How to “Win Big” in the Construction Industry

For this week’s Guest Post Friday here at Construction Law Musings, I welcome back a good friend of the blog, Brian Hill.  Brian helps people to achieve more from less in the areas of construction quality management, forensic investigation, business strategy and emerging technologies. He is also the editor and publisher of AECforensics.com – a digital magazine exploring the quality and risk management trends impacting the A/E/C (architecture, engineering and construction) industry. For more information about Brian, visit BLHill.info.

First off, let’s get some very important caveats out of the way. I am not an attorney and this article should not be taken as legal advice whatsoever. In fact, chances are that your construction attorney would advise against anything you are about to read. I’m also fairly certain that your insurance carrier would run screaming upon reading this.

My work in construction defect litigation has taken me to Las Vegas on numerous occasions. Since I’m usually there for business, I don’t see the area the way most people do. The glitz and glamour of the casinos seems tarnished at 7:00 in the morning as I’m heading through the lobby, coffee in hand, dodging chain-smoking seniors depositing their dwindling retirement one coin at a time.

Here is a secret: You don’t win big at the slots. In fact, one of the biggest winners in Vegas doesn’t have anything to do with casinos whatsoever. One company is single-handedly transforming this arid business environment into a hub for innovation and economic progress. That company is Zappos.com – a company that generates most of its revenue by selling shoes online.

CEO Tony Hsieh made headlines when e-commerce giant Amazon purchased his online shoe store for approximately $1 billion. The success of Zappos.com comes down to one very important concept: providing the best customer service possible.

What does this have to do with construction?

When you buy shoes, appearance is important, but most important is how they feel. As we all know, shoe manufacturers all have different interpretations of sizes, so it is really crucial to try a shoe on before buying. How do you do that online?

You can’t. There is a very real risk associated with buying shoes online. That is why Zappos.com made customer service the highest priority. If the shoe doesn’t fit, send it back. By making that experience as painless as possible, it mitigates the risk associated with buying shoes online.

When a property owner hires a contractor for a construction project, the stakes are much higher than buying a pair of shoes. No project is ever going to be completely free of defects. Unfortunately, there is a very insidious myth that exists in the construction industry: The One Year Warranty.

You might want to check with your attorney about the “statutes of limitation” or “statutes of repose” in your state. Why? You are probably liable for your work much longer than one year after completion. In fact, a lot of states extend that liability out to 10 years.

So if your warranty is only one year, the only recourse a dissatisfied customer has is to contact an attorney. That presents a “lose-lose” situation for you and your clients.

What if instead, you broke away from your competition and offered a much more substantial warranty? The gold standard would of course be a lifetime warranty, but even a 10-year warranty would be a real game-changer.

And how are we going to afford to offer this?

The real question is, how can you not afford to offer the best customer service there is in this market?

The cost of construction defect litigation is enormous compared to the cost of customer service. Every claim against an insurance policy brings a contractor that much closer to unaffordable premiums or worse, the inability to acquire adequate coverage.

Now consider the lifetime value of a happy customer, versus the lifetime cost of an unhappy customer. The happy customer becomes an ambassador for your company. Their recommendation of your services is infinitely more valuable than any stupid brochure, mailer or Facebook post your marketing department comes up with. The unhappy customer will try to convince every person they know to never hire your firm. Or worse (as in the case of some large homebuilders I have represented), they might even set up entire websites dedicated to pointing out how much your firm “sucks.”

How to implement the best warranty and customer service program in the business

1. The first thing that needs to happen is to get everybody in your company to understand how important customer service is. At Zappos.com, customer service is a core value and comes before everything else.
2. At Zappos.com, every employee (including top executives) is trained and must work as a customer service representative. At the end of the training period, each person is offered a sizable amount of money to quit. Only those who share the core values of customer service stay.
3. Make customer service representatives the heroes at your company. When a representative arrives on site, they should be dressed appropriately, be personable yet professional, and treat the customer with absolute respect. “Wow” the customer.
4. Put your customer service and warranty program in the spotlight in all of your marketing and communications. Shout it from the rooftops. If you don’t blow your own horn, there won’t be any music.
5. There are no stupid or trivial complaints. The little things, like paint blemishes, minor cracks, discoloration, difficulty operating doors or windows, are often the specific complaints that will keep a property owner engaged in a lawsuit. Once the expert hired by their attorney starts poking around, you never know what they’ll turn up – so don’t give them the opportunity.
6. Bonus tips: Schedule follow-up appointments with every client. Send them holiday cards. Start a referral program. Host customer appreciation parties.

Conclusion

I didn’t just come up with these ideas overnight. Everything you see here is something that I have discussed over the years with a variety of people: contractors, attorneys, insurance professionals, judges, mediators, architects, engineers, forensic experts, and accountants. So far, everyone I have talked to agrees on two points:

1. These concepts would absolutely transform the built environment and the construction industry.
2. It will never happen.

Why? Nobody is willing to take the risk.

But then whoever thought that you could make money selling shoes online?

Brian and I welcome your comments below.  Also, please subscribe to keep up with this and other Guest Post Friday Musings.