News & Notes Archive - June 2005
MH industry leaders propose a national consumer satisfaction index to improve its products, service and image. How about one step further: make product and dealership ratings available to the public? Don't hold your breath.
Last month I described a recent Roper consumer survey commissioned by the trade group Manufactured Housing Institute (MHI) that revealed that 39% of the owners of new manufactured homes reported encountering "serious problems" with their new homes, and that, worse still, of that number, only 22% answered their problems were fixed. Put another way, just over 30% of customers surveyed said they experienced serious problems with their new homes that were never remedied to their satisfaction. Can you image how much longer a car company like Ford or GM would last with that kind of rating?
This statistic, which came as no surprise to me and many consumer watch dog groups (although some MH builders were reportedly "shocked" at these revelations), inspired talk of a serious national consumer satisfaction index (or CSI) conducted by an impartial third party, that would help identify the poor performers — whether they be the factories, the retailers or the set-up contractors — and make the findings known to the industry.
I think this is a great idea, and long overdue. But I'd like to see the industry go one step further: make the CSI results public so consumers like you and me can easily go online and check out the ratings for not only the MH builders, but their retailers as well.
Imagine being able to go online to check out the consumer satisfaction rating of all the MH dealerships in your area, as well as the MH brands they sell, before you begin shopping. One can only begin to imagine how powerful an incentive a program like this would be in getting the industry to clean up its act.
I'm not the first to suggest this — at least one senior exec, a VP of Patriot Homes has expressed support for this measure — but in the absence of any significant representation of the consumer point of view within the MH industry, earlier this month I jumped in to add my two cents to the debate. What follows is my letter to MHI president Chris Stinebert. I believe it's worth sharing here because it alludes to questionable practices that you as a home shopper should keep in mind as you search for a reputable dealer:
June 3, 2005
Mr. Chris Stinebert, President
Manufactured Housing Institute
2101 Wilson Boulevard, Suite 610
Arlington, VA 22201
Subject: Key industry issues and a National CSI
Dear Chris,
We haven't been in touch since you kindly introduced me to the audience at the start of my workshop presentation, "Our industry through an outsider's eyes," at MHI's 2003 Expo in Las Vegas. To this day I have regarded MHI's inviting its first industry outsider to share what would certainly include candid criticism from a consumer's perspective as a gutsy move. I thank you and the MHI for providing me that opportunity.
Since then I have remained in touch with many of the industry players I met at the Expo, and followed issues in my capacity as a contributing writer to Manufactured Home Merchandiser magazine. Perhaps more relevant as background to this letter, as author of The Complete Buyer's Guide to Manufactured Homes & Land, I receive a considerable amount of feedback from consumers, both before and after they purchase a home. In addition, my consulting service to home buyers has enabled me to closely observe the ways many retail sales centers operate.
In short, while I am an industry-friendly newcomer, passionate about manufactured housing, who believes strongly in its potential, my principal role is that of an equally passionate advocate for the consumers who buy these remarkable homes. It is in this capacity, and in the hope of making a constructive contribution to the current dialog within the industry, that I am writing you. What follows is long, but hopefully not long-winded:
In the wake of the Roper findings, I applaud the industry going to General Quarters, calling a Chicago summit meeting for key players, and vowing to get serious about customer satisfaction.
Lending best practices is a key part of the strategy. You and MHI have done great work there. So is implementation of the 2000 Act (with better installation oversight) and the upcoming codifying of dispute resolution practices. Parenthetically, MHARR and its president Danny Ghorbani deserve much credit for grinding it out all these years on the policy level. All these initiatives are important and should proceed apace. But until the industry focuses on the way it sells its homes and institutes bulletproof Retailing Best Practices that really work, I fear all will be for naught. Please allow me to explain.
For the consumer, the gravel sales center, the street retailer (call them what you will), is where the rubber meets the pavement; it is here where a great many events transpire that collectively create lasting impressions for good or ill, and that have a profound effect on the customer's satisfaction rating. And herein lies the dark heart of the industry's problem.
Despite a 65% industry contraction that has squeezed out most of the sleazy fast-buck operators who flourished in the go-go 90s, there still remains at far too many dealerships a culture of dishonest (or at the very least highly questionable) practices, including profit hiding, contractor kick-backs, sloppy site work, back door spiffs, unfulfilled promises, overcharging, and a general jack-'em-up-and-glaze-'em-over mentality. Which is to say, the shenanigans are still going on.
