A Study of Exceptional Standards

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Customer satisfaction is vital for the survival and growth of any business, and nowhere is that more true than in the remodeling industry.

September 01, 2002

Customer satisfaction is vital for the survival and growth of any business, and nowhere is that more true than in the remodeling industry. To better understand how well remodelers are meeting their clients’ expectations, NRS Corp., a research firm specializing in customer satisfaction research, recently worked with remodelers across the country to survey their 2001 clients.

Findings from the National Homeowner Satisfaction research study indicate that most customers of the participating remodelers are very satisfied with their remodeler. In fact, the average index score of all NHS study participants is an extraordinary 96.

To honor remodelers with exceptional customer satisfaction results, the National Homeowner Satisfaction Award has been created. This year, the company with the highest index score — 99.3 out of 100 — and the winner of the inaugural NHS Award is Great Renovations Inc. of Farmington Hills, Mich. Runners-up — tied at 97.8 — are Small Carpenters at Large of Atlanta and Westhill Inc. of Woodinville, Wash.

The study measures the following components of customer satisfaction: project design, quality of materials, quality of workmanship, work-site conditions, production schedules, budget, price/value of projects, sales process (five subcategories), production crew (six subcategories), items identified for correction, timeliness of corrections and pre-contract expectations.

Overall satisfaction for each remodeler is calculated as a weighted average of the company’s satisfaction scores across all categories. Survey respondents also were asked to rate their willingness to recommend their remodeler. Each remodeler’s score for this question is averaged with its overall satisfaction score to yield an NHS Index score.

Setting high standards

When it comes to setting standards for satisfying homeowners, the remodelers who participated in the inaugural NHS study have set the bar high.

Each participating company has a great percentage of customers who would recommend it to family and friends. Because all participating companies did relatively well, the willingness to recommend a particular remodeler does not vary dramatically. In fact, even customers whose remodeler scored in the bottom third for overall satisfaction report that they are still likely to recommend their remodeler to family and friends.

Nevertheless, one would expect remodelers with the highest scores for overall satisfaction to score the highest for the recommend question, too. Such a finding would be consistent with research conducted in new-home construction, as well as in other industries. The results of this study reflect that relationship. Higher scores on overall remodeler satisfaction resulted in higher scores on the recommend to family and friends question.

 

Overall, would you recommend your remodeler to family and friends?
Definitely yes
91%
Most likely
7%
Unlikely
1%
Definitely not
1%

 

Overall satisfaction averages compared with willingness to recommend averages
 
Top 3 companies
Bottom 3 companies
Difference
Overall satisfaction
97.7
93.4
4.3
Willingness to recommend
98.7
96.4
2.3

In addition to tracking how likely clients are to recommend their remodeler to family and friends, NRS asked customers how many actual recommendations they had made. This question is important because it relates more closely to actual behaviors than to mere intentions. The NHS study reveals that a high percentage of customers have made a significant number of recommendations for their remodeler.

 

Since completion of your project, how many actual recommendations of your remodeler have you made to others?
 
Top 3 companies
Bottom 3 companies
0 referrals
8%
18%
1-2 referrals
34%
32%
3-5 referrals
32%
29%
6 or more
26%
21%

The top three companies have 92% of their customers making actual recommendations, while the bottom three companies have 82%. Interestingly, the top three remodelers have 58% of their customers making three or more recommendations, while the bottom three remodelers have 50% in this category. These results further confirm the importance of satisfied customers on a remodeling business even among such high-performing companies.

Expectations versus reality

Satisfaction at any given point in the project cycle is the sum of a customer’s perceptions minus his or her expectations. In this study, respondents reported that before they signed contracts with their remodeler, their expectations tended to be lower than the actual satisfaction scores reported after the project was completed. Remodelers who scored highest on the NHS Index had the largest spread between their index score and expectation score.

 

Rate the level at which you expected to be satisfied before signing a contract
Very dissatisfied
0%
Moderately dissatisfied
0%
Slightly dissatisfied
0%
Slightly satisfied
6%
Moderately satisfied
35%
Very satisfied
59%

 

NHS Index averages compared with expectation averages
 
Top 3 companies
The rest
 
NHS Index score
98.2
95.2
 
Expectation prio
91.4
92.8
 
Difference
(6.8
(2.4)

Aligning expectations and perceptions is key to achieving high customer satisfaction. This is an important factor because many buyers have unrealistic expectations. To achieve high customer satisfaction, it is important that remodelers be realistic about what a buyer will experience. If a remodeler is doing a great job, then aligning expectations with what customers will receive is that much easier, and satisfaction is almost guaranteed. These survey results show that those who did worse in customer satisfaction set higher expectations and delivered less than those who scored the best in customer satisfaction. The old adage “promise less and deliver more” rings loud and clear.

