January 19, 2007 / 11:33 PM / 12 years ago

Facing slump, homebuilders rethink advertising

NEW YORK (Reuters) - After years of quick and easy sales, a slowdown in the U.S. housing market has home building executives reconsidering their advertising plans, putting more time and money into novel ways of marketing homes.

As in other industries, two schools of thought have traditionally existed when it comes to advertising real estate: some believe more money should be put into marketing during tough times, pulling in reluctant buyers; others believe advertising budgets should be cut along with other costs.

“When times are very good, you tend not to put as much effort into advertising and you just trust that it’s working,” Ian McCarthy, Chief Executive of Beazer Homes USA Inc (BZH.N), said at the Reuters Real Estate Summit in New York.

“When times are getting a little tougher, as they are today, you put more effort into it,” he added.

McCarthy, however, said rather than dramatically change how much the home builder is spending on advertising, the downturn has the company considering new ways to use its budget rather than traditional print marketing.

Another executive, Robert Toll, chief executive of luxury home builder Toll Brothers Inc. (TOL.N), also said that while some will spend more on advertising during a downturn, he believes in spending the budget in new ways.

“The natural reaction is that if you’re in a soft market, go advertise more. Our philosophy has always been don’t do that,” he said.

Toll points out that during a soft real estate market people are not reading or listening as much as they are in a booming market.

“In good times, advertise more than the average budget, because people are looking then, they are searching for your ad,” he said. “In bad times, you can’t force somebody to go pick up a paper and look for an advertisement — they aren’t interested, they don’t want to look.”

The result is that Toll Brothers is shifting its ad spending, putting more emphasis on everything from direct mailings to social events.

“You do all sorts of extra things when the market is soft,” he said.

His tactics include meet-the-builder-days, wine and cheese parties for real estate agents, internal company contests and Internet marketing.

“I’d like to have it so that the minute you opened that box it said ‘You want to buy a new home, click here.’”

Beazer’s McCarthy also said the Internet is playing a larger role in advertising during the downturn as the home builder tries to hunt out potential buyers.

“We are not dramatically increasing our advertising at this time, but we are trying to target it wherever we can. For example, we are spending additional money today on the Internet,” he said.

With more money moving into new media, he said the company would take a “more prudent” approach to newspaper and print advertising while still keeping a close eye on the overall budget.

“If we can’t get the top-line growth we want, we’re watching our expenses,” he said.

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