How An Innovative Homebuilder Raises Customers' Path Of Value

In an essay and book 11 years ago, author and MIT researcher Michael Schrage peeled back layers of consumer insight to a staggering dawning. As this awakening applies to people looking to purchase a home, the moment to seize on it could hardly be riper.

It's this, Schrage wrote:

The better we know and understand who customers want to become, the better we can invest and develop the innovations necessary to get them there. To see customers as the assets they really are, the strategic design and marketing question must shift from 'What’s the new value of the innovation?' to 'What does our innovation really ask customers to become?' and, even better, 'Who do we want our customers to become?' These questions shift the focus from extracting value from customers to making customers more valuable." – Harvard Business Review

Customer centricity – when it comes to developing, designing, building, marketing, and selling new homes in new-home communities – means, as Schrage says, making not just better and more valuable homes and communities, but making "better and more valuable customers."

This realization flashed to mind last week, as City Ventures president Natasha Zabaneh and I spent time talking on the heels of word that City Ventures had sold out of two phases of its new Santa Rosa neighborhood, Grove Village, featuring solar, all-electric homes designed by the award-winning architecture team at WHA.

Zabaneh, whose career in homebuilding started as a sales counselor, came by her sense of what Michael Schrage was getting at at ground level. Working directly with customers, and evolving in those earlier days a little over a decade ago into the heavier lifting financial consultative high-value service provider we commonly see among sales associates today, Zabaneh rounded out skillsets that fused sales, marketing, finance, design, construction, and branding, all in the interest of a homebuying customer that for her and the City Ventures team, should become better and more valuable customers through their purchase.

This comes through clearly in Natasha Zabaneh's take on City Venture's challenge, a few years ago, as it its team determined it would branch out from a focus exclusively on attached solar, all-electric products and infill tracts – townhomes, condominiums, lofts, mixed-use, live-work – and begin offering single-family detached variations on the same solar, all-electric, hairy infill deals that would intimidate less patient and skilled residential developers.

We started doing solar, all-electric townhomes," Zabaneh tells us. "That attached product was our bread-and-butter when we first started. Solar wasn't as popular when we first started doing it in 2009. We were doing it as standard, and we were one of the first builders to offer it as a standard feature. When we coupled that with all-electric, it became the new wave, following the all-electric vehicles and the limited carbon footprint footprint that companies are looking to do.

We thought, 'Why stop at attached product and townhomes? Let's try and do  single-family homes.' This was challenging. Typically a buyer of a single-family home is pretty attached to that gas line, especially when it comes to cooking or fireplaces or, or things like that. It was an adjustment, and this was true for Grove Village buyers as well. It's still not something people are used to. But when they get into all the other great features and the great benefits of having an all-electric, single-family solar-powered home, it offsets that traditional need for gas power. Grove Village is probably our 10th or 11th single-family all-electric neighborhoods."

Of course, designing homes and planning neighborhoods so that customers – in their adoption of technologies and engineering they're unaccustomed to appreciating – wind up feeling like their better and more valuable as customers per se requires being able to do what builders do, in the face of all kinds of adverse conditions. Zabaneh spoke of one of the key challenges to deliver homes in a time frame hampered by atmospheric rivers and in the wake of multiple seasons of wildfire disruptions.

We were able to get our models done and the first phase of homes going well in advance of some of the weather impacts," Zabaneh notes. "We were able to open with some pretty significant demand because people had been watching the project for so long due to the construction taking longer than typical. When we did grand open, we already had a priority list of buyers that had been waiting for our project to actually open up. That was a unique situation that we're not usually accustomed to. Usually we start marketing and as soon as constructions going, and the build time isn't isn't as long because of environmental factors. This priority list held up over a longer period of time and even as market conditions were changing, we had that demand hold up."

Here's what Zabenah sees among the challenges and opportunities ahead despite a near term future for the housing market few are willing to predict with certainty:

There is a steady sales pace," she says. "People anticipate different things. I don't think people were expecting the rates to climb quite as high as they did even though you know we've been warned. I don't think anyone really anticipated we'd be in the 7% range like we are now. The interesting thing is there still such limited supply. This creates demand for new housing despite the impact of rates. Another factor that has also kept things stable in terms of a sales rates is that rents continue to climb as well. A lot of people are kind of becoming landlords and are looking at investment opportunities and looking at 1031 exchanges. We're still seeing cash buyers. I think the impact on the rates overall has probably opened up more buyers to these government programs like FHA or VA, etc. for example, where incomes haven't necessarily caught up to what rent or mortgage numbers are. The impact on economic impact has been stabilized by programs that have become available. So there are still buyers in the market. They're just getting a little more creative with different financing."

Where's City Ventures with respect to the land game, which some privately held builders have begun to fret about, given the high costs and relatively high risk of overpaying?

City Ventures is unique in that we are equal parts homebuilder and land developer and land acquisition. We spent a lot of time last year and at the beginning of this year expanding our land acquisitions team to to be on the lookout and searching for those land opportunities. What makes us unique as well is we'll find these opportunities, go through the entitlement process, and for those builders that you're mentioning, that are looking for land that's already entitled, we have the opportunity to sell to them as long as our pipeline continues to grow."

We have three land teams, one in Northern California and two in Southern California. The primary focus is finding these opportunities for us to continue to build our pipeline, and if an opportunity comes up – as one did recently in San Diego County, where another developer kind of came in and bought the project from us after it's been entitled and we've kind of gone through the process – we're in a position where we have enough of a pipeline where we can sell off some of these projects and continue to keep our our pace and meet the demands that we're trying to meet in the markets that we're trying to stay in."

How does Zabaneh look at her own professional priorities as one of homebuiding up-and-coming strategists and business builders?

I started in the field as a sales manager," she says. "I was always curious about how everything worked and my degrees were in marketing and finance, and so I ended up kind of leaning in towards the sales and marketing side. Working with buyers on financing and working with the lenders, I got a good understanding of that. Then I wanted to get into corporate operations, and began to focus on construction and operations, how everything works. I was very fortunate to work with a group of individuals who nourish that curiosity. They helped me grow and develop."

"My goal is to continue that and continue to see potential in people and to grow the team. We need to place the right people in the right positions and nourish their curiosity, and learn what they want to do and what abilities and skill sets that they have. And we need to learn how to scale that so that as we continue to grow over the next several years – which is very much the intention – backfilling some of those seats and expanding the team is definitely one of my top priorities. This goes for the operations side, the sales side, the construction side, etc."

"We've already been ramping up  our land acquisitions team since last year. A lot of us have been around since the beginning of City Ventures. There's a clear path on what our goals are, what we're trying to achieve."

With roots as a sales counselor, Zabaneh's appreciation for every other operational aspect of homebuilding's value cycle seems to drive toward that one axiom Michael Schrage points out as critical.

When it comes to developing, designing, building, marketing, and selling new homes in new-home communities, the challenge is not just better and more valuable homes and communities, but "better and more valuable customers."