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Market Watch - Page 10:

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Property Developers - Number Crunching Pays Off !

 

 

 

Deciding what to spend on sales and marketing for a new development can be a daunting task. Taking a big picture approach of key financial numbers for the project and then working through the details makes considerably more sense than putting together a wish list of an advertising and promotion plan that may overshoot budget.

It's important to work from a holistic, number-driven approach and set up spending limits and performance measures for gauging results.

First look at revenue or sales projections and break these down into realistic assumptions such as the pace of sales – that is, how many units you expect to sell each month. It's wise to compare your per square meter selling prices with a competitive set of properties already in the market.

Also verify whether your projection is realistic by comparing the sale rate of competing products and factor in other considerations, such as seasons, that can affect sales over the course of a year.

There are more visitors coming in the tourist season but property sales are highest when a certain profile of visitors are on the island including higher net worth individuals and strong representation from Hong Kong and the UK. Historically, more sales are from October to April though this trend varies for upper tier luxury properties.

Sales and marketing expenses include commissions paid in-house and to outside agents, as well as sales staff costs and all advertising, promotions and marketing of the project. While there is no industry standard percentage of sales and marketing expenses, expenses are most often expressed as a percentage of total sales?

Local trends in medium to high end condominium, town house and villa development aimed at overseas buyers show that sales and marketing expenses are usually about 10 % total sales.

Internal and external commissions reach about 5% of total sales, and incentive schemes with higher rates paid according to a progressive scale are more common among the larger agents.

Significant components of the expenses, budget will be print advertising; e-marketing – including Website, on-line banners, “pay-per-click” and direct email; tradeshows and exhibitions; point of sale material; billboards; entertainment and sales offices expenses and public relations.

These costs should be broken into line

 

 

 

items and match up with expense items in the monthly and annual, profit and loss statements, in order to monitor costs against the initial budgets.

Back up the items with specific-detailed assumptions such as ad placements in particular newspapers and related costs, and so on. The assumption worksheet builds up a zero-based budget instead of just putting in lump-sum amounts, it details out the actual, supported costs of each expense. It is best to obtain actual quotes.

Having control and monitoring monthly expenses is important as overspending on sales and marketing reduces the bottom-line profit for a project. Equally important is tracking the source of sales leads, which leads to a "conversion factor” showing how many potential customers who walk in the door finally buy the product.

Have sales staff set up a daily traffic record of customer contacts via agents,direct contact, Internet, phone and to alsoask direct customers how they came to visit the property. Each month when you review expenses, also analyse sales data.

Cumulate the results for the month and see what is producing the most sales.

Two critical exercises are reviewing how effective your spending is and where are the most sales generated. Marketing plans are not set in stone. You need to rework strategies, create new ideas and constantly improve to meet a changing market. Often you see projects that have 70% of their sales from outside agents but spend 80% of their marketing on stand alone advertising. A more logical approach would be to adjust the spending to co-op advertising or using greater incentives to encourage more sales from that venue.

In most cases, marketing is one of the most liked parts of property development. It allows you to use your creative juices, experiment and create botb'image and product.

Equally important, though, is that any development is a business and the same rules apply to cost management as they do to construction.

Measuring results through out the sales cycle, adapting and moving to the market and not letting ego get in the way of solid business judgement is key to getting the payday you want at the project's end.

 

 

 

   

Bill Bamett is Managing Director of C9 Hotelworks a Phuket hotel and residential consulting firm With more 20 years experience in the region, he has played an active role in some of the island biggest develovments.

       
       
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