HTA Update - 05/28/2008 (Plain Text Version)

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In this issue:
Home Buyers Benefit from Home Technology
Improving Profitability on Home Technology Options
Five Things Custom Builders Need to Know About Electronic Systems Contractors (ESCs)
Home Technology Solidifies Builder Revenue in Volatile Market
Quick Tip: Adding Technology to Existing Homes
Industry Recognition

Improving Profitability on Home Technology Options

Technology is not a commodity, and should not be sold like one. For many home builders, the technology they install in their homes has not changed much since the 1960s. Antenna wiring, telephone wiring, and intercom systems were on the selection sheet when my grandparents built their first house. Why are we still resistant to change almost 50 years later?

Younger home buyers, and even active adult consumers, are demanding more technology in their homes. From the driver seat of their cars, they can control music, lighting, temperature, and communications, and even receive real-time traffic and weather information. Car manufacturers have proven that technology helps differentiate their product and sells cars, so why couldn’t it do the same for homes? When packaged and marketed effectively, technology is not only a profit center, but also a great way to set builders apart from their competition.

Keep this in mind when working with your technology partners - working with an Electronic Systems Contractor (ESC) can be very different than working with a traditional subcontractor. For example, plumbing is a required trade in the home building process. It’s in the builder’s best interest to find the best product at the best possible price – the lower the price, the higher the potential profits. Keeping the base cost of your homes to a minimum is the key to remaining profitable and competitive in a difficult market, but what about option pricing? The house and the neighborhood is what brought them to you, but the options, features, and amenities are often what make them buy. Upgrades don’t have to be inexpensive, they have to be priced appropriately. Well-designed, properly priced systems can generate significantly more revenue than discounted cable and phone jacks. In fact, taking the bargain-priced base options off of your selection sheet will help your sell-in on the upgraded wiring and system packages.

Here are a few ideas to help you improve profitability on your technology options:

Partner with the right ESC for your business. Make sure their business philosophy aligns with yours.
Bigger isn’t always better. There are great systems integration companies of all sizes out there – shop around. CEDIA (Custom Electronic Design & Installation Association) is a great place to start.
Be different. Structured wiring is important, but boring (and your competitor offers it too). Install systems in your model that will make an impression.
Expand your product options. Customers may not talk about your granite countertops once they leave the house, but they’ll probably remember that cool TV behind the mirror in the master bath.
One size does not fit all. Select the products and packages that fit your communities. Ask your ESC to design different systems for your different floor-plans to ensure greater sell-in. Condo buyers generally don’t want central vac systems, so make sure they’re not on the sheet.
Price the packages correctly. No one will pay 40% more than the big box store pricing for a television, so set your pricing carefully. It’s better to get 15% from the sale of 50 systems than 30% of none.
Use technology as a selling tool. If finished basements, gourmet kitchens, and granite countertops make good incentives, why not technology? Consider offering a lighting control system, an iPod-based music system, a computer network, or even a “technology allowance” to attract buyers.
Let your ESC sell their systems, not your salespeople. ESCs are experts on technologies and can demonstrate all the features of home technologies. It’s their job to keep up with the latest and greatest products and know how they work. ESCs can show and train your customer how to use the technologies. Your sales team has enough on their plate, ESCs will do a great job selling technologies and promoting your company in the process.
Set clear expectations regarding roll-ins and appraisals with your ESC. This is a difficult economy for appraisals, and no one wants the electronics to be a deal breaker.
Be selective and focus desired product offerings, not price. When it comes to technology, it’s more important to offer the right products than to offer the best prices. If your customer wants a deal, they’ll shop the web. They buy technology from you because it was custom designed and professionally installed. They pay more for the products they want, so don’t confuse them with unnecessary low cost options.
Wire your homes for today’s technologies, not yesterday’s. That cheap wiring package looks good on the selection sheet, but will ultimately frustrate your customer. The cable TV jack doesn’t always go behind the TV. Chances are that TV over the family room fireplace will be connected to a cable box and a DVD player. Those devices will not be mounted behind the TV, so the wiring just got a little more complicated. The plain old TV jack will not work in this application and will most likely result in a warranty call on your part.
Embrace technology, your customers have. Find a good ESC and work with them in the beginning of the design build process. Your partnership can develop ways that will help you sell your home, more products and increase profitability.

Sean Weiner is the President of Baltimore based Starr Systems Design. Starr Systems has provided entertainment, security, and electrical systems to both custom and production home builders for more than 14 years. Sean is a member of NAHB, the HBA of Maryland, AIA (American Institute of Architects) and CEDIA (Custom Electronic Design & Installation Association). He is the recipient of five CEDIA Electronic Lifestyles Awards that honor excellence on technical and design/aesthetic aspects of technology installation projects in the residential electronic systems industry. For more information email sean@starrsystems.net or call Starr Systems at 410-494-4310.