Areas of excellence

 

Based on the average of all responses to each survey question, the following five categories scored highest for satisfaction:
Courtesy during the sales process
98.5
Knowledge of remodeling during the sales process
98.5
Design of project
98.0
Quality of materials
97.5
Availability during the sales process
97.3

Room for improvement

 

Overall, the five categories that scored the lowest for satisfaction are:
Items identified for correction
81.3
Price/value
91.8
Adherence to schedule
91.9
Cleanliness of work site
93.0
Communication of price changes caused by change order
93.2

Results of the items identified for correction question strongly suggest that this category poses the greatest challenge for all the NHS study participants. However, remodelers with higher scores for the items identified question also had higher NHS Index scores. As one might expect, minimizing callbacks helps maximize satisfaction.

Where the leaders stand out

 

Factors that separate the good from the great
Category
Top 3 companies
The rest
Difference
1. Communication of price changes caused by change orders
99.1
89.2
9.9
2. Items identified for correction
86.3
78.5
7.8
3. Adherence to production schedule
96.4
89.2
7.2
4. Time taken to make corrections
97.8
90.9
6.9
5. Cleanliness of work site
96.5
91.1
5.4
6. Communication of progress
97.8
92.9
4.9
7. Timeliness of responses to questions during construction
98.7
94.4
4.3

1. Communication of price changes caused by change orders

 

How satisfied or dissatisfied are you with your remodeler’s communication of price changes caused by change orders?
Very dissatisfied
1%
Moderately dissatisfied
2%
Slightly dissatisfied
2%
Slightly satisfied
5%
Moderately satisfied
11%
Very satisfied
79%

2. Items identified for correction

 

Overall, the number of items identified for correction after completion of your project was:
Much less than expected
43%
Less than expected
28%
Slightly less than expected
8%
Slightly greater than expected
15%
Greater than expected
6%
Much greater than expected
0%

3. Adherence to production schedule

 

How satisfied or dissatisfied are you with your remodeler’s adherence to the production schedule?
Very dissatisfied
2%
Moderately dissatisfied
0%
Slightly dissatisfied
4%
Slightly satisfied
3%
Moderately satisfied
22%
Very satisfied
70%

4. Time taken to make corrections

 

How satisfied or dissatisfied are you with the time it took your remodeler to make corrections?
Very dissatisfied
3%
Moderately dissatisfied
0%
Slightly dissatisfied
0%
Slightly satisfied
3%
Moderately satisfied
19%
Very satisfied
75%

5. Cleanliness of work site

 

How satisfied or dissatisfied are you with the cleanliness of the work site during the project?
Very dissatisfied
1%
Moderately dissatisfied
1%
Slightly dissatisfied
1%
Slightly satisfied
5%
Moderately satisfied
20%
Very satisfied
72%

6. Communication of progress

 

How satisfied or dissatisfied are you with your remodeler’s communication of progress?
Very dissatisfied
2%
Moderately dissatisfied
0%
Slightly dissatisfied
0%
Slightly satisfied
3%
Moderately satisfied
17%
Very satisfied
78%

7. Timeliness of responses to requests

 

How satisfied or dissatisfied are you with your remodeler’s timeliness of responses to requests?
Very dissatisfied
1%
Moderately dissatisfied
1%
Slightly dissatisfied
0%
Slightly satisfied
3%
Moderately satisfied
10%
Very satisfied
85%

Of the seven categories listed as breakout areas for the top three remodelers in this study, success with communication issues is most prevalent. Accurately communicating prices changes on change orders, keeping the homeowner abreast of work progress and promptly responding to requests are all opportunities to maintain or enhance customer satisfaction during the construction process. Keep in mind that the homeowner is on top of the work and might get increasingly anxious about the project as time progresses. It is vitally important that project managers position themselves as on-site consumer advocates for their customers. To do so requires constant communication with the homeowner, as well as a commitment to accuracy when estimating change order costs and work progress. Frequent, accurate communication is a key to keeping customers happy, especially while you’re in their homes.

One objective of the NHS study was to apply statistical validity to what many remodelers might have already known to be key factors that influence customer satisfaction. Ultimately, most of the remodelers in this study perform very well across all the categories measured and indicate that they have working knowledge of what it takes to turn customers into raving fans. This first NHS study is one snapshot in time of how the participating companies perform for customer satisfaction, but to plan and navigate for improvement, it is crucial that snapshots be taken regularly. The key to improvement is to focus on one or two areas at a time, and to make sure that you measure your customers’ satisfaction and monitor your company’s performance over time.

