wash a window. Why are we so unable to use this same insight with business processes?

Take for instance the current popularity of “lean” processes. Lean’s focus on efficiency offers clear advantages. The
logic of finding and eliminating waste, duplication, and omissions is unassailable. Yet applying lean thinking to
customer service can result in mean service. When working with individuals there is such a thing as too efficient.

Case in point, information operators in a major U.S. metropolis were instructed to skip amenities when assisting
callers to save time and increase productivity. Is handling five percent more calls worth sacrificing common
courtesies?

If you’ve been in the work force for very long you will recall when “empowerment” was all the rage. Meetings were
held. Slogans were printed, framed, and hung on walls. Managers in hundreds of companies unleashed the creative
energy of employees with the exciting pronouncement, Go ye forth and make decisions!

And they did–to the shock and dismay of many bosses who commented: “You did WHAT?!” Empowerment
without adequate education, training, and experience can result in some spectacular (and expensive) on-the-spot
decisions. For instance, one superintendent “empowered” to solve homeowner issues told the mother of four to “Go
somewhere for the weekend and send warranty the bill” while her hardwood floors were re-finished. The bill
included a hotel in Vail, ski lift tickets, dry cleaning, and a pet spa for Boomer, the family dog.

The list goes on. Management by Objectives was going to solve all our problems at one point just as Total Quality
Management (TQM) and Quality Circles were expected to do. Accountability had a turn as well. Each silver bullet,
in turn, proves itself not quite up to the task of solving all our problems and is too often therefore cast aside as
useless only to be replaced by the next silver bullet, typically referred to in buzzword short-hand and represented by
numerous industry articles and $26 must-have business books few of us ever finish reading.

But the fact that I have a dirty window to clean does not drive me to throw my hammer in the trash. Needing to put
a nail in a board does not mean my spray bottle won’t be helpful tomorrow. Maybe we can keep this in mind with
lean, accountability, TQM, and whatever other silver bullet lurks on the horizon. Each has uses and limitations;
success comes from mastering a wide repertoire of tools and making wise choices about which one to apply to the
situation at hand.

Wind Driven Snow in Vents

From Wisconsin: With recent snowfalls, some of our homeowners have experienced condensation coming down through bathroom exhaust fans. We=ve also had some snow intrusion into soffit vents. Our position is that these vents are installed per code and we are unable to control the blizzard conditions. Have builders changed their stance on this? Also, any magic words to help our warranty department through the phone calls?

Most builders are still following exactly the policy you described. Fixing weather related damage is not a precedent I would recommend setting. Unless something was installed incorrectly or a material failed, builders have no responsibility for these issues. Limited warranty exclusion of weather damage is information homeowners have from the beginning but may need to be reminded of.

To accomplish this, consider an email to all homeowners alerting them to such events at the beginning of the winter season or when large storms are threatening. List tips about such things as pet safety, ice damming, attic vents, and fireplace/bath fan dripping. Suggest preventive steps homeowners can take.

For instance, mention that they can install plastic over their attic insulation below visible vents-

snow collects on the plastic, melts, and evaporates without harming insulation or drywall. Include a reminder to step only on wood members of the attic to avoid injury or drywall damage. If fencing or trees are damaged, homeowner insurance might apply, and so on. A reminder before such things happen is better than a “no” after the event.

Warranty personnel should listen patiently and be empathetic. Some of them can probably relate their own experiences in coping with a storm’s effects. In responding to complaining homeowners, begin with agreement: “Yes, that was a terrible storm; we’ve had a dozen or more calls. You did the right thing, we can provide some suggestions that may help.”

In some cases wisdom suggests investing time in a warranty inspection. A visit to the home by a knowledgeable technician can reassure a homeowner that this maintenance issue is truly a maintenance issue. Having a list of several potential drywall repair people and painters can be useful. Sometimes the homeowner just doesn’t know where to start; if you can solve that they will follow through.