In today's technology-driven, digitally powered world, new businesses and industries are born, developed and sold almost at the speed of light. For example, before mainstream America had ever heard of YouTube, it was purchased for $1.65 billion by Google.

However, it is a very different story with traditional, "brick-and-mortar" businesses. Slowly and surely they may eventually become a multibillion dollar industry, but there is little focus placed on them, and usually no feeding frenzy to buy them. The design center industry supporting residential builders is a classic example of this paradox.

Prior to the 1990s, design centers were a rare sight. Builders that allowed selections beyond choosing color for a particular option would generally send the homebuyer to a local flooring, lighting and plumbing retailer with an allowance to spend. However, the housing bust of the late 1980s created a need for builders to generate additional revenue, and find creative ways to market and differentiate their companies. Thus, design centers began to flourish—first on the West Coast and then nationally.

Today, there are thousands of design centers servicing the homebuilding industry. They are owned and operated by both builders and third-party contractors. They include everything from converted garages attached to the builder's model home, to spectacular 20,000-square-foot destination centers that allow homebuyers to touch and feel most of the finish options that will go in and on their new homes. The exact number of these facilities is a mystery. But their revenue generated, although hard to measure, is estimated to be between $12 billion and $20 billion.

Why doesn't anyone know how many design centers there are, and how much revenue is being generated? Because the design center industry for residential builders, although large, profitable (if run efficiently) and growing, is a largely ignored business. It is run by builders and contractors with the best of intentions; however, builders are focused on building attractive, marketable homes, and contractors are primarily concerned with the efficient installation of finish options. Neither focuses the resources on their design center that they require and justify.

The results? Design center employees have been given little training that is targeted to their specific industry, the internal systems that manage their business are antiquated at best, and the operational model they work within can often be frustrating and chaotic. But there are solutions available today, especially for builders that take time to showcase technology in the design center, implement an automated selection system and utilize a quality customer relationship management strategy.

1. Implement an Options Selection System

Because the design center business is relatively new and "under the radar" in regards to the revenue it produces, very little software has been developed to support the business. However, that has been evolving in the past several years and the choices available will continue to expand.

The fundamental flaw to implementing new options systems is that many of the builders that do so think this will be the solution to their lack of planning, organization, process and documentation. That could not be further from the truth. A new system will take sound practices and processes and make them faster and more efficient. However, if planning is not thorough and they do not have workable organization and processes firmly in place, a new system will cause even greater chaos.

Assuming you take the steps to organize and structure your design center business, now you need to find the correct "system-fit" for your business. There is a growing list of tools available, depending on your needs. Your search for an online solution might begin by answering these questions:

• Will the options selection tool integrate into your back-end system, or will it be standalone?
• Does the system automatically do flooring and countertop computations, and are they done the way you bid/sell them?
• Is a system built for retail and reconfigured for the builder segment good enough for your business?
• Is the system scalable to your size business?
• Is the system flexible enough to adjust to the ever-changing needs of your client base?

Two of the leading choices are Envision, developed by a consortium of the largest production builders, and Options Online. (see sidebar on page 38) Other leading choices are Design Center Systems, Inc., developed by DCS Partnership Group; RFMS; BuildLinks; Aareas Interactive; Constellation HomeBuilder Systems and several others.

Remember, start with getting your design center "house" in order. Ruthlessly review, refresh and revise your planning, organization and processes for the better. Then the new system selection and implementation process will improve your design center efficiency and productivity instead of impeding it.

2. Use CDs, DVDs to Set Expectations

One of the biggest and most critical challenges facing builders today is the ability to communicate effectively with the homebuyers prior to the design center appointment. Homebuyers, especially first-time buyers, are thrust into an intense process that requires massive amounts of detailed information to be absorbed, and significant financial decisions to be made, all subject to strict timetables. The result is that homebuyers can experience a high level of anxiety and frustration throughout the option-selection process.

Exciting buyers about the forthcoming process is the first step in preparation and expectation setting. Engaging the buyer from the onset will set the right tone for the entire process, and keeping buyers engaged early on will also reduce questions, surprises and cancellations.

