I have been re-reading the book From Good to Great, by Jim Collins, and came upon an analogy Mr. Collins refers to that he termed “The Stockdale Paradox”. I instantly remembered the story from my previous readings and meaning behind it. At the same time, my little light bulb flickered on and how this story is so very appropriate for our current new home market.

For those of you that have not read the book, this is a business classic and I highly recommend it. I was fortunate to find this story on JimCollins.com so I will be able to share it with you.

To set the stage, Mr. Collins and his research team had been struggling to explain why some companies rise up and outshine their competitors, even when things look their bleakest. By accident, he stumbled upon “The Stockdale Paradox” at one research session with his team. After telling the story, many of his research team told Mr. Collins that this is exactly the missing piece they were looking for when attempting to convey why some companies make the leap to greatness and some don’t.

I hope you enjoy the story.

The Stockdale Paradox Chapter 4, pages 83–85

The name refers to Admiral Jim Stockdale, who was the highest ranking United States military officer in the “Hanoi Hilton” prisoner-of-war camp during the height of the Vietnam War. Tortured over 20 times during his eight-year imprisonment from 1965 to 1973, Stockdale lived out the war without any prisoner’s rights, no set release date, and no certainty as to whether he would even survive to see his family again.

He shouldered the burden of command, doing everything he could to create conditions that would increase the number of prisoners who would survive unbroken, while fighting an internal war against his captors and their attempts to use the prisoners for propaganda. At one point, he beat himself with a stool and cut himself with a razor, deliberately disfiguring himself, so that he could not be put on videotape as an example of a “well-treated prisoner.”

He exchanged secret intelligence information with his wife through their letters, knowing that discovery would mean more torture and perhaps death. He instituted rules that would help people to deal with torture (no one can resist torture indefinitely, so he created a step-wise system—after x minutes, you can say certain things—that gave the men milestones to survive toward).

He instituted an elaborate internal communications system to reduce the sense of isolation that their captors tried to create, which used a five-by-five matrix of tap codes for alpha characters. (Tap-tap equals the letter a, tap-pause-tap-tap equals the letter b, tap-tap-pause-tap equals the letter f, and so forth, for 25 letters, c doubling for k.) At one point, during an imposed silence, the prisoners mopped and swept the central yard using the code, swish-swashing out “We love you” to Stockdale, on the third anniversary of his being shot down.

After his release, Stockdale became the first three-star officer in the history of the navy to wear both aviator wings and the Congressional Medal of Honor.

You can understand, then, my anticipation at the prospect of spending part of an afternoon with Stockdale. One of my students had written his paper on Stockdale, who happened to be a senior research fellow studying the Stoic philosophers at the Hoover Institution right across the street from my office, and Stockdale invited the two of us for lunch. In preparation, I read In Love and War, the book Stockdale and his wife had written in alternating chapters, chronicling their experiences during those eight years.

As I moved through the book, I found myself getting depressed. It just seemed so bleak—the uncertainty of his fate, the brutality of his captors, and so forth.

And then, it dawned on me: “Here I am sitting in my warm and comfortable office, looking out over the beautiful Stanford campus on a beautiful Saturday afternoon. I’m getting depressed reading this, and I know the end of the story! I know that he gets out, reunites with his family, becomes a national hero, and gets to spend the later years of his life studying philosophy on this same beautiful campus. If it feels depressing for me, how on earth did he deal with it when he was actually there and did not know the end of the story?”

“I never lost faith in the end of the story,” he said, when I asked him. “I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”

I didn’t say anything for many minutes, and we continued the slow walk toward the faculty club, Stockdale limping and arc-swinging his stiff leg that had never fully recovered from repeated torture. Finally, after about a hundred meters of silence, I asked, “Who didn’t make it out?”

“Oh, that’s easy,” he said. “The optimists.”

Since we’re at the New Year, let’s make a resolution, as salespeople, to sell to a process in 2007. The process is not revolutionary; it’s not even new. The most common name for this process is the Critical Path. I have modified it slightly, based on new home sales, but really this process works for any line of sales.

