Andy Gianino’s title is President of The Home Store. He earned a PhD in developmental and clinical
psychology from the University
of Massachusetts . (He was trained as a child therapist.) Andy completed a clinical doctoral internship
at Albert Einstein Medical Center , NY , NY and a Harvard Post-Doctoral Fellowship at McLean Hospital ,
Belmont , MA . He also was the research director of a NIMH
grant on mother-infant social interaction at the University of Massachusetts . He’s been in the modular home industry since
1986, 28 years. In 2005 he wrote The
Modular Home for consumers.
Modcoach: Andy, why
do you think the modular home industry is stuck at 3% of the total new home
market?
Andy: It’s partly
because customers don’t know about modular homes. But it’s even more because customers are
unconvinced of their value. They
especially have doubts about the quality and cost savings of modular
homes.
Consider how our image as modular home builders gets framed
compared to stick builders. People in
general don’t think of the problems with stick homes in terms of the type of
construction as much as in terms of the quality of the builders. But they think of problems with modular homes
in terms of the type of construction, regardless of the manufacturer or builder.
I realize there’s a push to have the manufacturers do more
advertising. But I don’t believe a
marketing campaign will change the opinions of those people who are prejudiced
against modular homes. If we have this
kind of problem with our image, we must change this perception with more than
marketing. And we must do this together
– as an industry.
The best way to deal with this is to become better – not a
little better, but significantly better.
In my opinion, we aren’t better than stick builder by enough of a
margin. This includes those things we’re
definitely better at than stick builders (quality, price, time). Being 10% or even 20% better is enough in
most matters to tip the balance. But not
when you’re working against pre-existing prejudices.
To overcome the negative impressions some consumers have
about modular homes, we need to become so good that word of mouth endorsements
overwhelm the negativity. We need to
impress our customers so completely that they want to make converts of family,
friends, and acquaintances. This will
only happen when we exceed their expectations.
For that to happen, we need to improve what we do.
Modcoach: Are modular
home builders getting what they need from their manufacturers?
Andy: Not enough
of what they need most.
With regard to quality, there are still too many things that
need to be fixed in the field by either the builder or the manufacturer.
With regard to time, it takes too long to order and turnkey
a modular home. First, it takes a few
months to complete all the required steps that bring the customer from the
first sales meeting to their modular delivery.
One problem is that many of the steps done by the manufacturer are
repeated by the builder and vice-a-versa – for multiple revisions. This is especially true for drawings, custom
specifications, and pricing. A competent
stick builder can break ground in half the time.
After the home is built, it takes too long to complete the
mechanical hookups and carpentry button-up on anything but a simple ranch. I would like to see manufacturers do more at
the factory to reduce the builder’s time in the field.
Manufacturers also need to work with builders to reduce
costs. Simply put, we’re not as
affordable as we should be. In fact, we
seem to have accepted that modular homes are only a little less expensive than
stick homes and that most of the savings is due to speed of construction. I would have thought we’d be able to drive
down the cost using lean procedures and automated systems. Virtually every other industry in the US has
improved its productivity more than residential construction.
What’s standing in the way of lowering the total cost to
manufacture, sell, and turnkey a modular home?
One factor is weak product innovation.
Another problem is that there are too many inefficiencies requiring
redundant overhead with sales administration.
As I already mentioned, these include drawings, specifications, and
pricing. Inadequate quality control also
drives up the price.
Modcoach: What could
Manufacturers do to help builders?
Andy: They could
create a Customer Relationship Management (CRM) program that integrates the
factory and builder’s sales, turnkey, and service systems. I did this for my own company as soon as I
realized how many details I needed to identify and track for each customer and
how many steps I needed to complete in a timely fashion for each customer. Once our volume grew, our company couldn’t
handle this complexity efficiently and accurately without help from an
automated system. Our system tracks the
following functions.
- Customer Leads
- Modular Pricing
- Contractor Pricing
- Sales Administration
- Contractor Administration
- Delivery and Set
- Warranty Service
- Profit and Loss
I also think that manufacturers should adopt Building
Information Modeling software. BIM is
the most powerful tool invented for the construction industry. If the modular industry could adopt this
software as its preferred drawing program, it would totally set us apart from
all but the largest builders.
Manufacturers should also help builders with turnkey project
management. Specifically they should
provide:
- House specific instructions and drawings for the set crew and button-up crew to complete their tasks
- A manual of contractor best practices
- Project scheduling integrated with Modular Pricing and Contractor Pricing
As your blog has often noted, manufacturers should help with
training their builders (as well as their sales reps). When starting out, few builders have all four
of the skills needed to be successful.
These include marketing, sales, contracting, and business skills. Yet no manufacturer has a comprehensive
training program. One-day, once a year
training sessions, popular with manufacturers, are good as refresher
courses. But they almost never foster
lasting learning of new material.
With regard to sales training I have three suggestions:
- On-Line and In-Factory Classes and Webinars
- A manual of Modular Sales Best Practices
- Videos and Podcasts of Sales Best Practices
With regard to turnkey training I have five suggestions:
- On-Line and In-Factory Classes and Webinars
- A manual of Contractor Best Practices
- Videos and Podcasts of Contractor Best Practices
- A manual of Troubleshooting Best Practices
- Videos and Podcasts of Troubleshooting Best Practices
I’d also like to suggest that manufacturers could significantly
help builders if they were to stop selling to dealers who disregard their
responsibilities to homebuyers. I’m
talking about dealers who, first, fail to educate their homebuyers about their
responsibilities, especially the scope of work needed to complete a turnkey,
and second, ignore their homebuyers when they have warranty problems. These dealers seriously undermine consumer
confidence and interest in modular homes.
They also directly erode builders’ profits, since they compete mostly by
selling on price.
Modcoach: How does
the relationship between builders and manufacturers need to improve?
Andy: I believe
that the changes I’m advocating are more likely to happen if a stronger,
committed, and more mutually dependent relationship between manufacturers and
their builders is forged. Manufacturers
need to invest substantially in their builders.
Builders need to commit strongly to a manufacturer.
There are a lot of reasons for this, as I explain in my
presentation. In short, manufacturers
and builders need the same thing.
Integrated systems and tools that help both of them build modular homes
faster, with better quality, for less money – so they can be more successful.
If this is to happen, it makes sense for each manufacturer
to create its own system and tools for its builders. If a manufacturer creates its own system and
all of its many builders create their own unique systems, there won’t be a
realistic path to integration. Also,
builders can’t easily afford or justify the expense. I can personally vouch for that.
So how might a closer relationship work? A manufacturer that has created the systems
and tools for its builders could offer these without requiring any reciprocal
obligations from the builder. Or, it
could require the builder to buy a certain number of homes a year without
preventing the builder from buying homes from another manufacturer. Or, it could limit the builder to only buying
its homes. It could require either of
the last two options to be accompanied by a formal contract between the
manufacturer and builder. This could be
in the form of a licensing or franchise agreement.
Even if a manufacturer required a
contractual relationship in exchange for offering its systems, tools, and best
prices, it wouldn’t need to require every builder to make this commitment. Those builders who didn’t commit would still
benefit because of the better systems, faster delivery, and lower prices. They just wouldn’t get the advantage of the
manufacturer’s state-of-the-art systems and tools.
Andy, thank you for sharing
with modular home builders and their factories your thoughts on how to improve
our industry.
1 comment:
I have really worked to change the perception of prefab housing with my books showing gorgeous houses in this country and around the world. My books can be bought in bulk at a reasonable cost by builders to use as proof of the quality and beauty of prefab. Unfortunately only a small amount of builders take advantage of this opportunity.
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