Paul Schumacher was eager to get down to business as he addressed employees at Schumacher Homes’ 2012 annual meeting. That’s because business was good. In 2011, the company’s leads were up. Sales were up. Customers were happy. And to top it all off, it was the single best year in Schumacher’s 20-year history. All in all, the market outlook for custom home building was looking pretty great.
But if you weren’t in that meeting, you’d never know it.
“It’s probably the best time ever to build a custom home and get exactly what you want,” says Schumacher, founder and CEO of the custom home building company that has built more than 10,000 homes to date. “Low interest rates, material costs — everything is in the advantage of the customer — other than the perception that it’s gloom and doom out there.”
Schumacher understands that many prospective homebuyers remain recession-wary. Value is the new cultural mentality, and consumers are now quicker to assign labels such as “expensive” and “extravagant” to products advertised as “new” or “customized.” In fact, the company’s biggest competition now comes from the used home market.
“When you think of building a new home, people think, ‘Oh my God; it’s going to be too expensive,’” Schumacher says. “‘It’s going to take forever, and I’m going to end up in a divorce when it’s done.’ So we’ve just got to flip that on its end.”
Show; don’t tell
As a veteran homebuilder, Schumacher knows that no one in the construction industry is going to say that they don’t make a quality product. He’s seen the word “quality” exhausted by competitors and other builders. So to set the company apart from its competitor’s claims, he’s created a business model that lets customers experience its quality firsthand.
Schumacher developed the unique model early in his homebuilding career. He frequently had customers who were interested in model homes, but either wanted to build in another area or purchase the models. That meant the company needed new model homes to showcase the quality finishes, design elements and building materials for its next set of customers.
This dilemma led Schumacher to a realization. Making it easy for people to experience your value is the first step in converting new customers and showing them what you can do for them. If quality was one of the company’s key differentiators, why not display the model homes in commercial locations where people could view the quality, design and finishes any time they wanted? Then the company could build its new homes on the customer’s lots.
“It’s very different than the typical homebuilder coming in, and putting in a subdivision – going up one street and down the other — with a cookie-cutter approach,” Schumacher says.
“People can go through 365 days a year and see and experience our quality and not just talk about it. When they go through a model home they can hold us accountable, and we expect them to hold us accountable to that exact same quality that they see in our model homes.”
The “build on your lot” model also opens the company to a broad group of potential customers. While location is predetermined with all used homes and many homebuilders, Schumacher can offer customers quality custom homes that fit virtually any price range in any geographic location.
“We say, ‘We want you to live in what you love,” Schumacher says. “So in any geographic location we’ll have 200 to 300 different floor plans that we offer, but those are just a starting point.”
Today, the company builds model homes along the highways throughout where it does business. It’s no surprise that employees refer to them as “a parade of homes,” especially considering how many people pass through them each week.
From a marketing and advertising standpoint, the models help the company learn about the attitudes of buyers in different communities where it operates.
“It’s great to have big numbers coming through where we can kind of hear the same things over and over to try and identify trends,” Schumacher says.
“People really like the fact that we’re like a permanent fixture on the highway, that we’re not going anywhere. We’re not a builder that’s just going to go into a subdivision and when the subdivision is built out, they’re just going to move across town or out of town.”
Make it special
An ongoing challenge for any business is creating products that people prefer to ones readily found out in the market. While you need a product that’s affordable and good quality — of course — you also need to offer a better buying experience.
To show customers that building a new, custom home won’t blow their budget or boost their blood pressure, Schumacher developed his business around the idea that it’s all about customers getting exactly what they want.
“We say we’re not going to stop in the design process until we nail it and you’re getting exactly what you want, because our competition is the used home market,” he says. “We always tell people in buying a used home — someone else’s dream home — it just comes down to how many compromises are you willing to make. In building a new home, you don’t have to make any because it’s all designed around you.”
First, the company uses every opportunity to survey consumers and learn their new home “wish lists,” incorporating the market’s feedback into upgrades in existing models. It also adds these design options and features into its vast design database for future customers.
“You have to change,” Schumacher says. “Our whole design philosophy is we have to be able to give something to someone when they walk in a model home — it’s a blueprint that’s fun and exciting and inspiring — to get them to build, because if it’s the same old, same old, been there, done that, there’s no point in building it. They can go out and find it in the market.”
Larger trends in consumer feedback even prompted Schumacher to launch a new line of home designs called the Earnhardt Collection, which addresses a market segment that desires more informal spaces such as great rooms and open kitchens. Collaborating with the Earnhardt family — popular from the NASCAR racing world — the company launched the new line in late 2011, and it is already popular with customers.
“People really want unique, fresh homes,” Schumacher says. “They want a very relaxed and comfortable atmosphere — formal is out.”