Here it is (in chronological order):

            1. Preparation  

            2. Greeting

            3. Needs Analysis

            4. Presentation

            5. Demonstration

            6. Select One

            7. Objections

            8. Finance

            9. Closing

            10. Follow up

            11. Due Diligence

            12. Referrals

The top 5% of new home salespeople understand this process and follow it perfectly. We call them Consciously Competent, that is, they always know where they are with each customer in the sales process. The customer can throw anything at them, they handle it, and go right back to the sales process.

As you may have noticed, we have 12 steps and ironically, 12 months in the year. Any worthwhile transformation is a series of small, incremental steps. This month, we will deal with Preparation.

“95% of the success of today’s new home sales professionals is directly attributable to what they do when they are not in front of the customer.” -Rick Storlie

Preparation is the step most often skipped by home builders and salespeople alike. We all want to rush into our model homes, have tons of traffic and immediately sell some homes. Yes, this did work for a number of years but alas, no more.

Think of how top athletes prepare for their sport. An Olympic sprinter will train for 6 days a week, for 1,200 days, 6-10 hours a day for a race that lasts less than 10 seconds.

During Lance Armstrong’s 7 year Tour De France win streak he trained 344 days a year riding 60-120 miles a day for a 30 day race. A boxer will train for 1,000 minutes for every 1 minute in the ring.

The idea is this, we as salespeople need to spend dozens of hours preparing for our weekend traffic and sales presentations. Imagine how good we could be if we did the following preparation:

            • We understand who our buyers are, what they want in a home and how much they are willing to pay for it.

            • We understand our own personalities and learn how to identify our customer’s personalities. In other words, we sell the way the customer wants to be sold, not the way we like to sell.

            • We know our top 3 builder competitors better than they know themselves. When a customer mentions their name, we immediately know how to differentiate our builder from them.

            • We have a sales environment within our models that makes it easy for customers to buy from us. Studies show that 89% of the buying decision for new home buyers is based on the believability of what they saw in the sales centers. Most models I visit may have a plat map on the wall. Believe me, you need a lot more visual aids that that to create value for your customers. Who is the builder? What is special about the community? Why would I want to live in this neighborhood? A salesperson must take ownership of those three things and transfer that enthusiasm to every customer as they present the product (and you can’t tell them, you must show them!).

            • We work on our sales presentations weekly, perform market research monthly and report our findings back to our builders so they can re-position our product.

            • We continually invest time, energy and resources into personal development so when that customer comes through the door, emails us or calls on the phone, we give them 100% of our energy on helping them make a good informed decision.

The greatest thrill I get as a trainer, manager and coach is to see one of the salespeople I work with see some success by applying the sales techniques I teach. There is nothing better as an educator to take someone who is more or less raw, shape them through education and watch them come into their own.

Before I share these stories with you I should give you a little background on these folks. They did not come to me with a lot of experience (in fact, I have never been able to train anyone with a lot of experience because they suffer from that terrible disease know-it-all-itus!). They don’t have their masters or PhD’s. These people are pretty much just like me and you.

Some of the qualities they do have in common are the following: They are unassuming and have great attitudes. Despite all the hard work, they know how to have fun. They are persistent and love to get constructive direction and give their own feedback. They are team players. All of them have worked in other industries and bring some of that knowledge with them. Most importantly, they are disciplined and do what they need to do to get a sale.

Sell that model!

We will call our first salesperson Roy (I’ve changed the real names to protect the innocent!). Roy was working with one of our builder clients in a temporary model home this year. The reason we call it temporary was due to the fact that we put it up outside of a new area we were going into. The new area was under construction and we used the model to sell into it. Well as we all know, we have a bit of an inventory challenge today. This particular model was no different in that it had plenty of other competition, both new and used.

Our policy is to always attend showings by outside Realtors and Roy had one on this particular day. He attended the showing and found out this particular couple was a transfer buyer and along with their Realtor had seen 70 homes this past week. When they first walked into Roy’s model that home was nothing more than showing #71.

At the first visit, Roy disarmed the Realtor but sincerely complementing him in front of the buyers. He then dug into just what the buyers were looking for. When he found out the hot buttons from the buyers, he went to work. In the next 10 minutes he demonstrated how his location, neighborhood and home could satisfy their hot buttons.

