Barratt American : Home Builder Wins Recognition It Sought

Quick: Name a California home builder.

If nothing comes to mind, don’t feel bad. The majority of Californians can’t name a builder without prompting. But if the name Barratt comes up, don’t be surprised.

Barratt American Inc., the U.S. offspring of England’s largest home builder, has spent several million dollars since the summer of 1981 trying to make you think of Barratt when you think of housing, President Mark Frazier says. And the gamble seems to have worked.

By early 1984, the Irvine-based company was the best-known builder in all of its markets, sometimes overshadowing companies that build two or three times as many homes, according to outside research conducted for the company in 1984.

No Small Achievement

All told, one in 10 adults in Barratt’s market areas could name the company without prompting, the study by Dancer Fitzgerald Sample Inc. found, and more than half of the people surveyed recognized the name once they heard it.

That may not sound like much in a world where an estimated 93% of the American population recognizes Procter & Gamble’s Mr. Clean, but it’s no small achievement in the housing business.

Unlike Mr. Clean’s competitors, which number a couple of dozen, home builders number in the thousands. About three new houses out of four are built by local firms that put up fewer than 25 homes a year, according to the National Assn. of Home Builders. High profiles they haven’t got.

What brand advertising home builders historically have done was relatively low key--simple messages communicated on billboards and in newspaper ads.

Unprecedented Blitz

Barratt, on the other hand, splashed its name and its oak-tree logo not only in the usual places but on television and radio as well. A company helicopter was deployed to drop parachute teams at new-home sites, and a model home that could be relocated as needed was installed in one Sears, Roebuck & Co. store after another in neighborhoods near new Barratt projects.

“For a real estate developer, (the marketing blitz) was unprecedented,” marketing consultant Ken Agid says.

Housing experts say consumer marketing efforts like Barratt’s are becoming more common in the home-building industry. “It’s tougher to sell housing today than it was in the latter 1970s, when inflation was pushing up prices very rapidly,” says Jay Shackford, a vice president of the National Assn. of Home Builders. “What we’re seeing is much more sophisticated marketing techniques, especially in the competitive metropolitan areas.”

Just in recent weeks, the Newport Beach-based William Lyon Co. has run a newspaper ad proclaiming “We’re No. 1 one for the fourth year in a row” and not even mentioning a specific Lyon project.

Meanwhile, Encino-based Larwin Co. has been running full-page advertisements dominated by the figure of a woman in an evening gown and the message, “Larwin. When you have a taste for fine living.”

Barratt also has pursued another marketing strategy that housing experts say has become essential in the sensitive housing business: finding a niche and exploiting it. Barratt’s is the first-time buyer. Sixty percent of its homes are built for that market, Frazier says.

But, despite the eye-catching hoopla and wide recognition, nearly five years after its arrival in the United States, Barratt American has not been as successful as parent Barratt Developments PLC had hoped, Frazier says.

The parent itself was for years a small local builder in Newcastle-Upon-Tyne before vaulting to the top of England’s private-sector housing industry in the late 1970s and early 1980s on the strength of its affordable homes and aggressive marketing. When the company arrived here in mid-1980 by buying Irvine-based American National Housing Corp., it hoped to do the same.

Launching its first wave of advertising one year later, the company’s leadership vowed to market its way to the top of the California home-building industry within two years, then roll out nationwide until Barratt became as dominant in U.S. housing as its parent is in England.

Barratt American has grown, to be sure. In 1984, the company sold about 1,760 homes statewide and generated an estimated $180 million in revenue, compared to 905 homes and $104 million in 1981, the first full year of U.S. operations.

Leadership Not Achieved

Sales have increased by roughly 30% each year, Frazier says, and the company has been profitable every year since it arrived. (U.S. profits are not reported separately.) But the goal of leadership was not achieved, and Frazier says the high interest rates and resulting prolonged housing recession that devastated the U.S. home-building industry through much of the early 1980s impressed Barratt Developments that marketing, no matter how creative, cannot fully offset uncontrollable economic forces, Frazier says.

Some housing experts, such as Agid, contend that the high-profile brand advertising Barratt pursued wouldn’t have produced the sales volumes that the company wanted even in a better market.

“It doesn’t pay at the bottom line,” says Agid, a former marketing vice president for the Irvine Co., Orange County’s largest landowner. “It would have been more productive for them to spend their money differently.”

Frazier disagrees and points to the increasing use of brand advertising by home builders as proof that he’s not alone.

But it remains uncertain whether a marketing technique that helped make parent Barratt the United Kingdom’s biggest home builder--with an estimated 12% of the market and name recognition with a whopping 80% of the population--can be translated from a compact island nation to the sprawling United States.

Frazier says that Barratt Developments re-evaluated its goals after learning first-hand just how risky the U.S. home-building business can be and decided that it no longer cared to be No. 1. No more acquisitions were made, and no brand advertising currently is running or planned.

“It’s important to be large, to be well known, to be profitable and meet the needs of the market,” Frazier says. “But, at this point, the company does not want to take the risk of that sort of severe depression again. The larger you are, the more risk you are taking. In a good year, the California market can be 25% to 30% bigger than the U.K. market. All the market Barratt wants to do can be done right here.”