Since the majority of people want significant customization on the outside or inside of their home, the company also emphasizes the fun, straightforward nature of its design process. To help people envision their changes, designers demonstrate them on a live monitor, using interactive, real-time design technology.
“They’re seeing the walls move before their eyes,” Schumacher says. “They’re seeing the exterior change. And the beauty of that is we’re all so visual, we can say, ‘Is this exactly what you mean or do you want to add two more feet here? Do you want to rearrange the kitchen?’ and they’re doing it all right in front of their eyes. People say this is great because you can get so much more done when you’re doing it in real time.”
Even with these design elements, Schumacher knows that price is still the major factor in building a new home instead of buying used.
“People say ‘I love the plan. I’ve designed it. I’ve customized it. It’s exactly what I want,’” Schumacher says. “But the next big question is, ‘OK — how much?’”
To answer this question, he’s spent the last 10 years developing a price quoting system that lets customers individually price every piece of their home. When you are dealing with customers who are unfamiliar with the many costs going into the final product — design, labor, building — transparent pricing is even more critical, Schumacher says.
“We put them in control so they see where every dollar is spent,” Schumacher says.
“It’s that innovation all around the whole design and buying cycle that I think really differentiates us.”
The success of the company’s business model is evident in the quick turnaround time, good communication and high quality that make up its competitive advantage. But it’s also the product of the 225 employees who contribute to the company’s goal-oriented and results-driven culture.
The backbone of this culture is a company-wide scorecard system, which rates each store location and individual employee with color-coded metrics. Metrics are built around areas such as sales, time of construction and homeowner satisfaction.
“A big part of our success is the whole scorecard system where everyone, every department knows what’s expected of them on a monthly, quarterly and yearly basis and everyone is working in the same direction,” Schumacher says. “Without those goals, a lot of it is just talk.”
Red scorecards indicate stores or employees that are below a goal, yellow indicates that they’re within 10 percent of a goal and green signifies that they’ve met or exceeded a goal. The simple and visual nature of the scorecards makes them especially effective, he says.
“Anyone in Schumacher Homes can pick up a scorecard, and without even looking at what the individual metric is, they can see a lot of green means ‘Man, we’re doing a good job! We’re on plan.’ Yellow — ‘Hey, we’ve got to address those areas’ — and red, ‘We’ve got to take note of it,’” he says.
Scorecards also show individuals how their achievements roll up into the company’s overall progress on its goals. Results are shared on the corporate Intranet as well as publicized at regional meetings.
“We’re an open book,” Schumacher says. “Whoever is in first place, it’s very well-known and whoever is in last place it’s very well-known. Everyone really strives to be the best they can, to meet their goals and then to be the best in the region and the best in the overall company.”
Schumacher uses company meetings as an opportunity to recognize top performers as well as to recognize accomplishments such as ‘most improved.’ When you discuss goals clearly and often, people can see what you trying to accomplish on a short-term and long-term basis, empowering them to be part of the success.
“You communicate the importance of the goals, in that, by hitting the goals we can get to the next level of investment or we can do these significant projects,” Schumacher says. “So everyone understands their significance, their role, and what the company is trying to do.”
Today, the company’s culture is built on green scorecards and how employees can see more of them. When visiting different offices, Schumacher notices that employees are quick to pull out their scorecards and ask for feedback.
“They’ll say, ‘What is it going to take for us to be green in whatever the metric is?’” he says. “There’s great sense of pride and teamwork in that.
“We know that we have to have a very good, straightforward, simple process that makes it fun and exciting. At the same time we have to deliver an unbeatable value, a great value.”
Out of 35,378 homebuilders in America, the company was recognized with the 2012 National Housing Quality Award, an industry benchmark award for total quality management. Coming off its best sales year ever, it’s also seeing a new spike in customer interest through leads and site visits.
“Our mantra here is we don’t really care what’s going on in the industry — we’ve got to go make our own market,” Schumacher says.
How to reach: Schumacher Homes, (877) 267-3482 or www.schumacherhomes.com
- Show your value to customers.
- Customize your customer experience.
- Get your team invested in your value proposition.
The Schumacher File
founder and CEO
Born: Canton, Ohio
Education: Western Reserve Academy, Cornell University, University of South Carolina
What is one part of your daily routine that you wouldn’t change?
Working out every day at 5 a.m. — physical stamina and mental stamina go hand in hand.
Who are your heroes in the business world and why?
My mom and dad are great role models for a strong work ethic, positive attitude and to believe all things are possible.
What would your friends be surprised to find out about you?
I had four holes in one — and climbing Mt. Kilimanjaro with my 14-year-old son in June.
On getting out of the ‘flipping’ business into the home construction business: What I realized is that all you are doing is dealing with someone else’s mess, because you’re just going in and fixing up old houses. As I got into it after a year or two I thought, man, it would be great to have your own brand new, fresh product and not be fixing up someone else’s mess from 40 or 50 years ago.