Before the showing ended, Roy asked a minor close question, “How do you think our location and home would work for you?” The buyers gave him two objections to which he carefully wrote down. Before they left, he created some urgency by explaining the amount of market research he had done in the area and how this home was a great value. He also let the buyers and agent know of other upcoming showings (he may have embellished a bit).

After the showing Roy followed up with the agent and found out the buyers wanted to come back and take another look at the home when they were back in town. Roy set up the showing date and time right then and there. At our next strategy meeting we discussed the two objections and how we could minimize them.

Objection #1: The buyers were concerned about a nearby power plant and if the emissions could have a negative impact on their children.

Solution: Roy called the power plant directly and spoke to a representative. The representative sent him some information documented by outside sources on the emissions. It turns out there were no issues. He also contact the National Weather Service to find out what the prevailing winds were in the area to see if the emissions would come towards their home.

Objection #2: The buyers were confused by how the lower level would finish out and if they could finish the rooms they wanted.

Solution: Roy met with the builder’s designer and reviewed their wish list. She drew out a potential layout to show to the buyers.

At the next showing Roy was excited with the information he had discovered. He brought copies of his research for the buyer and Realtor and showed how the emissions were safe. He also showed the data from the weather service that showed the prevailing winds would also blow the emissions away, not towards the home.

Next he tackled the lower level. Prior to the buyers arriving, Roy had scaled the plan and put tape down on the floor of the lower level and demonstrated the lower level with the customers as if it was already finished. He made sure to involve the Realtor in the demonstration to get him excited about the possibilities.

Before the buyers left, they told Roy his home was in their top 3 and they would be making a decision before they left town again. Sure enough, Sunday night we received a purchase agreement that was nearly full price!

Asking for the sale

With all of our builder clients, we mystery shop our salespeople to check if they are using the techniques they have been taught. We will call our next salesperson John. On John’s mystery shop, he did a pretty good job up until the asking for the sales where he fell flat on his face.

We worked with John on his closing techniques by role playing on how he could work some of these techniques into his presentation. John immediately took the information and training and incorporated it into his scripts. He now has several minor close techniques that he uses with customers to take their temperature during the presentation so he can flush objections and continue with major closes.

Wow what a ride 2006 was! As homebuilders and new home salespeople our bellies are full of humble pie. The new home market in 2006 reminded us all that we have plenty of improvement opportunities ahead of us. If there is one thing I hope you took away from 2006, I hope everyone realizes that our previous rate of sales and income levels were not so much based on how terrific we were as salespeople and builders, but rather, how terrific a seller’s market we were in.

Ask yourself this question, ‘if I could do it all over again, what would I change?’ As a professional sales trainer, consultant and salesperson, here is my list of seven ideas I hope you incorporate for 2007:

Idea #1- Develop a Marketing Plan. Your marketing plan should encompass the following items:

            1. Identify your target market- Who are you trying to sell to? What do they need and want in their homes? Where do they live and how much will they spend?

            2. Corporate marketing strategy- What will you do to drive walk-in traffic? One third of your sales should be from walk-in traffic.

            3. Realtor Outreach Program- What will you do to increase your co-op sales? Another 1/3 – ½ of your sales should be Realtor generated.

            4. Referral Program- What will you do to increase referrals from your past customers, hot prospects and sphere of influence? Approximately 33% of your sales should originate from this program.

            5. Competition Analysis- What are the builders down the street and more importantly, the used homes down the street selling for? What are they doing better than you? What are you doing better than they are?

            6. Media Schedule and Budget- When, where and how will you promote your homes and neighborhoods? The schedule should be set monthly and be spread out over the entire year. Your budget should coincide with your projected absorption for each neighborhood and be realistic in your sales goals.

Idea #2- Get serious about market research. Your market research does not stop with your marketing plan. Salespeople should be shopping the competition at least monthly. You must shop your top three builders and developments monthly and document your findings. Report this back to the builder and adjust your offering based on what is selling. Don’t forget used homes. In most of our submarkets, 75% – 85% of all sales are used homes.

Idea #3- Obtain your Certified New Home Sales Professional (CSP) designation. The National Association of Home Builders offers the CSP designation for sales professionals. This course will walk you through all the areas of the new home sales process today’s salesperson must not only know, but master. Check www.batc.org for local offerings.

