What Is PulteGroup’s Market Segmentation Strategy?
The move-up buyers in Pulte Homes communities tend to place more premium on location and amenities.
Aug. 7 2015, Updated 11:06 p.m. ET
Focus on single-family attached homes
PulteGroup’s (PHM) homebuilding operations include construction and sale of single-family detached homes, townhouses, condominiums, and duplexes. Other major players like D.R. Horton (DHI) and Lennar (LEN) also focus on single-family detached homes, while Toll Brothers (TOL) caters mainly to the luxury home segment.
Sales of single-family detached homes, as a percentage of total unit sales, were 86% in 2014, compared with 85% in 2013 and 79% in 2010. The increase in the percentage of single-family detached homes can be attributed to a weakened demand for townhouses, condominiums, and other attached housing.
Major brands and target customers
In order to target its major customer segment, namely entry-level, move-up, and active adult, PulteGroup has launched a variety of brands like Pulte Homes, Del Webb, Centex, and DiVosta. Pulte Homes, Del Webb, and Centex are the major brands, which contributed almost 100% to the company’s homes closed and the company’s revenue. Pulte Homes, which is the largest among them with a share of 45% of homes closed, had an average sales price of $387,000 in 2014. On the other hand, Del Webb and Centex contributed 30% and 25% to homes closed with an average sales price of $325,000 and $208,000.
Market segmentation strategy
The move-up buyers in Pulte Homes communities tend to place more premium on location and amenities. These communities typically offer larger homes at higher price points. Centex brand is targeted to entry-level buyers, so these homes tend to be smaller with product offerings geared toward lower average selling prices.
Through the Del Webb brand, the company addresses the needs of active adults. The Del Webb brand offers both destination communities, mostly for retired people, and “in place” communities that provide assistance to senior citizens for those buyers who prefer to remain in their current geographic area. Many of these communities are rich in amenities and features, including golf courses, recreational centers, and educational classes to promote active lifestyles for those over the age of 55. Del Webb communities generally are larger than entry-level or move-up communities.
Investors looking for diversification in the homebuilding sector can consider ETFs such as the SPDR S&P Homebuilders ETF (XHB) and the iShares Dow Jones US Home Construction Index Fund (ITB).