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What Is D.R. Horton’s Market Segmentation Strategy?

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Focus on single-family attached homes

The homebuilding operations of D.R. Horton (DHI) include construction and sale of single-family detached homes and attached homes, such as town homes, duplexes, triplexes, and condominiums. Other major players like Pulte Group (PHM) and Lennar (LEN) also focus on single-family detached homes, while Toll Brothers (TOL) caters mainly to the luxury home segment.

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Market segmentation strategy

In order to target different customer segments, D.R. Horton (DHI) launched a variety of different brands, including D.R. Horton, America’s Builder, Express Homes, Emerald Homes, Breland Homes, Regent Homes, and Crown Communities. D.R. Horton’s branded communities, which focus on first-time and move-up homebuyers, are the core of its business and account for a substantial part of home closings. Crown and Breland’s product offerings are similar to D.R. Horton communities.

Focus on new segment

To acquire entry-level homebuyers whose focus is primarily on affordable homes, D.R. Horton introduced a new brand, Express Homes, in fiscal 2014. D.R. Horton’s Regent brand is similar to its Express Homes communities. On the other hand, Emerald-branded communities, introduced in fiscal 2013, appeal to buyers in search of higher-end move-up and luxury homes.

Homes marketed under the Express Homes and Regent Homes brands together represented 5% of fiscal 2014 home closings, while homes marketed under the Emerald Homes brand represented 2% of fiscal 2014 home closings. In view of the positive customer response to the Express and Emerald brands, D.R. Horton (DHI) plans to introduce a number of communities under these brands in the years ahead.

Investors who are interested in trading the sector as a whole should look at the SPDR S&P Homebuilders ETF (XHB).

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