Idea #4- Embark on a personal development program. How often do you hear, “I need to work smarter, not harder?” Yes, we all must work smarter but how can we work smarter if we don’t educate ourselves (continuing education classes don’t count!)? Personally, you can develop yourself on a daily basis through books, audio programs and seminars. Two great resources for books and CD’s are www.builderbooks.com or www.amazon.com.

Idea #5- Script it! Top new home sales professionals know exactly what the sales process is and exactly what they need to say and not say to customers. These scripts are not canned. Rather, they are memorized and internalized for certain selling situations. After an all pro has internalized these scripts, they personalize them and they come out to the customer as natural conversation. Some of the areas that must be scripted:

            1. Greeting  

            2. Discovery  

            3. Presentation (community, neighborhood and builder)

            4. Demonstration (community, neighborhood, homesite and model(s)

            5. Objections (know your top 10 and how you will minimize them!)

            6. Closing techniques (At least 5 but preferably 10)

Idea #6- Write out your business goals (and better yet your personal ones too). You should have no more than 3-5 goals that include unit sales, income, customer satisfaction and total volume. Each goal, however, must have measurable tasks assigned to it. Review your goals daily and update them weekly. Be specific in your tasks and always have a deadline for when they need to be completed.

Idea #7- Embrace change! Let’s face it; we can’t sell the way we used to. If you made it though 2006 not making many changes, 2007 is your year. Today, we must reinvent ourselves or make it easy on yourself and leave the business. A favorite quote of mine is, “people won’t change until the pain of staying the same overcomes the fear of change.” Some areas to focus on:

            1. Discipline. We go through life living with the pain of discipline or the pain of regret. Only you can make a conscious decision to do what others won’t.

            2. The way you sell. With the amount of inventory in the market, closing the sale on the first visit will be very difficult. You need a great contact management program with an aggressive follow-up system for each lead you generate. Learn scripts and practice your presentation on co-workers so when you meet those few buyers, they won’t get away.

            3. Change you product offerings. Now is the time to design new plans and build them when old models sell. Increase the value of your to-be-built homes by including more features that many builders and customers consider options.

Remember the definition of insanity, “Doing the same thing over and over again but expecting different results.” We made it through the last 8 of 9 years not by being good, but by showing up. Change is the number one fear we all face. I encourage you to take charge of your future by implementing the changes you need to make, today.

This is a question that is the primary topic of discussion for a week or two after the annual Builder’s Association of the Twin Cities Fall Parade of Homes. This conversation happens all over the twin cities, east to west and north to south. Inevitably the conversation goes something like this:

Builder #1: How was your Parade?

Builder #2: Traffic was way down from previous years the buyer quality was poor. Everybody coming in to the models was just killing time. We got a couple of leads but they don’t want to do anything until next year.

The funny thing is this exact conversation happened this year and many years previous to this (when times were considered good!). It seems the answer to this question is determined on the attitude of the salesperson and what they relate back to their builder. Yes, traffic was down. Yes, there was some poor quality traffic and yes, many people said they wanted to wait until next year. But the difference between a good and bad Parade is not what happened during the event, it’s what the salesperson does after the event with any leads they captured (no matter how few they are).

Creating Urgency  

Creating urgency is the difference maker. As salespeople, we must come up with some strategies to create urgency now and convert some of our leads to move ahead today, with our builder and not wait until next year. Try this idea:

Figure out your rate of sales for your builder, the entire neighborhood (all builders), the submarket and if necessary, your local market. Here is the idea; we must show activity even if it seems we have none.

            a. Your builder- How many homes have you sold this year. Now calculate that on a weekly basis. Most of us are going to find we are selling too few homes to use this statistic with a prospect. If so, go to the next area, the entire neighborhood.

            b. The neighborhood (all builders) – Calculate the same statistic for all the builders combined and break it down to the week. If you can say that the current rate of sales in your neighborhood is one a week or more, this will create some urgency. If this still doesn’t work, go to the submarket.

