The Hierarchy of Needs for Homebuilders

By Matt Collins - February 09 2024

Have you ever been in a situation where you hear a great idea – it makes sense, is innovative, and you are certain it will work.  However, now is simply not the time to focus on that idea.  There is a reason this happens, let’s discuss why.

Just as Abraham Maslow introduced his theory of hierarchy for human needs, there also exists a hierarchy of needs for homebuilders. This structure forms a roadmap to success in the industry, detailing from basic to ultimate objectives. However, this roadmap is not random, it’s crucial to address the needs at the bottom before focusing on those above. Now, let’s delve into the hierarchy:

1. Ability to Control Costs

The base of the pyramid. In an industry that’s notoriously budget-driven, managing and decreasing costs is vital. This is where the Purchasing team must focus their efforts. Implementing cost-effective measures, leveraging economies of scale, and investing in thought-leading technologies can significantly reduce direct construction costs.

2. Ability to Increase Prices

Once the first tier is sufficiently satisfied and able to be maintained, homebuilders can move to the next need – the ability to increase prices. This doesn’t mean unreasonably escalating prices beyond what the market will bear but rather finding opportunities to add value to your homes from the eyes of the customer. Incorporating innovative designs, marketable and unique features, and smart home technologies can elevate the value proposition and justify a higher price point.

3. Ability to Cut Expenses

The third level involves reducing expenses. These can include unnecessary administrative expenses, inefficient operations, and redundant resources. Streamlining processes and adopting digital solutions such as an effective ERP, smart home plan software, and CRM systems can help cut overhead costs significantly.

4. Scalability

The next need is scalability. To grow, homebuilders must have strategies and systems that can accommodate expansion. This includes creating reliable supplier/trade bases, eliminating noise in the systems, and investing in training and development to create a capable and agile team.

5. Market Leadership

As we near the top of the pyramid, becoming a market leader is the next need. Homebuilders should aim to set industry standards, influence trends, and be the go-to choice for customers. This can be achieved through consistent quality, innovative offerings, exceptional customer service, and effective marketing strategies.

6. Philanthropic Contributions

Finally, at the peak of the pyramid is the need for philanthropy. Today’s homebuilders need to be not just profitable businesses but responsible corporate citizens as well. This includes supporting local and global communities, training the next generation of trades, and investing in causes that align with the company’s values.

By recognizing and addressing these needs in the correct order, homebuilders can not only survive but thrive in today’s competitive market. Remember, it’s not just about achieving these needs but understanding the path to reach there, starting from the most basic to the highest.