Nick Lehnert – Product Segmentation Driving Sales for Homebuilders

Urban Land Magazine

April 28, 2014

Product segmentation is becoming increasingly sophisticated as real estate developers gain access to new technology and tools. A 2014 ULI Spring Meeting forum, moderated by Gregg Logan of RCLCO, presented several case studies demonstrating how builders and developers are using product segmentation to enhance the bottom line.

Historically, said Logan, product segmentation—at least in the single-family-home business—has focused on lot sizes and market segments. For example, a 40-foot-wide (12 m) townhome was designed for dual-income couples with no children (“DINKs”).

Now, however, product lines are being further segmented with the help of psychographics. For example, the DINK cohort may include “thinkers,” “achievers,” and “experiencers.” “Thinkers are practical consumers who seek durability, functionality, and value,” Logan explained, “while achievers, who are concerned with image, want prestige brands and finishes.”

Nick Lehnert of KTGY Group showed how single-family homes on small lots can be configured in a wide variety of ways to appeal to different buyer segments. The process begins by making lots more square than rectangular, allowing for interior courtyards and other privatized outdoor spaces. These homes include large garages with ample storage and enclosed outdoor areas for pets and children.

In Lehnert’s innovatively designed homes, the focus is on the interior courtyard or covered outdoor space. Many of KTGY’s homes are designed for multigenerational use; one configuration can accommodate two families on separate floors. Some of KTGY’s homes have “auxiliary” or “idea” space that can be used as an office, guest quarters, homeschooling area, or whatever homeowners can imagine. And for long-married baby boomer couples, separate bathrooms are a popular option.

Like Lehnert, architect and planner Brian Canin is focusing on designing smaller homes for baby boomers and other buyers, exploring the “missing middle” between traditional single-family detached homes and mid-rise multifamily dwellings.

“About 60 percent of today’s buyers have no children, and 30 percent are singles, so the standard single-family house is no longer on point,” Canin explained. For baby boomers buying in Florida, he has created a single-story “jewel box” home with 1,660 to 2,100 square feet (154 to 195 sq m) on a wide, shallow lot. Most of the home’s living space is oriented toward the backyard courtyard; however, to “socialize the street,” there is a covered courtyard facing the sidewalk.

Some of these homes provide auxiliary second-floor space for a caregiver or guest. To appeal to the single women who constitute a large segment of the market for this type of home, there are uncommon details like plugs inside drawers.

For a small but deep-pocketed market niche—affluent families who love all things Disney—Golden Oak at Walt Disney World Resort offers custom single-family homes priced from $1.8 million to $6 million, designed for multiple generations with five or more bedrooms. Features include private plunge pools, summer kitchens, and expansive outdoor living spaces with bars, fireplaces, and televisions. About a third of the homes have private elevators to accommodate grandparents. Residents enjoy use of a private club with extensive activities and exclusive events.

Disney’s Page Pierce said that early customer research found that buyers wanted large homes and preferred traditional styles. The average Golden Oak buyer is 51 years old with a net worth of at least $10 million; more than 70 percent are second-home buyers, while the remainder live at Disney World year-round.