            c. The submarket- Calculate the rate of sales of all the homes in your neighborhood’s price range within your geographic market and break it down to the week or better yet, the day. Let’s say your neighborhood ranges in price from $350,000 – $500,000. You research the MLS and building permits and find out in your city (geographic market), there have been 30 sales (used and new) reported on the MLS. The city has issued 50 building permits and there are currently 25 homes for sale, brand new, in the market. Subtract 25 from 50 and add the 30 MLS sales and your total sales in the $350,000 – $500,000 submarket is 55. Let’s say we are 40 weeks into the year. 55 sold homes divided by 40 weeks equals 1.375 homes a week. If this number still doesn’t look that attractive, go to the entire market.

            d. The market- Calculate all the MLS sales and pre-sold building permits in your geographic market (used and new, using the same guidelines as above, and convert this to a weekly, or better yet, daily rate of sales.

Sample Script  

Salesperson: Mr. and Mrs. Customer, (name of neighborhood) is located in the city of _______________ and the _____________ school district. (Name of city) is very active as a home is sold every (hour/day/week).

Use this script when you are presenting an overview of the community or neighborhood. Even though your sales may be slow, you need to communicate that homes are selling in your neighborhood and/or community. Subconsciously, this tells the customer that yes, people are investing in your community and yes, homes are selling.

During follow-up calls, make sure you are relaying new sales in your submarkets and markets to your prospects. Give them a snapshot of what happened over the last month. Tell them why it makes more sense to move ahead today vs. waiting (best selection, value, lifestyle, interest rates, incentives, etc.)

A Parting Thought

Careful consideration needs to be given to today’s customer. They read, see and hear many negative messages from the media on the state of today’s housing market. They see many unsold homes in their current neighborhood and hear about huge discounts many builders are giving to sell homes. On one hand, they love the thought of buying but are terrified at the thought of selling. In other words, today’s buyers are more confused than ever. The knee jerk answer we receive when we ask about timelines is, “a year or two” or, “we’re thinking about it.”

Here is a question for you, why don’t we as salespeople like to close? I could pose that question to five different salespeople and most likely get five different answers but I would put money on this reason: the fear of rejection. Let’s take a closer look at the psychology of the close and how we can deal with our own fears.

As a fourth grader I remember times when I wanted to call a certain girl in my class and would sit by the phone for over an hour trying to get up the courage to call. My heart would pound and my hands would sweat. I played the conversation over and over in my head about what she would say when I “asked the question.” She could say yes but what if she said no? It was that fear that paralyzed me from ever making the call!

How things are the same for the new home salesperson. We love to greet, demonstrate, build rapport and qualify but we also become paralyzed when we need to “ask the question” for the sale, reservation or appointment. It is definitely time to lose our inhibitions as today’s buyers will not be closing themselves as they did in the past.

I define closing as the natural progression to a dynamic presentation and demonstration. Closing is not the use of some magical words or phrases at a specific time that trick a customer into buying your product. In order to become great closers, we must focus on what we do prior to asking for the sale. Here is a list of what great closers do on a daily basis:

            1. Preparation. Great closers do their market research to make sure they have the right product at the right price. They have explored their community and neighborhood focusing on the benefits of living their. They make sure the selling environment the customers enter is

            welcoming and has all the information necessary to make a good decision.

            2. Presentation. Great closers prepare their presentations and don’t leave anything to chance. They know how and where they will greet their customers; qualify them and how best to present and demonstrate their homes while creating urgency along the way.

            3. Minor closes. Great closers use small “minor” or “test” closes along the way to get customer objections on the table. They know they don’t ask for a final close (the purchase agreement) until they have fully explored the needs of their customer and if their neighborhood and builder can satisfy those needs.

            4. Objections. Great closers love objections because they lead to the customer’s hot buttons. They understand that unless they hear objections, the customer will never buy their product. They prepare for objections and have pre-planned answers.

            5. Final close. Great closers will have three to four closing strategies that they use at will and can stack on top of one another. They understand that they will have to close five to seven times with most customers in order to get the sale. For them, “no” only means the customer needs more information in order to buy.

Closing begins the moment the customer walks into the model home. It is said nearly 50% of every sales consultation ends without the salesperson closing for the order. We know most new home salespeople are not closing too often but rather not enough. In order to eliminate our fears of rejection, we must improve everything we do in our model homes beginning with the sales environment and moving forward from the way we greet our customers.