How much do you fly? Have you ever had status with your airline and then lost it?
As a fairly active business traveler, I have been the grateful recipient of treasured Delta status. I felt like a new traveler, more eager to get on the plane. I was treated like a person. But, as they say, all good things come to an end.
After cutting back on my travel, I quickly lost status. Yet, at the airport, I see so many familiar faces, continuing to enjoy their elite status despite similar travel cut backs.
The secret? The Delta American Express card.
This not intuitive relationship has been tremendously lucrative for both Delta and American Express. If you look at Delta’s earning report in 2017, it showed one million credit card accounts and $3 billion in revenue to their annual $41 billion.
Stifel analyst Joseph Denardi shows that selling miles to American Express contributes upwards of 35% of Delta’s earnings and closer to 50% for American Airlines.
This super successful program has me thinking … How can loyalty programs like this be harnessed into other industries? As a housing market professional, I wonder if there are ways for the new home industry to create such profitable relationships with another entity, leading to cooperative sales growth. Is there a way for homebuilders to extend their relationships with customers past the initial purchase? It seems as if it could be so easy, since housing is a product that the consumer interacts with all the time.
These longer term relationship models may also be pivotal in addressing the current affordability crisis in the country’s housing market. Module Housing, a prefabricated housing design firm based in Pittsburgh, is starting to tap into a longer term business model by offering customers a uniquely designed, base model home that can easily be added on to and expanded after the home buyer saves enough money, after their family grows, or simply after their needs change.
“When someone buys a house, they will be investing again in the home within the next five years,” says Brian Gaudio, CEO at Module. “They will have a life event, have a child, add another roommate, or start renting out a piece of their home on Airbnb to leverage their home for income. They may want to update or finish what they weren’t able to afford at the time of purchase.”
Considering that the majority of customers will gravitate toward a big change in that time period, Gaudio has developed a system to better understand their customers and where they are in their life and what they envision their house to be, both short and longer term. Then, the company helps them achieve that as they are living in their home. Rather than moving or “trading up,” homebuyers just return to their original builder to expand their existing home.
“Throughout their purchase, we survey them, we ask them what will be important to them during the next five years, to take a pulse,” Gaudio says. “Then we sit down and talk through their starter unit to see how it will change in the next five years to build in the flexibility of the scenario they are playing out – maybe they start working from home a lot.”
Gaudio wants to keep an open line of communication so that as the life events happen, they’ll know and can reach out for another business opportunity, one with a customer who already knows and trusts them. He expects it not to be awkward or mistimed because of the ongoing dialogue. Module also is extending the warranty on the home to do just that – build a relationship with their homeowner based on trust.
Not only that, but they are tapping into other small purchase decisions. During the initial build, customers can choose base options, such as a plain shelf in the kitchen, that can later be upgraded with custom designed, built-in cabinetry after the homeowner either has the need for more storage or has the funds to pay for it.
When I spoke to Gaudio about how we get closer to customers with a program similar to airline rewards, he thought of renovations that could potentially lead to free appliance upgrades, maintenance programs and maybe even a partnership with a national retailer, like Ikea, that would offer a discounted program. He also thought lease-to-own programs would provide that avenue for a mutually beneficial, ongoing customer relationship dynamic.
In Module’s model, home buyers have to plan their renovation and could potentially earn status to get first to get priority on the renovations list. Finally, Gaudio also thought of putting his homes on a platform that would allow homeowners to swap while they are traveling instead of going to an unknown like Airbnb, which would again extend that experience with the customer.
Steve Glenn, founder and CEO at Plant Prefab, had similar intents with a flexible, expandable design, offering home owners the ability to add onto a base home model. However, he launched the plan more than 10 years ago and hasn’t seen it gain popularity. He found that the design to support future add ons was very costly, which didn’t appeal to the target cost-conscious buyer who would choose that type of home so they had time to save for the addition.
Despite that experience, Glenn believes that the opportunity for additional touch points with customers is building with an online experience.
“We think that the people who are doing custom homes, which is more and more of the market, will look to build and design their own homes online,” Glenn says. “We will look to support the process online as much as possible, and we are focused on the urban market, because it requires custom solutions.”
And with a recent investment from Amazon, it’s no wonder Glenn thinks that online experience will be critical. Glenn wasn’t able to share what the Amazon investment will mean for Living Homes, but did say that they plan for more integration with Alexa technology and hope to be able to expand that experience relevant to processes in designing and living in the home.
But really, can’t there be other opportunities? Where is the rewards system for owning a home? I’m thinking relationships that extend beyond the home experience. What would make a homeowner feel like they were upgraded to first class when they open the door to their home? The possibilities are still to be defined, but clearly we need to start imagining them.