Here are just two recent examples:
In Northern California last month, a client of mine, a CPA who can easily afford a $180,000 chattel loan and who owns an aging 1970 mobile home in a primo coastal MH park (with rent control), was told by a dealer of a high end MH brand that he could trade in his old mobile for $12,000. The going rate in that area for removing unrecycle-able junkers to the dump is around $4,500. The quoted retail price of the new replacement MH was $7,500 higher than a comparable model — an old mobe dawg trick right out of the car business. And this dealership is owned by a major MH builder. I recommended my client go elsewhere. He did.
Here in Washington state I did some pro bono consulting work last fall for a struggling couple who successfully qualified for a home and a lot under the FHA 442 regs. The dealer treated them with irritable disrespect, was in cahoots with a local contractor who rushed through the installation of a cinderblock retaining wall, cutting corners on engineer specs. Now, six months later, following winter rains, the retaining wall has collapsed against the rear of the couple's home, creating a finger-pointing mess and a great deal of stress for my distraught clients.
Not only has this culture of shady business practices been endemic to much of the MH industry for many decades but many of the industry's builders, despite lip service to the contrary, have been loathe to crack down on dealerships where this culture thrives because too many still regard their dealerships as their true customers.
Just last week, for example, a marketing executive for a western region builder of high-end homes boasted their plant was so impressive "we won't even sell to a customer until they come visit our plant first." Did he mean home buyers, I asked. "Oh, no. I mean dealers," he replied, adding, "We'll let home shoppers tour the plant but only if accompanied by a dealer."
Combine these attitudes with the fact that the sale of manufactured homes is still less regulated than the sale of used cars, and add "trailer bidness" sales practices that have been going on so long that many dealers believe "that's just the way it's done," and one can readily understand why this industry's public image is in the tank.
I truly believe the only way to correct this deeply corrosive flaw is to instill accountability and transparency into the way manufactured homes are sold, installed and serviced. How? Hire an independent, trusted third party (such as J. D. Power & Associates) to institute a national consumer satisfaction index, paid for with floor fees, that rates all parties to the home purchase (and includes a one year after warranty service appraisal) — and then make those ratings freely available to the general public — on the Internet, just the way the Better Business Bureau does.
In fairness, the release of these ratings should be withheld from the public for, say, the first two years to allow low scoring participants, especially the dealers, to improve their scores. But the absolute key to success is the statistics must be made public, and easily available-to anyone.
This strategy, by itself, would not only have a transformative effect on the way dealers conduct themselves (and hasten the end of shady practices) but would demonstrate the MH industry's unprecedented commitment to achieving customer satisfaction.
Dealer ratings would also be a boon to the builders. I recently spoke with a senior executive at a major builder who complained, "When I'm scouting for a dealership in an area to take on our homes, I have no way of knowing who the best dealer is except through word of mouth recommendations — if I can find even that. And then it's a year or more after that before I really have any idea how well the dealer has treated customers."
There are other market-driven strategies that can be implemented:
* Lenders could offer loan performance awards to dealers for the multi-year success of loans that they originate. In short, pay the dealers for being honest and conscientious.
* Bonuses for key staff at manufacturers could be determined by the CSI index for the previous reporting period. You probably know Palm Harbor already does this, using their in-house CSI results. (Another by-product of a national CSI is builders would have a standard CSI measure to rate their overall performances against each other.)
* Instead of awarding year-end bonuses to warranty supervisors based on how little they spend on warranty service (talk about unclear on the concept), builders can base bonuses on warranty service satisfaction ratings.
Granted, a national CSI index that is freely available to the public is strong medicine, but in my view this strategy, based on pocketbook incentives, is the only way the industry will be able to effectively police itself and clean up its act.
I realize I'm not proposing any strategies that are not already on the table, but my sincere hope is that their endorsement from someone whose day-to-day involvement is from the consumer side of the equation may lend credence to the argument for their prompt adoption.
Thanks, Chris, for your consideration. I am most grateful for this opportunity to comment.
With best wishes,
John Grissim
Note: Judging from the email I received from various folks in and out of the MH industry, the letter received fairly wide circulation. A few industry insiders thought the proposal a terrible idea. Clearly the initiative faces an uphill battle with the industry's old guard. I don't really expect the idea to gain traction any time soon. In the meantime, the home buyer's best strategy is to be informed, say alert and be swindle-proof.