Many builders make it a point to feature and promote the options in the model homes, sales office and design center. Among the most common options presented in the design center appointment are appliances, cabinets, flooring, countertops, structured wiring, window coverings, doors, lighting, electrical fixtures, ceiling fans, bathroom and kitchen fixtures, outdoor kitchens, garage systems, closet systems, multiroom audio, and even fireplaces with plasma TVs.

One way to prepare homebuyers for the design center process and set the proper expectations is by using technology.

"The design center experience is a visible process … it requires visible tools. Buyers are more likely to enjoy the experience and remember what they've learned if they are engaged," says Jay Flynn, vice president of sales and marketing for Bridgeway Interactive, a developer of custom video and technology solutions for new homebuilders. "By using proven, state-of-the-art Web and multimedia tools, builders can create an interactive, engaging learning environment."

From sales agent, to designer, to warranty and customer care, all departments have to be aligned on how the buyer is prepared for the design process. Videos and CD-ROMs can be great tools to communicate the design center process in advance to the buyer, while providing a consistent message from buyer to buyer and throughout your organization.

Taylor Woodrow Homes Western Region is providing its buyers a series of interactive Web and video tools to guide them through the various steps and considerations for making design decisions prior to their design appointment.

Partnering with Bridgeway Interactive, Taylor Woodrow delivers custom videos and Web tools that prepare buyers for the many steps involved in their design meeting. These videos are available to buyers at contract via CD and over the Web through their own password protected portal, www.mytwhome.com. Taylor Woodrow buyers have direct access to available upgrade options, a "virtual room designer" tool, product disclosure videos and interactive buyer lifestyle questionnaires. All this information can be reviewed and absorbed on the buyer's schedule and in the comfort and convenience of their own home.

"Today's consumer requires information … and lots of it," says Arianna Barrios, Taylor Woodrow's Western Region marketing director. "It's our job to help educate and prepare buyers prior to entering our design center, but most importantly, we have to deliver the information in a way that is timely, accurate and compelling. By utilizing video, CD and the available Web tools, we accomplish that."

Taylor Woodrow is also the first U.S. builder to offer virtual home tours and design-center preparation videos for buyers to download and view on their iPods.

"The new tools will help change the way we communicate with our buyers," says Barrios. "Get them excited, get them engaged, and get them coming back to Taylor Woodrow."

3. Use Technology in Design Center

Once a builder has set expectations and communicated with buyers prior to their design center appointment, he needs to continue to educate, engage and empower buyers once they reach the design center itself. One way is to maximize the use of multimedia and technology tools to enrich the buyer's design center experience. Plasma and LCD TV screens, music, CD ROMs, Powerpoint, video and Web technology are all examples of effective and exciting tools that can help deliver entertaining, consistent and accurate content to buyers.

Specifically, using compelling product disclosure DVDs and videos can help set expectations as to how products will or will not perform. And better yet, these videos can be featured in a home theater system merchandised within the design center, sales office or model home.

"Today's builders have a short amount of time to fully educate buyers on all the products available to them. Video is proven to be one of the better all-around mediums available to entertain and educate buyers in making smart and informed decisions," says Flynn. "Buyers will merely scan through disclosure documents, so retention varies widely. An effective, content-rich multimedia program can give builders the peace of mind that buyers are viewing consistent information, nothing will be omitted, and real-world statistics reveal that retention will increase from video presentation. In fact, we have customers reporting a decrease in warranty costs from the products in our program of 30 percent to 50 percent!"

For builders, the benefit is two-fold: important product disclosure information is presented to the homebuyer while at the same time a big-ticket option upgrade product category is showcased. It's a win-win.

Design centers are increasingly being filled with vivid, larger-than-life LCD and plasma screens. Builders can take advantage of these attractive, leading edge tools to present content that best represents the upgrades while delivering relevant content.

Many builders use DVD-based videos—professionally developed and produced by companies like Bridgeway Interactive to the industry—that play throughout the design center, sales offices and model complexes. Customized video content can run as a continuous loop of varied content including builder promotional videos, virtual home tours, disclosure and maintenance video, design center appointment process and more. This software is loaded onto home technology products that are sold as upgrades.