Methodology

The application process for the 2002 NHS research study began in early spring 2002. Remodelers across the country submitted information on each customer from 2001. All participating remodelers closed at least 25 projects of $2,500 or more in 2001, and every customer from that year was mailed a survey. About 30% of the total survey population contributed data to the study. NRS Corp. developed and deployed the survey, collected the data and analyzed the findings. NRS and Professional Remodeler jointly verified the information provided by participants.

Nothing sells like a satisfied customer

In recent years the science of customer satisfaction has evolved to give us the American Customer Satisfaction Index (ACSI), a multinationally accepted system that measures customer satisfaction in large industries such as auto manufacturing, air travel and government. Although the ACSI is not currently used to measure customer satisfaction in the construction industry, research conducted in these other industries has shown a strong correlation between customer satisfaction and future consumer spending, corporate earnings and stock market performance.

Based on measurement principles established by the ACSI, customer satisfaction research conducted by NRS Corp. has found that satisfied customers are a significant source of profitability within the home building industry. In home building, NRS has identified a direct connection between high customer satisfaction and improved financial performance.

Furthermore, findings consistently show a direct correlation between home buyer satisfaction and a willingness to refer. After all, customers are worth more than just the dollars in their contracts — they represent profit potential. In home construction and remodeling, profit potential is realized as repeat business and (most often) as referral business.

Monitoring customer satisfaction is not new in remodeling. The methods vary from casual, post-project customer interviews to sophisticated third-party surveys that collect and analyze data at multiple points throughout a project.

Companies that make customer satisfaction measurement a top priority stay apprised of their customers’ expectations, as well as their ability to meet or exceed those expectations. These companies empower themselves with business intelligence that can help create cohesive company cultures, aid in forecasting earnings and help establish reputations for satisfaction excellence.

Operating a business without a good customer service measurement system is like navigating an aircraft without a guidance system. If a company’s aim is to maximize profitability, why risk missing the target?

Consider what a lost referral costs. How about several? If we look at opportunity costs versus the cost to go the extra distance to satisfy — even delight — customers, it’s apparent that an indifferent or dissatisfied customer is more expensive.

The science of satisfaction

Satisfaction relates to emotions, and although a project can be compartmentalized into processes (sales, construction, etc.) and categories (workmanship, knowledge, etc.), in the customer’s mind the project is perceived as one, big, evolving emotional experience.

The emotional trajectory the customer experiences depends on how well a remodeler meets or beats the customer’s expectations every step of the way. Maximizing a customer’s profit potential requires a commitment to regularly auditing perceptions of quality and aligning expectations of quality in order to provide the customer with the most favorable emotional experience possible.

What your customers say about you as time goes on — the synopsis of your business from their perspective — is a rolled-up assessment of everything they experienced while working with you. This includes both the tangibles (such as product quality) and the intangibles (such as messy job sites).

But how do you know where to invest in your customers’ profit potential? Remodelers must first determine what their customers’ satisfaction levels are at the beginning of a relationship, during the construction phase and after project completion.

Perceptions can change every step of the way. It is important that a measurement system ensures that data at all points are actionable, and can be used to establish trends over time and across all projects.

Normally, satisfaction tends to run high at contract signing. Monitoring your customers’ perceptions during this phase will inform you of how well you are managing their expectations of the sales process, as well as how you are establishing expectations of the construction process and the finished project. This is crucial information because what your customer thinks now is the foundation with which all future perceptions will be compared.

During the construction phase, remodelers have tremendous opportunities to interact with their customers and manage quality and expectations. Communication is key. Routinely reporting progress, providing prompt and accurate answers to questions, and clearly explaining price changes are examples of satisfaction components that must be properly managed. Indeed, the construction process can be the most challenging phase for a remodeler when it comes to managing customer expectations because of the anxiety many customers experience during this time.

By the time a project is completed, customer expectations established during the sales process will have been affected by the construction process. Any issues during construction that were not anticipated will have affected the overall satisfaction with the finished project.

At this point the remodeler will be in a customer service mode, reacting to any issues that come up after completion. Although there might be an initial euphoria after project completion, customers might become dissatisfied if the remodeler does not fulfill obligations after leaving. This is the last contact the remodeler has with customers, so it is vital to do it right for long-term satisfaction.

For determining longer-term perceptions, surveying customers one month after the completion date provides insight into what perceptions about your remodeling company are being sustained. This is when quality of materials and workmanship can re-emerge in importance in overall customer satisfaction.

NRS Corp. is a leading research and consulting firm that has served the construction industry since 1993. For more information about the NHS research study or the NHS Award, please contact NRS Corp. at 800/851-5823. You can e-mail questions to NRS at info@nrscorp.com.

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