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Posts Tagged ‘economy’

The Value of IMAGE, The Image of VALUE

July 9th, 2014 No comments

There is much talk of the need to “do something” about our industry’s image. Wow, that’s some understatement!

But what? And how? And who will pay for the refurbishment?

It’s a deep problem. It’s hard to refurbish an image that was never really “furbished” in the first place! The MH industry has a lot of growing up to do, and it’s quite a challenge.

Tony Kovach recently published the following graph.

manufactured-housing-mobile-home-shipments-graph-chart-calculatedrisk-posted-masthead-blog-mhpronews-com-

Our eyes jump to the trend of the past decade, which emphasizes the need to “do something.” I invite you to study the other end of that graph. The sixties.

In that decade, as today, the rule of thumb for a stick builder was to dedicate about half of construction cost to materials. That didn’t work for those building homes in factories. They had to build a product sturdy enough to ship a thousand miles on its own wheels, and if material content dropped below 60 percent—lock the factory doors. No reputable dealer would buy. In those days, despite buying all that material factory-direct and very efficient labor, the MH cost was far higher per square foot than a house (excluding land).

By the end of that decade, the rule of thumb—the MH optimum for sales maximization—was 70 percent material, 10 percent labor, 10 percent overhead and 10 percent pretax profit. In good years, that worked and profits rolled in. In bad years, you got hammered.

Sounds like a loser business?

Not if you knew your stuff. If you managed 30-plus inventory turns, collected cash on delivery of the homes, operated in a pole-barn factory and had nominal investment, you could operate on your supplier’s 30-days-same-as cash payment plan. Banks released floor-plan cash upon delivery of the home. 100 percent return on equity was not out of the question. But everything had to work.

Look again at Tony’s graph. Everything did work during that decade for those who managed well. A year of no sales increase was considered a recession.

Manufacturers had to master that formula or get out of the race. Competition was brutal, but everyone understood that no one could do it alone. Manufacturers, suppliers, dealers, developers and banks. All were highly profitable when they got their sums and strategies right.

The quality of manufactured homes soared and the cost of producing them plunged. Such was the magnitude of opportunity in the sleepy housing industry.

It was Skyline, Fleetwood and the like who got the publicity—biggest MH manufacturers, most profitable companies in the stock market and all that. Surely they should have stepped up to the plate and “done something” about the industry’s image?

Well, they did what they could, but their hands were tied. Every nickel of such a manufacturer’s profit would have funded just one percent of industry sales for an image-building program. And what, one might ask, could a manufacturer have done for its image more useful than investing in product improvement? That’s what the critics and customers requested, and rightly so.

The largest manufacturers each held less than 10 percent market share and had plenty of competition snapping at their britches. Which of those “leaders” should have stepped up to the plate and invested significant funds in the industry’s image? Sure the profits were good, but they didn’t stay that way.

Look again at Tony’s graph, and what happened when things stopped going well for the industry in the early seventies. That’s why there was so much resistance to the HUD standard, and still is. That’s why it has always been hard to get those “big manufacturers” to spend “just a little bit more” on the want-of-the-week. If the competition doesn’t do the same, you’re toast. Real competition is not for the faint of heart, but it works wonders for customers.

Competitive product improvement, step by step. Learning curve. That’s how the MH industry cut the cost of building homes in half. Focused, efficient, production in a housing market where nobody was in charge, regulation was rampant and good times were rolling. Don’t hold your breath waiting for a repeat of that kind of housing opportunity.

My enthusiasm for today’s outlook is based on the fact that the leaders have survived and now have commanding market share, while retaining—improving—their production cost advantage over the stick guys. I don’t know what the Big Three’s margins are, but they’re profitable. We’re in a new and potentially better ball game.

The outlook is marred by the yo yo of housing demand, fluctuating with the whims of the economy and regulators. That’s why, when asked to write a book on the potential of manufactured housing, I said, “You’ve got to be kidding!”

It didn’t take much research to change my mind. The survivors seem to have learned to cope with such market volatility and stifling regulation. The production cost advantage is still increasing and the competition continues to doze. Well managed surviving MH producers remain profitable in a scenario that would have crushed any normal manufacturing industry long ago … but woe to the manufacturer who single-handedly takes on the cost of a major industry image upgrade.

It needs to be done, but has to be a team effort, with participation by most members of the industry at large. And there has to be strong leadership so we all head the same direction.

Given the squabbling we all see and regret, is there any hope?

Of course there is! The MH industry has always been a teamwork affair, where even bitter enemies worked together to keep the system functioning, because we all had a vested interest in keeping this marvelous housing system pumping, cranking out houses and profits. That has not changed.

Sure HUD, Dodd-Frank and their ilk are a royal pain in the butt, but they strangle the other guys, too. Despite best efforts of bureaucrats to rule by regulation, economics will win in the end, and we’ve figured out an inherently better way to build houses.

Yes, for a time we fouled our nest. Young industries do that. Yes, the public disdains “trailers.” Tell me what sort of low cost housing they like? Nobody wants low cost housing except those having a nose for value or low income. Those are huge markets that no other product can satisfy that need as well as manufactured housing.

What we lack in image, we more than make up in value.

Let’s build on that. ##

bob-vahsholtz-author-dueling-curves-battle-for-housing-posted-industry-voices-guest-blog-mhpronews-com-manufatured-housing-professional-news-75x75-Bob Vasholtz is the author of Dueling Curves. Bob Vahsholtz is the author of DUELING CURVES The Battle for Housing. Bob can be reached at kingmidgetswest@gmail.com. Web: www.kingmidgetswest.com

A prior guest column from Bob – Who's in Charge Here – is linked.