Post-appointment communication strategy is also vital. The education doesn't stop once options selections have been made. Builders, now more than ever, are looking for innovative and differentiating ways to enlighten their buyers on the care of upgrades and their new homes.

Fulton Homes in Tempe, Ariz., in partnership with Bridgeway Interactive, has created customized maintenance and warranty CD-ROMs. These multimedia informational tools are distributed to the homebuyer after their design appointment, and familiarize the homebuyer on the facts, features and functions of their new home and interior finish options. The maintenance and warranty tools contain product maintenance videos, warranty information and a Web site for warranty and maintenance of products sorted by manufacturer.

Delivering consistent, comprehensive and compelling maintenance and warranty information to the homebuyer educates the buyer on critical product information, and reduces customer service calls and warranty claims.

According to data from Bridgeway Interactive, its builder-customers using these tools and techniques have experienced upgrade sales that are 18 percent to 40 percent higher, along with reduced warranty complaints and increased referral and repeat sales.

4. Implement a CRM Strategy

Many builders, in an attempt to have a more customer-centric view of their businesses, are successfully developing and implementing customer relationship management (CRM) systems.

To be clear, CRM is not just a software purchase … it's a business strategy. Technology will enable and support the CRM strategy; however, no technology, regardless of its level of sophistication, can succeed without a sound strategy behind it.

For starters, a successful CRM strategy must be aligned with the builder's business goals. "Good customer relationship management is not syrupy sweet salutations and idle fluff," says Scott Mueller, vice president of customer relations at Westcott Homes in Bothell, Wash. "CRM is based on sound professionalism … think organizational. Begin with your mission, vision and values and go from there. Ensure that your company's culture, organizational chart and training are established with the homebuyer's experience in mind."

A sound CRM strategy requires builders to examine every aspect of the design center process from the buyer's perspective, and work on creating a cohesive experience based on accurate expectations setting and meticulous follow-through.

Every marketing item, site visit, orientation and options meeting should be scrutinized and every employee should be educated. Every touch-point and employee that the homebuyer is exposed to needs to be looked at and molded into a seamless, customer-friendly experience.

A good CRM strategy can become the design center's strongest salesperson. Builders can spend less money per sale on marketing expenses, get buyers on board earlier in the build process, and secure more of those high-margin option sales dollars for their efforts.

"Referrals come from your truly evangelical buyers," adds Mueller. "These aren't the homebuyers that would recommend you if they were asked to on a survey, these are the homebuyers that would stop their grocery cart in the aisle and recommend you to a stranger they overheard mentioning the words ‘new home.'

"Good customer relations is all about driving your referral business, and, on average, our referrals buy $20,000 more in options from our design centers because they buy earlier in the build process, when more options are available and they come already prepped for a great experience," concludes Mueller.

5. Evaluate Third-Party Design Center Suppliers

Other industries commonly use third-party resellers. Toyota, Boeing, the entire airline industry, and many others stay focused on the core of their business by partnering with outside companies that provide products and services.

There are many reasons for doing this—cost, flexibility to adjust to market changes, or increased quality due to the ability of a third party to concentrate its expertise on one area. For airlines, most train their pilots through companies specializing in this.

The homebuilding industry has many examples of this that should be considered in a design center strategy. The two primary examples are utilizing a third-party design center to send homebuyers to and having suppliers in your design center.

The third-party design center has become more prevalent as suppliers have expanded their ability to display, select and install multiple options. Some of the largest providers of these services are Creative Touch Interiors (CTI), Peninsula Floors Inc. (PFI) and L & L Floor Co.

Tom Tidmore, CTI Pacific Region vice president of sales and marketing, says, "Creative Touch Interiors has teams of professionals that manage the process from design selection and material purchasing to field management and customer care. This allows our builder customers to reduce their own investments as well as operating expenses, plus it shortens the overall construction cycle."

Another option utilizing third parties to support a design center involves having their employees meet your buyer in your design center. This may necessitate them being there full time, or working on an appointment basis, thus it depends on the supplier and the number of your homebuyers.

Some of the design center services being offered today include more technical items such as home automation, home theater, video and sound systems, and HVAC systems. KB Home, Ryland Homes and many others have contracts with home integrators and others to staff their design centers. THB