DECIPHER™ Case Study 19:
KB Home
Market and Product Diagnosis, Re-Positioning, & Turnaround, Price Optimization, Sales Analytics, Product Premium Maximization, Competitive Performance Benchmarking, Investor Reporting
Synopsis
Increased sales (that had stalled prior to engaging Competitive Analytics) back to budgeted range within four weeks of re-opening.
Background
KB Home is one of the largest and most recognized homebuilding companies in the United States. Since its founding in 1957, the company has built more than half a million quality homes. KB Home’s unique homebuilding approach lets each buyer customize their new home from lot location to floor plan and design features. As a leader in utilizing state-of-the-art sustainable building practices, all KB homes are highly energy efficient and meet strict ENERGY STAR® guidelines. This helps to lower monthly utility costs for homeowners, which the company demonstrates with its proprietary KB Home Energy Performance Guide® (EPG®). KB Home has been named an ENERGY STAR Partner of the Year Sustained Excellence Award winner for four straight years and a WaterSense® Partner of the Year for four consecutive years. A FORTUNE 1,000 company, Los Angeles-based KB Home was the first homebuilder listed on the New York Stock Exchange, and trades under the ticker symbol “KBH.” For more information about KB Home’s new home communities, call 888-KB-HOMES or visit www.kbhome.com.
Challenge
A national homebuilder opened a home site that offered both single-family detached homes and single family attached town-homes. After initial in-house research and the contracting of several local consultants, this community located in Southern California opened for sale. Within two months, sales rates plummeted to zero and traffic was at a bear minimum. The regional president and distraught project team were at a loss to understand the sudden change in performance. After much deliberation, the company engaged CA to perform a pricing study. After CA performed their internal site investigation (“Scope, Scour, and Swarm”), CA explained to the client that a pricing study to determine how much to lower prices was NOT in the best interest of the client and that the property in question needed alternative analyses that might allow for site design changes without drastic price cuts. In essence, CA does what other consultants do not. CA does not give the client what they WANT; CA delivers to the client what they NEED.
Solution
CA did a thorough investigation of the property as well as a comprehensive analysis of primary competitors, secondary competitors, tertiary comparables, and analogue properties and submarkets. CA also interviewed numerous prospective homebuyers within the immediate neighborhood as well as the surrounding competitive market area to get a strong indication of buyer preferences, geographical preferences, amenity preferences, unit feature preferences, affordability preferences, and affordability tradeoffs. CA conducted a unique base price and premium analysis with various scenarios based on the level of improvements that the property required (e.g. hard-scaping, soft-scaping, merchandising, theme, marketing strategy, etc). CA’s recommendations surprised and shocked the client. CA recommended a six-prong tactical plan to turnaround sales: 1) Redesign the property theme which included hard-scape and entry (ingress/egress) design recommendations; 2) Adding of soft-scape features which included specific recommendations of trees, vines, flowers, etc; 3) Re-merchandising of model homes which included specific recommendations of color, décor, furniture, sound, and visuals; 4) Closing down and re-opening with a new Grand Opening date based on market demand; 5) Decreasing base price points and premiums to a lower level than expected; 6) Redesigning of marketing materials and brochures to reflect the improved theme.
Results
Increased sales (that had stalled prior to engaging Competitive Analytics) back to budgeted range within four weeks of re-opening. CA has been engaged on numerous assignments that start off as more of a Sherlock Holmes novel. Typically, a phase of investigation is required in order to identify the appropriate questions before attempting to answer the wrong question. And this involves a serious scientific approach to an assignment, not a template-based “made-as-instructed” approach. CA is very proud that we are not just mathematicians, scientists, statisticians, and deep thinkers but innovators and creative problem solvers, versus the army of self-proclaimed consultants peddling their pseudo-advisory services.
Return on Analytics
>2,800%
If you are interested in speaking with a client contact from this company about the work we have done with them, please contact us to submit your request and we will be happy to contact the client for you.