 

(Editor's Note: The chart show above is courtesy of CalculatedRisk and was used in the following article, Manufactured Housing's Declaration of Independence. As with all letters to th editor, articles and guest column, the views represented are those of the writer. Other perspectives are welcome, email latonyk@gmail.com with Letters to the Editor or OpEd in the subject line.)

The Lack of Sales Training in the Manufactured Housing Industry

August 20th, 2013 No comments

Tony, in your LinkedIn Discussion, you asked the question, “Are manufactured housing pros today truly 'trained' to sell new MHs?

Unfortunately, the answer is (for the most part), “No.”

When the tidal wave of a slowing economy, a major downturn in housing starts, an skyrocketing number of foreclosures and lower site-built mortgage interest rates hit, we saw the biggest sales collapse that I can remember in over 20 years in and around the industry.

It's sad, but when most companies experience lower sales, the FIRST thing that goes are the things they list as "nice to have" items, like training.

Great companies invest in MORE training during economic downturns, to ensure that they have the best chance of selling to every Client that walks through the door. IBM is a great example of this.

The training that DOES occur is typically in-house training, where companies are most likely to become myopic in their view of the industry. And, when this happens they revert to teaching the things that worked in the past, which they find aren't effective in TODAY's market; which also reinforces the idea that “training doesn’t help.”

This is a HUGE problem, because today’s market is dramatically different than the industry of yesteryear.

Today:

OVER 90% OF ALL HOME-BUYERS (Including Manufactured Housing Clients) DO THE MAJORITY OF THEIR SHOPPING ON THE WEB! 

And virtually 100% of the BEST BUYERS shop via the Web.

Most dealers don't seem to be aware of this – or if they ARE – they don’t know how to use the Internet to attract the attention of the best buyers.

If they don't have a compelling marketing message – if their website and associated social media sites aren't professional and appealing – then potential Clients see that dealership as amateurish, and never "convert" (that is, click through and ask to be contacted by a salesperson), much less visit that sales center.

When a good buyer DOES contact a dealership, the sales professionals have to know how to use multiple modes of communication to engage that Client.

They have to be professional, credible, and competent on the phone; with email; and with social media to create a "three-dimensional" relationship with the customer.

When the Client believes they've found a credible company, sales professional, and the right home, THEN they will come to the sales center to COMPLETE the purchase process. This means that sales and marketing are now a combined effort and that…

THE SALES PROCESS HAS CHANGED IN A MAJOR WAY!

Whether the industry wants to believe it or not, this has become a Web-Driven market, and sales professionals have to be good at using the tools and techniques that work in this new environment.

Training that addresses these and many other changes in our marketplace is virtually non-existent; and most of the training that IS available is dated and out of step with today's market.

In addition, most manufacturers and/or dealers are exceedingly reluctant to invest in training.

The manufacturers that have big backlogs believe that if they build a better, cheaper product, that they will ALWAYS have a big backlog.

Those that DON'T have big backlogs think that PRODUCT is the answer – not training.

They believe the problem is that they haven't found the winning combination of features, benefits, and price point. Therefore their efforts and money are invested in product development, not sales force development.

They don't understand how important it is to invest in Web-based marketing and associated training.

The net result of this is that many existing retailers will suffer and die on the vine, and new ones will come and go. And, when the next big downturn hits the industry, manufacturers and retailers alike will be poorly-prepared to deal with it, because they will not have invested in the single most powerful marketing and sales tools in existence:

  • A strong digital media marketing presence
  • And great sales training to build the skills needed to bring great prospects in off the Web; and then to convert the sale, once they have the Client on-site.

I love this industry! It provides housing for a socio-economic group that will always need affordable, good quality, energy-efficient, attractive housing.

But the industry continues doing the same things it's always done – even though the market has changed in a dramatic way.

There was a good book written by Spencer Johnson in 1998, "Who moved my cheese…" The theme of the book (a shifting marketplace) strikes at the heart of the manufactured housing industry today.

My greatest hope is that a few manufacturers & dealerships will recognize the need for major change, and will invest in both Web-based marketing AND in modern, market-relevant sales training; both of which would help the industry increase its share of the housing market. ##

jim-carpenter-posted-manufactured-home-professional-news-mhpronews-com-75x75-.jpgJim Carpenter,
The Carpenter Consulting Group,
previously with Oakcreek Homes

Housing Starts Climbing – Now is the Time to Begin Major Marketing Efforts

September 24th, 2012 No comments

gary-fleisher-modular-home-coach-posted-mhpronews.com-industry-voices-manufactured-home-marketing-sales-management- (1)Reports coming out of Washington state that housing is beginning actually see the light at the end of the tunnel and it's not a another train headed our way.

If you are a new home builder or factory owner/management, now is the time to implement that Marketing Plan so that Spring 2013 will see more orders. Marketing first…Sales next.  Without a marketing strategy your sales will probably be no better than they are right now.

good-news-every-one-posted-in-mhpronews

New-home construction in the U.S. probably rose in August to the highest level in almost four years, showing residential real estate is sustaining a recovery even as the broader economy sputters, economists said before a report today.

Builders broke ground on homes at the annual rate of 767,000, up from 746,000 in July and the most since October 2008, according to the median estimate of 85 economists surveyed by Bloomberg News. Another report may show sales of existing homes advanced for a second month.

We expect housing to be a bright spot,” said Yelena Shulyatyeva, a U.S.economist at BNP Paribas in New York. Nonetheless, “there’s still foreclosures, there’s still delinquencies, people are still cutting on mortgage debt.” ##

gary-fleisher-modular-home-coach-posted-mhpronews.com-industry-voices-manufactured-home-marketing-sales-management- (1)Post submitted by
Gary Fleisher
Modular Home Coach
modcoach@gmail.com